Governance for oracle pools and the SigmaUSD bank

(This post represent my personal thoughts and not Ergo Foundation opinion)

I think at this point we need to seriously consider community control over ERG/USD pool and also the stablecoin bank.

The stablecoin bank had possibility of contract upgrade initially, however, with anonymous guys deploying it giving update possibilities to them did look too dangerous, and no one else expressed a wish to have a governance token. It seems interest to the SigmaUSD was heavily underestimated.

Oracle pools participants have governance tokens, but we hadn’t chance to publish their list and so on.

So now we have some time to discuss governance. We can start with some committee of trusted (anonymous and not so) members and then switch to some broader participation or switching updates off after some bootstrapping time.

Please let me know what do you think about that and how can you be involved. It seems SigmaUSD can have large and thriving community, we need to seed it properly now.

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Very interesting!

For a community member that might get involved, what would that involvement potentially look like? What are the actual needs that a community member could fill?

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I think transparency is paramount if you a wanting to produce a financial product, that say , a business could use to settle an account or someone could send home money from there hard earned wages from 1 side of the world to another, then you absolutely need transparency, and be able to show governance and a transparent and publicly available reasoning behind technological and operational decisions. For example, just now there had been a “fault in the system” having a systematic way to report, assess, and action a remedy to the fault, that is accepted by the community,

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You will hold a token allowing you to vote for a stablecoin protocol update. You need to vote responsibly! (so to understand contracts or trust people who can do that)

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Thoughts that come to my mind, which I think make for a good governance. Participation/Involvement and knowledge/experience, transparency, and decentralization of course. Guidelines for communications their location to facilitate transparency(like this forum or discord). Guidelines for how people make decisions how votes are weighed. How to know that people are educated and not just superficial and gaming the system. What are the specific decisions to be made, this is good to help find the people to fit the roles.

Then tokenomics…

Can we adopt an established system of governance like cardano catalyst. Or any other? Dash or?

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Well for me it is how to we give maximum liberties with minimal duties. Does a stable coin need much governance ? If so what kind of metrics are the most interesting? Some things of the top of the head:

  1. Oracles should it be a curated list or anyone and the data validation happens in the aggregate of the oracles only?

  2. How can we maximize equality from the community? Would it be a voted list of people or randomly drawn from the users of the stable coin to make a vote? Do we boostrap it and then go towards a bigger community to have a say?

  3. Collaborations - should people who have an important vested interest in the sucess of the stable coin contract like UI runners - collaborating other stable coins and exchanges have a say and how do we align theyre interest to the stable coins interest (fees should they be used for more than just the redistribution of founds to the stabel coin holders) ?

  4. Liabilities. An autonomous contract has no liabilities but a vote that then causes damage in such a contract might. How do we protect the voters so they will vote freely what they believe is in best interest? I think we could look to insurance sector for inspiration to this.

For me at this point in time I think you start simple and you start with oracles. There should be more oracles in the system so that it is not dependant on the few.

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I like that. Consider me available if I can be of any service.

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Starting with the Oracle’s,
how do we have the highest quality/secure input to the contract, at the quickest possible speed, would be my first question.
as we saw with in the first iteration, when the markets made sudden movements, the input to the contract wasn’t sufficient for a real world tradable product.
What is the simplest way to rectify this.

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I agree with you Kushti.

Open transparent governance is critical for community trust.

The ability for the community to iterate, update and improve the contract over time is critical for solid development.

Even though I took a hit in SigmaRSV, I appreciate that the foundation did what it did, when it did.

Personally, I think this type of contract is critical infrastructure and should have some ZK treasury attached that insure sustainability as well as incentivizes the creation of value.

What that would look like is up to the community and token holders, but it should definitely be conservative, open and transparent.

AdaNorthPool brings up great points that all require deep thought.

The basic framework of AgeUSD has great bones, let’s work together and make it uniquely Ergos.

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I appreciate your personal thoughts on the matter kushti.

In mid-February on Discord, you had mentioned ongoing discussions regarding the DAOization of the Treasury.

It was regarding expanding the multisig capacities, creating a mixture of delegates from the community, core devs and EF members.

Is this related or separate from the governance developments you are proposing here?

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The solution isn’t taking pool updates from 60 to 30 minutes and increasing the fee.

