Since January 1st, 2019:
USD Volume: +2,668%
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Unique Addresses: +332%
Fundamentals for @KyberNetwork have been surging 🚀
— DeFi Rate (@DefiRate) March 17, 2020
In lieu of the launch of Katalyst – the network’s upcoming tokenomic upgrade – the community has been eager to hear about the interworking of one of the most highly anticipated DeFi DAOs to date – KyberDAO.
Early today, Kyber shared an ecosystem update which dives into different design choices surrounding KyberDAO and the $KNC ecosystem. Let’s dig into what the report says!
✅KyberDAO: Staking and Voting Overview
We're getting closer to Katalyst! This post shares the key design principles and mechanisms behind the KyberDAO, incl. important details on KNC staking, voting, delegation, and claiming #ETH rewards. #katalyst2020 https://t.co/lxorId8cCi
— Kyber Network (@KyberNetwork) April 2, 2020
Governance At Its Finest
For those unfamiliar with DAOs, KyberDAO is largely a mechanism for the community to govern how Kyber’s network fees are distributed. At its core, tokenholders will use the DAO to vote on how network fees (currently 0.25%) are split between:
- Voting Rewards – Fees which are distributed to holders who stake and participate in the KyberDAO governance.
- Token Burns – Fees which are allocated to burning outstanding KNC.
- Reserve Incentives – Fees rewarded to those providing Kyber with underlying liquidity.
What emerges is a balancing act in which the three levers must be carefully curated to ensure all parties are properly aligned. Here’s a good representation of this:
Perhaps the most unique aspect of KyberDAO is the novel approach to governance. Rather than aggregating voting rewards over long time intervals or issuing them dynamically, the DAO will leverage what they called epochs.
“Staking and voting are done in epochs, which just means fixed periods of voting time, denominated in Ethereum block times. One KyberDAO epoch will be around once every 2 weeks.”
Every epoch will contain at least one governance proposal and all tokeholders will split that epochs rewards pro-rata relative to the amount of KNC staked and the number of polls participated. Best of all, all rewards are issued in ETH and claimable in the following epoch. Here’s a look at how rewards are allocated:
KyberDAO will also introduce voting delegation in the form of “pool masters”. These are highly active participants who can be relied on to vote on all campaigns and have an informed background on the logic and implications of a given decision. Pool masters share to earn a larger portion of the epoch rewards, while those who delegate to pool masters are able to collect passive rewards for governance without actually having to vote themselves.
DAO Food for Thought
All and all, it’s safe to say that KyberDAO is shaping up to play a huge role in the wider DAO ecosystem. Beyond its innovative design and custom framework, Kyber is extremely attractive for a number of key reasons:
- No Minimum KNC – Anyone can participate in governance with as little as 1 KNC.
- No Lockups – Unlike other DAOs in which tokens are vested for upwards of a year, tokenholders are free to enter and exit KNC at a whim.
- No ‘slashing’ –Kyber governance participation is entirely up to the individual tokenholder. While users will receive more voting rewards for more participation, there is no downside to going an epoch or two without voting.
In a world where current DAOs are largely permissioned or subject to high capital requirements, KyberDAO will be a very interesting experiment to allow users big and small to participate in governance in a value-added way.
As far as accessing the DAO itself, Kyber will roll out a new site a launch – kyber.org – which is entirely focused on governance. This site is accessible both on desktop and mobile and therefore aims to make it as easy as possible for users of all backgrounds to get involved.
Shifting Towards Decentralization
One of the more respectful elements of this announcement was Kyber’s clear communication that they will initially play a major role in mandation and execution of voting proposals within the DAO. Rather than simply handing the voting off to the community and stepping aside, Kyber will aim to gradually decentralize the voting process as more participants become familiar with what is best for the wider Kyber ecosystem.
“As the current DAO maintainer, we take the role of facilitating discussions, driving open and transparent decision making, and executing (and following through) the formal DAO processes very seriously.
If we perform this balance well, our legitimacy will continue to grow, participation will increase, and the community’s understanding of the key operations will be sufficient to allow us to gradually move more operations towards DAO votes, including network features, technical upgrades or protocol upgrade decisions.”
For those keen to get involved with KyberDAO, we encourage you to join the Discord and head on over to the governance channel. There will also be a “pre-vote” poll in the coming weeks to decide the initial set of variables to start the new network with before the DAO begins.
7/ There will be an important “Pre-vote” Poll 🗳conducted on Discord to decide the initial set of variables to start the new network with before the DAO is live💡
Follow @KyberDAO and join us on Discord🤗 https://t.co/GATUjxaPzt
h/t to community member skycloud for the GIF pic.twitter.com/IWn9XJ9pxp
— Kyber Network (@KyberNetwork) April 2, 2020
For developers eager to build tools to help optimize the KyberDAO workflow and onramps, we recommend referencing these documents.
To keep up with new updates in a passive manner, follow the KyberDAO Twitter.
We’re super stoked on this launch and look forward to playing a big role in their governance in the coming weeks!
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.