Overview of Ungovernance Phase One

General Discussion
1

As we are approaching the first ungovernance stage (to be executed by 17th of April 2022), it would be a good idea for the entire community to know what to expect. For a quick refresher on RAI ungovernance, check out the official docs.

The following is a series of updates to the RAI protocol in order to prepare it for the first ungovernance phase as well as a list of governance permissions available once ungovernance is in motion.

Parameter Changes

  • ESM Threshold - 10% of the FLX supply (down from 12%). This is the percentage out of the total supply of FLX that must be burned in order to trigger Global Settlement.

  • ETH Stability Fee - 2%. This is the annual stability fee charged to open Safes that mint RAI.

  • Bounds on Redemption Price Movements - +100% or -50% over 4 months (currently 3 months). This is a safety measure to ensure that, in case of RAI market manipulation, the redemption rate cannot make the redemption price move at an alarming rate. With this update, redemption price movements would be limited to +/-100% over 4 months (120 days).

Contract Updates

Governance Minimization Layer for the Lender of First Resort - this contract will restrict governance power over the lender of first resort pool. It still allows governance to set/toggle the following parameters:

  • The minimum amount of staked LP tokens to keep in the lender of first resort pool (tokens which cannot be auctioned for RAI)
  • Enable and disable the 3 month escrow for FLX staking rewards
  • Enable and disable slashing
  • Set the amount of LP tokens to sell in a single auction as well as the starting RAI bid

Besides the LP token amount to sell and the starting RAI bid, the other parameters may be set in stone after the initial ungovernance process is finished and the community takes over. The LP token amount to auction and the initial RAI starting bid are hard to automate due to the fact that automation would depend on calculating the price of a FLX/ETH LP token. Determining the price of a LP token can be challenging due to the fact that the FLX & ETH balances in the Uniswap v2 pool can be easily manipulated.

New Surplus Auction House - this auction house is meant to dispose off system surplus in exchange for FLX. The winning FLX bid in split in two: half of it is sent to FLX/ETH Uniswap v2 stakers and the other half is burned.

Phase One Ungoverned Contracts

The following is a list of contracts that are ungoverned in the first stage as well as governance minimization contracts that still allow for a limited array of parameters to be changed.

  • Liquidation Engine - the only thing governance can do is to whitelist and blacklist saviour contracts through this contract

  • Debt Auction House - governance cannot change any parameter

  • Surplus Auction House - governance cannot change any parameter

  • ETH-A Increasing Discount Collateral Auction House - governance cannot change any parameter

  • Oracle Relayer - governance can only reset the redemption rate to 0% in case of a bug in the controller using this contract

  • ERC20 RAI Contract - governance cannot change any parameter

  • ETH-A Collateral Join - governance cannot change any parameter

  • ERC20 RAI Coin Join - governance cannot change any parameter

  • Tax Collector - governance can change the stability fee for ETH-A between 0.1% and 2% per year. The governance minimization contract for the Tax Collector still needs to be deployed

  • ESM - governance cannot change any parameter

  • ESM Threshold Setter - governance cannot change any parameter

  • ETH-A Single Ceiling Setter - governance cannot change any parameter

  • Collateral Auction Throttler - governance cannot change any parameter

  • ETH-A Debt Floor Adjuster - governance can change the timestamp when the next ETH-A debt floor recalculation can happen. This can delay the recalculation but it does not affect how the core protocol functions. Timestamp changes can be done through this contract.

  • Auto Surplus Auctioned - this contract recomputes the amount of RAI that’s disposed off in a single surplus auction. Governance cannot change any parameter

  • Debt Auction Initial Parameter Setter - this contract recomputes the amount of RAI to ask for in a debt auction as well as the initial amount of FLX to mint for the amount of RAI that’s calculated. In order to recompute these parameters, the contract needs to be connected to price oracles for FLX and RAI. Governance is only able to update the addresses for these oracles

3 Likes
2

Bounds on Redemption Price Movements

Should this be +100% / -50%? These 2 are equivalents; -100% is quite dramatic. Eg -99% is the equivalent of +10,000%. I’m thinking the +/- shoudl be more on an inverse basis, unwieldy as it is.

How will front end change when some of the other ungovernance parameters change?

Rest sounds super awesome to me or way above my head!+

3

That’s a very good point :ok_hand:

4

Bounds on Redemption Price Movements - +100% or -50% over 4 months (currently 3 months). This is a safety measure to ensure that, in case of RAI market manipulation, the redemption rate cannot make the redemption price move at an alarming rate. With this update, redemption price movements would be limited to +/-100% over 4 months (120 days).

Is this enforced at the price level or the rate level? E.g. is it possible to have a rate of +100%/y (which is less than +50% over 4 months)?

Same question for negative rates - would a -75%/y move be allowed since that is still a lower rate than -50%/4 months?

I could see the bounds potentially causing issues if they interfere with normal controller operation during an extreme imbalance. If the rate actually reaches the limit, the controller will stop having any effect, and we would be forced to trigger emergency shutdown.

5

It’s at the rate level and realistically if you go to theese bounds and the market doesn’t react, the system will most probably have to settle either way