The governance mechanism of the Ardana Protocol is designed to be as flexible and upgradeable as possible. During the initial phase, overall governance will be charged to the Ardana founding team, with gradual migration to voting by Ardana token holders. Voting is a critical component of Ardana’s decentralized decision-making process. To participate in governance, Ardana ecosystem users must stake their DANA tokens and earn exDANA. Alongside giving access to platform profits, exDANA represents a vote that can be exercised when proposals are put forward in governance.
Token holders can vote to:
- Add a new collateral asset type with a unique set of risk variables.
- Change the risk variables of one or more existing collateral asset types.
- Choose the set of Emergency Oracles.
- Decide on freezing compromised oracles.
- Trigger an emergency shutdown.
- Upgrade the system.
The governance process includes Proposal Polling and Final Voting. Proposal Polling is conducted to establish a rough consensus of community sentiment before Final Votes are cast. This two-step process helps ensure governance decisions are considered thoughtfully and reached by consensus prior to the voting process itself. Additionally, Executive Voting is held to approve changes to the state of the system. An example of an Executive Vote could be a vote to ratify risk variables for a newly accepted collateral type. At a technical level, smart contracts manage each type of vote. A Proposal Contract is a smart contract with one or more valid governance actions programmed into it. It can be executed only once. When executed, it immediately applies its changes to the internal governance variables of the protocol. After execution, the Proposal Contract cannot be reused.
Each collateral token has its own set of risk variables, the values or which are determined by the risk profile of that token. These values are directly controlled by DANA token holder voting. The Key risk variables for vaults are:
- Debt Ceiling: A Debt Ceiling is the maximum dUSD that can be created by a single collateral type. This is to ensure sufficient diversification of the collateral portfolio. Once a collateral type has reached its Debt Ceiling, it is not possible to create more collateral debt in that token unless existing users pay back some vault debt, or the ceiling is raised.
- Liquidation Ratio: A relationship measure between collateral and debt used to trigger the liquidation of a collateral asset. A low Liquidation Ratio means Ardana Governance expects low price volatility of the collateral token so a lower collateral to debt ratio can be tolerated; whereas a high Liquidation Ratio means higher volatility is anticipated.
- Liquidation Penalty: The Liquidation Penalty is a fee added to a Vault’s total outstanding generated dUSD when a Liquidation occurs. The Liquidation Penalty is used to encourage Vault owners to keep appropriate collateral levels.
- Collateral Sale Duration: The maximum duration of collateral sales is specific to each collateral token. On the other hand, Debt and Surplus auction durations are global system variables.
- Sale Bid Duration: The time before an individual bid expires and closes the sale.
- Sale Step Size: The minimum auction bid increment beyond a previous bid. This is to incentivize early bidders and to prevent abuse by bidding a tiny amount above an existing bid.
- Stability Fee: The annual percentage interest paid for a loan for a given vault type
The successful operation of the Ardana Protocol depends on Ardana governance taking necessary steps to mitigate risks. The Ardana enterprise's highest priority is the security of the Ardana Protocol. Measure in place to ensure top level security include:
- Formal Verification: the strongest defence of the protocol;
- Contracted security audits by the best security organizations in the blockchain industry;
- Third-party (independent) audits;
- Bug bounty programs;