Decentralized Finance (DeFi) offers an alternative democratic financial system which is decentralized, fully automated and censorship-resistant. No permission is needed from a central authority to use DeFi services, and no single entity controls the product’s settings and parameters.
It is the community that decides on the rules and procedures that regulate the protocol in a democratic and automatic manner. Therefore, in this spirit, starting from today, all WOW protocol’s financial and economic parameters are defined through voting by WOW token holders.
WOWswap takes the governance in DeFi to a new level by implementing instant on-chain permissionless governance that counts every vote and adjusts the protocol’s parameters in real time without any downtime.
How it works
WOW token holders can stake $WOW for a period from 14 to 730 days and receive non-transferable xWOW tokens, which are used for voting. A minimum staking period (14 days) is required to prevent flashloan attacks on governance and make sure that voters have skin in the game before they make any changes to the protocol. Currently staking and voting is available on Binance Smart Chain.
All quantitative protocol parameters such as interest rates, liquidation margins, protocol fees, liquidation rewards, and others are modified via voting — xWOW holders can change parameters by submitting their values on blockchain.
Final values for each parameter are defined as weighted averages of all voting transactions. For example, if holders of 800 xWOW vote for a liquidation reward to be 5%, and you are voting for 1% with 200 xWOW, the final value will be 0.8*5%+0.2*1% = 4.2%. A new liquidation reward will be effective immediately after your vote — there is no need to wait for anything or receive an approval from anyone else.
The Scope of WOWswap Governance
WOWswap Financial Parameters
The financial model defines all major financial parameters of the protocol.
- interest rates at 0%, 80% and 100% liquidity pool utilization states;
- maximum leverage rate multiplier;
- liquidation margin;
- liquidation reward;
- maximum share of the liquidity pool per token;
- minimum WOW/xWOW requirements for trading with 4x and 5x leverage (for real degens only).
WOWswap Economic Parameters
The economic model defines how WOW protocols generates revenue and redistributes it.
There are 2 main revenue streams:
- trading profit fees;
- liquidity provider fees.
Generated revenue covers 5 types of expenses:
- governance rewards;
- development costs;
- insurance cost;
- donations;
- buy back and burn program.
Governance Rewards
Governance rewards come from several sources:
- trading profit fees paid by traders
- liquidity provider fees paid by liquidity providers
- staking rewards provided by WOWswap
Staking WOW and WOW/BNB LP tokens in DAO is sufficient to receive governance rewards, no actual voting is necessary. Governance rewards are distributed among all xWOW holders proportionally to their xWOW balances.
Phase 2 — WOWswap Improvement Proposals
In the next phase WOWswap Improvement Proposals (WIP) portal will be launched where xWOW holders will be able to propose new tokens for listings, adding new features to the protocol, propose/vote on adding new charities for donations and more.