Using a “Moving Average,” either SMA or EMA, would smooth things out, and increasing the updates to be as close to realtime as possible would be useful. Fixing the Oracle issue should eliminate the need to increase the fees, which is a bitter pill just to thwart a weakness in the oracle.

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There are a lot of potential Oracle/fee models to discuss and play with.

It would be interesting to see if we could compile and use the transactional data from the first SigmaUSD iteration to test different parameters.

That is a lot of work/time but long term could be valuable.

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As a non-dev community member that understands contracts I would love to be involved and support better governance in anyway I can.

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Perhaps it would be helpful to pull from the research and work being done for Voltaire over at Cardano? If they’ve already gone to the trouble of breaking down the various constructs for governance it might save some time to piggy back off their research rather than starting from scratch. Just a thought. I suppose I would rather see a governance system based the work of experts in the field rather than an ad hoc solution. Of course if there are already experts internal to this project then it would just be a matter of setting forth some proposals for discussion and voting…

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Using Oracles for better Governance.
Maybe another idea to add more security to the smart contract, and regarding the high demand would be to have a reserve ratio between 800 and 1600%. If the fees are 2x higher, the interest in the contract should be the same, as investors in SigRSV probably came for the share of the fees and not to take a risk. And if investors are paying 2% fees, they will probably want to stay in the contract for the long term, which means that they also don’t want to be to vunerable to negative price changes over the long term. The price could at any time be divided by 8, so that really the maximum risk that the contract should allow people to enter in the contract. That would then also “lock” more ERGs out of circulation, which would be benficial for the price. With fees of 2.5%, you could even go to 1000%-2000% minimal reserve and still get the same interest from investors and still have a lot better prices than competitors on Ethereum. The governance token could then adjust the fees at a later stage if needed, but as market conditions regarding fees, interest rates and anything else could change drastically. Probably that the best solution would be to have a mix between oracles and governance token. For example oracles must answer Yes to the question if there is a problem with parameters X, and the if yes, the voting can occur only on parameter X. Oracles could also be used to validate that there is no known hacking or conflict of interest occuring during the voting process, or it is stopped and delayed.

The smart contract needs real world data adapted to real world situations which are infinitly different and complex, but the smart contract must have the ability to categorise them, simplify them into some parameters and decisions and have the ability to update or even auto-update later on each parameter once we have more experience. Upgradability in any form, even to a new smart contract respecting some very precise conditions like reserve ratios could also help to keep the smart contract valuable over the long term.
So the process would be to first ask vote through a minimum threshold, then asking validation from oracles that there is really a problem, then vote on the specific improvement proposal.
Once ERG market cap is a lot higher, we might also use this advantage to reduce the fees, as it will be more difficult for anyone to manipulate the price.

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I agree developing the long term the ability to take Oracle pool data, create market benchmarks, and developing a mechanism that uses these benchmarks to flexibly price risk could offer huge benefits to ageusd and defi in general.

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Hi all!
In my opinion, Governance for oracle pools and the Sigma USD bank MUST be separated and independent. Oonly in this way we may create few “banks”, “dex” or other smart contracts reused the same data and call this an “ecosystem”.

Orecles should publish actual data ASAP, and then all other contracts independently decide what to do with this data.

about “frontrun” avoidance. Why sigma-bank can’t operate in the same way as frontrunner? just look to the current published oracle date and correct contract trade-rate immediately?

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Does the Ergo Foundation have a collective opinion on how best to proceed? What is the consensus?

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So many awesome proposals here! Based on them I would like to propose the following initial recovery plan:

  1. @scalahub is testing updates for stablecoin bank now. Then we can have testing deployment and then testing update ceremony with @cymatic @Armeanio @ergo101 , who else is willing to be there?
  2. there will be new oracles pool with more frequent updates and some smoothening. Who is willing to be there?

We can start with 2% fee and maybe higher min reserve ratio (as proposed by @veriumfellow ), and also shorter cooling-off period. Then we can go for updated governance schemes, also tracking how SigmaUSD performs.

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Here’s an idea that I don’t care for because I think using an increased fee will be a barrier to adoption, but I’ll mention it anyway:

Attrition could be applied to the fee in either direction. For the first moments after the epoch, the fee is higher and it slides downwards as the pricing data becomes stale.

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