# DAO and Governance

## **Governance Voting**

As a genuinely decentralized protocol governed by the ISSUAA DAO, and to ensure that asset holders receive fair value for their assets, ISSUAA relies on governance votes. These votes are conducted by holders of the ISSUAA Protocol Token (ISS) who have locked their ISS for a specified period (up to a maximum of 4 years) and received veISS (Voting Escrow ISS Tokens) in exchange for their lock. Token holders have a strong incentive to participate honestly in these voting processes because incorrect results would erode trust in the system. This, in turn, would lead to reduced acceptance, lower trading volumes, diminished fee earnings, and potentially lower token valuations.

Furthermore, voting is incentivized through the issuance of ISS reward tokens. This incentive aims to boost participation in the governance voting process, notwithstanding the associated gas fees.

### **Freeze Votes**

When an asset surpasses its predetermined upper limit, it should be frozen, rendering it ineligible for issuance, and allowing long tokens to be redeemed at the upper limit price while short tokens become worthless. Users who believe the upper limit has been breached can initiate a voting process. During this process, all veISS token holders have the opportunity to cast their votes and determine whether the upper limit has indeed been breached.&#x20;

The voting period spans seven days, and each veISS token as one vote. After the seven-day voting period, no further votes are accepted, and any user can close the vote. If the majority of votes confirm that the asset has exceeded its upper limit, it is frozen, and those who voted "yes" receive voting points. If the majority decides that the asset has not breached its upper limit, trading continues as usual, and "no" voters receive voting points. Voting points serve as the basis for the distribution of token rewards.

### **Expiry Votes**

Each asset is assigned an expiry time upon creation. After an asset expires, a voting process can be initiated to allow governance token stakers to vote on the asset's price at the time of expiry. This price determines the valuation of long and short assets, serving as the basis for user payouts when tokens are redeemed.&#x20;

The voting period spans seven days, and once it concludes, no additional votes are accepted. The process can be closed by any user. The expiry price is calculated based on the stake-weighted average price of all votes. Voters within a 1% bandwidth around the calculated expiry price receive voting points.

### **New ISSUAA Asset Proposal Votes**

New ISSUAA assets can be created through a DAO decision. Initially, a user with a veISS balance of at least 100,000 tokens, or at least 100,000 veISS, must propose a new asset. This triggers a voting process in which all users owning veISS can participate for a duration of seven days. After this voting period ends, no further votes are accepted, and any user can close the vote. If more than 50% of stake-weighted votes favor adding the asset, it is automatically added as a mintable asset. Otherwise, it is not added. Users who supported the successful option receive voting points.\\

### **ISSUAA DAO Grant Proposal Votes**

To fund services provided to the ISSUAA community, 5% of all ISS tokens are allocated for ISSUAA DAO Grants. Grant applicants with veISS balance of up to 100,000 tokens or more can request a grant for anybody of up to 100,000 ISS tokens, which is subject to approval through a voting process. During the seven-day voting period, users can cast their votes on the proposal. After this period, any user can close the vote. If the majority of votes support the proposal, the DAO automatically transfers the grant amount in ISS tokens.

### Upgrade Proposal Votes

ISSUAA's primary V2 smart contracts are structured as proxy and implementation contracts. The proxy contracts, holding all state variables such as balances, are entirely immutable, but the implementation contracts can be altered. Unlike other projects that assign proxy contract ownership to a multi-sig wallet, ISSUAA has chosen a different approach to maximize decentralization. The ownership of all proxy contracts is assigned to a smart contract (Upgrader.sol), which can change an implementation contract only after a successful ISSUAA DAO upgrade vote has concluded. To propose an upgrade vote, users of the ISSUAA protocol must possess a veISS balance of at least 500,000 veISS tokens. The contracts that can be upgraded are as follows:

●        AssetFactory

●        VoteMachine

●        DAO

●        RewardsMachine

●        MarketFactory

●        VotingEscrow

●        Upgrader
