II.III Governance Controlled Protocol Parameters

These values will be set after launch through the TTG mechanism. It is not possible to deploy the protocol with preset parameters.

Minter Rate

The annualized percentage charged continuously to Minters on their Owed M. It is alterable with a Standard Proposal.

Logic: This annualized percentage should (generally) be less than the average rate on the Eligible Collateral being earned by Minters. This spread, adjusted for the Mint Ratio, is the profit margin of the Minter.

Penalty Rate

The percentage charged on Owed M that is in excess of the amount a Minter is permitted to have generated. It is assessed any time Impose Penalty is called, which is embedded in both Update Collateral and Burn. It is alterable with a Standard Proposal. This is a fixed percentage and not an annualized rate.

Logic: This percentage should be sufficiently high to deter Minter offenses, but not so high as to overly punish Minters that are victims of circumstance.

Example

Minter 1 has 1,000,000 Owed M but has not updated their on-chain Collateral Value within Update Collateral Interval, and hence the on-chain Collateral Value is 0. Whenever they call Update Collateral or Burn, and Impose Penalty is consequently called, they will pay Penalty Rate on 1,000,000 - (0 * Mint Ratio). So they will pay Penalty Rate on their full debt. 1,000,000 * .01 = 10,000 M in Penalty Rate charges. This assumes that only one Update Collateral Interval period was missed.

Earner Rate

The annualized percentage paid to M in the Earn Mechanism. If the cumulative M paid out via the Earn Mechanism is going to be greater than the amount of M being generated by the Minter Rate, the Earner Rate is automatically discounted to whichever percentage will reduce this mismatch to 0. ZERO holders receive all remaining M that is not paid out to the Earn Mechanism for their participation in protocol governance. It is alterable with a Standard Proposal.

Logic: This annualized percentage should be consistent with the yield demanded by institutional holders of M. It is mechanically prevented from exceeding the cumulative level of M generated by the Minter Rate. It should not be set so low that it results in insufficient demand for M and thus an inefficient market for Minters.

Mint Ratio

This percentage is the fraction of a Minter’s on-chain Collateral Value that they can generate in M. It effectively controls the leverage of a Minter and the over-collateralization of M. It is alterable with a Standard Proposal.

Logic: This percentage controls the leverage of Minters and the over-collateralization of M. It should be set high enough to encourage attractive Minter economics, but not so high that it compromises the stability of M.

Mint Delay

This amount of time is the period between when a Minter has called Propose Mint and when they can first call Mint. It serves as a protective measure to ensure all actors have sufficient time to audit each Mint. It is alterable with a Standard Proposal.

Logic: This amount of time should be long enough to ensure proper auditability and to afford Validators a chance to call Cancel or Freeze if necessary. It should not be so long that it introduces unnecessary friction into the Minting process and reduces the efficiency of Minters and the stability of M.

Propose Mint Time To Live

This is the amount of time after the Mint Delay that a Proposed Mint has to be called before it expires. It serves as a protective measure to ensure that Minters cannot call Propose Mint and then execute the Mint at a much later date. It is alterable with a Standard Proposal.

Logic: This amount of time should be long enough to give Minters a chance to react to the Mint Delay lapsing and execute their Mint, without being so long that it compromises the integrity of the previous Validator checks.

Update Collateral Interval

This amount of time is the period between which Update Collateral must be called by a Minter. If they do not call Update Collateral within this amount of time after their previous call, their on-chain Collateral Value is assumed to be 0 and they will incur Penalty Rate on the next update. It is alterable with a Standard Proposal.

Logic: This amount of time should be long enough to ensure that Validators can reliably check the status of the off-chain structures and balances, but not so long that it compromises the integrity of those checks.

Update Collateral Threshold

This number of signatures is the minimum number of Validator signatures required to execute Update Collateral. If a Minter cannot provide this number of signatures, they cannot successfully call Update Collateral. It is alterable with a Standard Proposal.

Logic: This number of signatures should ensure that the Update Collateral process is as secure as possible given the number of Validators in the network. It should not be set so high that Minters cannot reliably call Update Collateral.

Minter Freeze Time

This amount of time is the duration for which a Minter will not be able to call Propose Mint or Mint after having the Freeze method called by a Validator on their address. It is alterable with a Standard Proposal.

Logic: This amount of time should be sufficient for the Minter to remedy an issue, but not so long that it materially disrupts its normal course of business.