DAO and Governance
As a truly decentralized protocol governed by the ISSUAA DAO and in order to ensure that asset holders are receiving the fair value of the asset, ISSUAA relies on governance votes, which are undertaken by the holders of the ISSUAA Protocol Token (ISS) who locked their ISS for a certain amount of time (max. up to 4 years) and received veISS (Voting Escrow ISS Tokens) in exchange for the lock. Token holders have an implicit incentive to be honest in such voting processes, as wrong results would lead to a lack of trust in the system. This would in turn lead to lower acceptance, lower volumes, lower fees earned and also a lower valuation of their tokens.
Additionally, voting is also incentivized by the issuance of ISS reward tokens, which should further increase participation in the governance voting process - despite the gas fees this requires.
If an asset has surpassed the upper limit that is defined when the asset has been set up, the asset should be frozen, which means that the asset can no longer be issued and that long tokens can be burned at the price of the upper limit. Short tokens are becoming worthless.
If users consider the upper limit to be breached, they can initiate a voting process, in which all veISS token holders can vote and decide if the upper limit has really been breached. The voting process will be open for seven days. Every veISS token holder can participate in this process, with each veISS counting for one vote.
After the seven days voting period no more votes are accepted and the voting can be closed by anybody. If the majority has voted that the asset has breached the upper limit, the asset is frozen and all voters that have voted “yes” will receive voting points. If the majority decides that the asset has not breached its upper limit, the asset will continue trading as usual and the “no” voters will receive voting points. Voting points are the basis for the distribution of token rewards.
Each asset has an expiry time, which is defined when the asset is created. After the asset is expired, a voting process can be initiated, which lets governance token stakers vote on the price of the asset at the time of expiry. This will set the price, based on which long and short assets are valued. This value is the basis for the amount the user receives when tokens are burned.
After the seven days voting period is over, no more votes are accepted and the voting can be closed by anybody. The expiry price will be calculated based on the stake weighted average price of all votes. Voters that have been in a 1% bandwidth around the calculated expiry price will receive voting points.
New ISSUAA assets can be created by a DAO decision. Firstly, a new asset needs to be proposed by a user, who has a locked ISS balance of at least 100,000 tokens; i.e. at least 100,000 veISS. This will trigger a voting process, in which every user owning veISS can participate. The voting will go on for 7 days. After the seven days voting period has expired, no more votes are accepted and any user can close the vote. If more than 50% of stake weighted votes have been in favor of adding the asset, the new ISSUAA Asset will automatically be added as a mintable asset. If not, the asset will not be added. Voting points will be granted to users that have supported the successful option.
In order to be able to pay for services that users provide for the ISSUAA community, a 5% share of all ISS tokens is reserved for ISSUAA DAO Grants. To receive a grant out of this 5% DAO grant share in ISS tokens, ISS holders having a veISS balance of 100,000 tokens or more can apply for a grant of max. 100,000 ISS to be granted to anybody who should be paid for services provided for the ISSUAA DAO. Once the voting process is open, users can vote on the proposal for 7 days. After the voting process is over, any user can close the vote. If the majority has voted in favor of the proposal, the DAO will automatically transfer the grant amount of ISS tokens.
ISSUAA's main V2 smart contracts are designed as a proxy and implementation contract structure. This means that the mother (proxy) contracts, which hold all state variables such as balances etc. are fully immutable, but the implementation contracts can be changed. By design, the implementation contract can only be changed by the owner of the proxy contract. Most other projects assign the ownership of their proxy contracts to a multi sig wallet, whose signers essentially control the protocol. However, ISSUAA has selected a different approach in order for the ISSUAA DAO to be as decentralized as possible. Therefore, ownership of all our proxy contracts has been assigned to a smart contract (Upgrader.sol), which can change an implementation contract only after a successful ISSUAA DAO upgrade vote has concluded. To suggest an upgrade proposal vote, users of the ISSUAA protocol need to have a veISS balance of at least 500,000 veISS tokens. Upgradeable contracts are the following: