Today, with the rapid development of blockchain technology, decentralized finance (DeFi) has become a hot topic in financial technology. As an innovative stablecoin project, the Frax protocol has attracted the attention of many investors and users through its unique governance mechanism and token design. This article will take an in-depth look at the Frax governance mechanism, focusing on its core components and how it operates.
Frax governance overview
The Frax governance mechanism is a fully on-chain, trustless and decentralized governance system based on Compound and OpenZeppelin’s Governor contract and controls Gnosis Safes. The introduction of this governance mechanism removes the assumption of trust that Frax stakeholders will not behave maliciously, making the Frax protocol completely controlled by veFXS holders through on-chain governance.
Motivation: Prior to the introduction of the Frax governance mechanism, the operations of the Frax protocol were not fully decentralized. Most operations are conducted by key Frax stakeholders through Gnosis Safes. This means that the security of the protocol relies heavily on the integrity of these stakeholders and the inability of external attackers to force them to perform malicious actions. However, with the introduction of the Frax governance mechanism, this trust assumption is removed and the protocol is fully controlled by veFXS holders through on-chain governance.
Main components
The Frax governance mechanism consists of two main components: FraxGovernorAlpha and FraxGovernorOmega. These two components have different purposes and configurations.
FraxGovernorOmega: FraxGovernorOmega has limited control over the underlying Safes. Only the Frax team or Safe owners can create Omega proposals. Each proposal is mapped one-to-one to a Safe transaction. Omega is configured as an additional Safe owner, and a Safe transaction must be approved before the Safe owner can execute the transaction. This is enforced via a custom Gnosis Safe Guard.
Omega has very short voting delays, short voting periods, and low quorum values. Safe owners can only add proposals to Omega after obtaining Safe's threshold number of signatures. For example, if a Safe is 3/6 (5 owners + Omega), 3 owners must sign before the proposal can be placed in Omega.
After a proposal is added to Omega, it follows the same life cycle as a Governor proposal. If passed, Omega calls approveHash on Safe, and any owner can execute the proposal through the Gnosis Safe UI. If the proposal fails, rejectTransaction can be called on Omega to approve the transfer of 0 Ether. Other owners can sign and execute the same 0 Ether transfer, which will only increase Safe's nonce, allowing new Gnosis transactions to be created.
Omega also has a feature called short circuit threshold. If 51% of holders oppose a proposal, the proposal will automatically fail.
End state and key takeaways from governance
The end state of Frax governance will be full control of all major Safes, giving veFXS holders the final say on everything in the protocol. veFXS holders can vote on all proposals and can replace Frax team members as owners of the underlying Safes and perform any action if a quorum is reached and passed.
Frax team members can create optimistic proposals through FraxGovernorOmega, which succeed by default. Normally, proposals fail by default, but under the Frax governance mechanism, veFXS holders can vote on optimistic proposals. If an optimistic proposal reaches a quorum and there are more negative votes than positive votes, the proposal fails.
in conclusion
The introduction of the Frax governance mechanism marks the transformation of the Frax protocol from a partially decentralized system to a fully decentralized governance system. This not only improves the security and transparency of the protocol, but also gives veFXS holders a greater say in the protocol’s decision-making process. As the DeFi field continues to develop, the governance mechanism of the Frax protocol will provide valuable reference and reference for other projects.
By deeply understanding the Frax governance mechanism, we can see the huge potential of decentralized governance in the future financial system. This innovative governance model can not only improve the operational efficiency of the protocol, but also enhance users’ trust in the protocol, ultimately promoting the healthy development of the DeFi ecosystem.