Governance Pool
Only protocol participants may govern Umoja. All governors are rewarded for their participation.
Stake $UMJA, earn Bitcoin ($yBTC), and build voter influence within the protocol.
The Problem
For Umoja to fully decentralize, governance decisions must be made by the broader community. However, participation is low—research shows that under 10% of token holders vote, with fewer than 1% controlling 90% of the voting power. This imbalance stems from weak governance incentives and mismanaged token distributions. Most protocols fail to motivate governance participation like they do staking, where rewards (e.g., APY) are offered.
Overview
The Governance Pool tokenomics model is designed to maximize protocol financial security and governance participation by encouraging long-term staking. The model is outlined as follows:
$UMJA Staked for $UMO: Staking $UMJA in the Governance Pool earns users $UMO (non-transferable governance tokens) and smartcoins rewards as an APY.
$UMO as Governance Token: $UMO, earned over time through staking, represents voting power for protocol proposals via Snapshot. Voting power infinitely accrues using a formula that gives greater weight to the duration of staking over the amount staked. As the staking time increases, the accrual rate grows exponentially, rewarding long-term stakers significantly more than those who stake for shorter periods. Snapshot voting with $UMO will be quadratic.
Governance Rewards: Stakers earn 20% of protocol management fees via smartcoins rewards, claimable upon unstaking $UMJA. Rewards are accumulated monthly to incentivize longer staking periods and reward distribution is directly proportional to the amount of $UMJA staked over the total staked supply.
$UMO Grants Working Lottery Eligibility. Stakers who accrue $UMO become eligible for the Working Lottery. Those who accrue more $UMO have a better chance of winning. (Coming soon).
Voter Influence Accrual
The following provides the voter power accrual model for the non-transferable governance token, $UMO:
GOV(t) = S * rGOV * t^αWhere:
GOV(t) is the total amount of governance tokens accrued after time t.
S is the amount of staked tokens (i.e., $UMJA).
rGOV is the accrual rate of governance tokens per unit of time.
t is the time duration for which tokens are staked.
α is a multiplier that enhances the influence of time over the staking amount. α should be greater than 1 to favor longer staking durations.
Off-Chain Governance
Umoja will implement a monthly proposal review and voting cycle amongst $UMO token holders using the quadratic voting model on Snapshot, a generalized Web3 governance platform. Quadratic voting is a system where the cost of votes increases quadratically, making it more expensive to cast multiple votes on the same issue. The voting model carries the following benefits:
Prevents Domination: Limits the influence of any single voter.
Captures Preference Strength: Reflects how strongly voters feel about issues.
Encourages Fairness: Gives minority opinions a better chance to influence outcomes.
From a high level, the proposal submission and voting process will be conducted similarly to Uniswap’s process.
Governance Parameters
Finally, the following parameters & events must be voted on by protocol governance:
Management Fee
The lifetime performance fee that the protocol takes on its total assets under management (AUM).
18%
Yield Stabilization Fund Fee
The proportion of the management fee that is distributed to the Yield Stabilization Fund to ensure that the protocol’s users are protected from negative yield performance. Fees are redistributed quarterly and are first applied to negative yield performance events and then provided to smartcoin stakers.
30%
Governance Pool Fee
The proportion of the management fee that is distributed to the Governance Pool treasury to reward $UMJA stakers (and governors). The fee is redistributed to stakers in proportion to the amount of $UMJA stake they commit of the total $UMJA supply staked.
20%
Mint Reward Rate
The rate at which smartcoin minters earn $UMJA rewards for every USD of smartcoins they mint.
25 $UMJA / $1 Smartcoins Minted
Burn Fee Rate
The rate at which smartcoin burners burn $UMJA fees for every USD of smartcoins they burn.
27 / $1 Smartcoins Burned
Smartcoin Updates
Any update that introduces new strategies / major fixes to the underlying trading of any smartcoin.
N/A
Collateral
Supported smartcoin collateral.
yBTC, BTC/cbBTC
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