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governance.md

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Governance

OWN protocol governance aims to include all stakeholders in the network with a fair share of voting power in proportion to the value they bring to the network and not just the monetary value of their staked $OWN. While aiming for a protocol with ‘minimum viable governance’, governance controls some of the most important aspects of the OWN protocol due to the necessity of bridging between the traditional music world and the on-chain ecosystem:

  • Inflation rate of the $OWN token
  • Protocol fee take rate
  • Royalty Admin approval
  • Fraud adjudication
  • Smart contract upgrades

These decisions must be done while giving proper and fair voting rights to all stakeholders in the protocol:

  1. Music industry institutions: record labels, distributors, DSPs, PROs.
  2. Artists, rights holders and creatives
  3. Investors & developers

To maintain fairness we do away with the “one token, one vote” model prevalent in many protocols and instead implement a weighted voting mechanism based on Protocol Derived Value (PDV). This avoids stakeholders with a large amount of capital from capturing protocol value at the expense of creatives and other less capital rich, but equally valuable, protocol participants.

Minimum viable governance

As governance votes structural and critical aspects of the protocol, such as the protocol fee take rate, we aim to minimize attack vectors on capturing protocol value and maximize a distributed voting mechanism among all stakeholders. We achieve this through three mechanisms:

  1. Time interspersed voting: Main governance votes are conducted on a yearly basis, not on an ongoing basis. The interspersed voting calendar gives participants who are not involved in daily governance the time to make an informed voting decision. Ongoing protocol governance will occur on a shorter time frame by committees voted for in the main governance votes. This structure mimics current democratic structures of delegation
  2. Protocol Derived Value (PDV) based voting: Voting power is represented by value to the network and not only staked $OWN. PDV includes metrics such as the number of OMAs created per artist, OMAs validated per Royalty Admin, OMA-based transaction volume, $OWN staked, liquidity provided etc.
  3. Derivative voting token: Prior to the main governing vote a derivative OWN token, $dOWN, is distributed to all participants in the protocol. $dOWN is used to vote in the upcoming governance decision and is thereafter burned. Each governance vote uses a new $dOWN. This prevents voting power accruing over time to capital rich parts of the protocol. $dOWN is divided equally among the different participants:
  • 25% to Royalty Admin
  • 25% to Artists
  • 25% to $OWN token holders
  • 25% to liquidity pool providers and developers

Each 25% allocation is then subdivided based on individual wallet PDV. Allocations can stack, thus an Royalty Admin who also offers liquidity and stakes $OWN tokens would receive $dOWN to represent the value add they contribute to the network. $dOWN can be delegated or traded leading up to the vote but can only be used in that one time vote.