Introduction
As DeFi continues to democratize financial systems, SaucerSwap leads the way with its on-chain governance system, powered by the Hedera Consensus Service (HCS). This system is embodied by the SaucerSwap DAO, which plays a pivotal role in managing key aspects of the protocol, particularly the alignment of incentives through reward allocation across both V1 and V2. While the protocol itself operates autonomously via immutable smart contracts, the DAO empowers the community to influence its adaptation to an ever-changing market.
With the launch scheduled for Monday, August 5th, at 18:00 UTC, this article explores the governance process within SaucerSwap, detailing how the community’s collective decision-making shapes the protocol’s development and future direction.
Token-Weighted Voting
At the heart of the SaucerSwap DAO is the power of its community, represented through the holdings of SAUCE and xSAUCE tokens. Voting power is determined by a user’s balance of these tokens, with xSAUCE converted to its SAUCE equivalent. The formula for calculating voting power is:
Voting Power = SAUCE bal + (xSAUCE bal × conversion rate)
Vote counting and results will be updated every minute, with the final tally taken at the exact end of the voting period to ensure an accurate reflection of voting power throughout the governance process. This method ensures that the voting power accurately represents the most current token holdings for each proposal.
Governance Process
The governance process consists of three distinct phases: Request for Comment (RFC), Proposal, and Election. Each phase is designed to facilitate efficient, transparent, and meaningful community engagement.
1. Request for Comment (RFC) Phase
- Purpose: Gather initial feedback and refine proposals.
- Duration: Minimum of 3 days.
- Requirements: No minimum voting power required.
- Platform: Discussions occur on the SaucerSwap Governance Forum at gov.saucerswap.finance.
The RFC phase is an open forum where community members can present and discuss proposed changes. It’s a brainstorming stage with no minimum voting power requirement, allowing for diverse input and proposal refinement.
2. Proposal Phase
- Purpose: Formalize and submit proposals for voting.
- Duration: 2 days.
- Requirements: Minimum of 100k units of voting power to submit a proposal.
- Quorum: 10M voting power and majority to proceed with Election.
- Platform: HCS-based voting conducted via the SaucerSwap Interface.
After gathering feedback, a refined proposal is submitted for voting. To move forward, the proposal must reach a quorum of 10M units of voting power and a majority vote. Additionally, it requires a minimum of 100k units of voting power from the proposer.
3. Election Phase
- Purpose: Final community vote on proposals.
- Duration: 2 days.
- Requirements: 40M voting power quorum and majority for enactment.
- Platform: HCS-based voting conducted via the SaucerSwap Interface.
The final phase is automatically triggered if Proposal voting criteria is met. It involves another vote via HCS for enactment. An Election must achieve a quorum of 40M units of voting power and a majority vote to be enacted.
Technical Implementation
The HCS facilitates voting for SaucerSwap proposals and elections through a designated HCS Topic ID. Users connect their wallets to saucerswap.finance/governance to sign and submit voting messages in JSON format to HCS. Upon receiving a vote, SaucerSwap uses the Hedera mirror node to access the voter’s historical balances of SAUCE and xSAUCE at a specific UNIX timestamp. Users can vote multiple times, but only their final vote is counted. This system avoids smart contract risks while inheriting the speed and efficiency of the HCS.
Governance Scope
The governance scope includes:
- Default Token Listings: The default list includes larger and established projects, such as high-value bridged assets and prominent Hedera projects. To be added, projects must pass due diligence, a DAO vote, and meet liquidity requirements.
- V1 Farm Creation and Amendment: The DAO oversees the creation of new yield farms and the adjustment of emissions for existing farms. Projects must meet liquidity and trading volume criteria and pass a community vote to qualify for dual token emissions in SAUCE and HBAR.
- V2 Pool Creation: Initially permissioned to prevent liquidity fragmentation, new pools in SaucerSwap V2 are curated and governed by the DAO.
- V2 LARI Campaign Creation and Amendment: The Liquidity-Aligned Reward Initiative (LARI) allows liquidity providers to earn additional incentives. Proposals for creating or amending LARI campaigns are submitted to SaucerSwap Labs and require DAO approval.
- Tokenomics Changes: Any significant changes to SAUCE tokenomics proposed by core maintainers must be approved by the DAO.
Matters outside this scope, such as treasury management and meta-governance, are managed by the SaucerSwap core maintainers for the time being.
Conclusion
The SaucerSwap DAO empowers its community to participate in the protocol’s governance, ensuring that decisions are made collectively and transparently. From token listings to liquidity pool management, the DAO’s influence shapes the protocol’s future, reflecting the values and priorities of its members. As SaucerSwap continues to evolve, its DAO remains a cornerstone of its decentralized and community-driven ethos.
