GSUp token represents a multi-function community token used within the GSU Protocol.
GSUp token is used to vote on functions within the protocol, therefore, representing the voting power of an individual or a group of individuals.
Anyone can propose a poll/vote for the governance to vote on. One can vote via sGSUp tokens upon depositing them into a voting contract.
In case of GSUCoin surplus inside the protocol, governance can trigger an auction of the surplus GSUc to be used to purchase GSUp tokens from the market. Upon successful completion of the auction, the protocol will burn the GSUp tokens acquired, thereby increasing the value among all GSUp holders.
In case of the GSU Buffer Account becomes undercollateralized, GSUp tokens can be minted by the protocol using them to purchase the GSUc tokens on a market which will be then used to balance out the protocol.
As GSUp tokens will be required to be deposited into a smart contract to contribute to the administration of the protocol through joining the voting pool, it will also allow those who actively participate to earn a proportional reward coming from the Stability and Liquidation Fees of the protocol (Staking).
Stability Fees differ across the vault types.
Governance via GSUP Token
The on-chain governing structure of the GSU Protocol has been crafted to be as adaptable as possible so it can evolve as needed. As the GSU Protocol develops together with its community, more sophisticated forms of proposals might be employed in the future.
sGSUp token holders will be responsible to vote on e.g.:
New collateral types.
Alter the risk parameters of existing collateral types.
Adjust the Savings Rate.
Propose and vote on Improvement Proposals.
Activating the Emergency Shutdown (last resort of protection).
Individuals and delegates in the GSU Protocol Governance will be able to use the funds collected in the Buffer, which consists of proceeds from Stability Fees, Liquidation Fees, and other sources of income, to finance various infrastructural needs and services, such as risk management, research, and price feeds.
A security delay (>48h) in the governance process is set up to maintain the necessary opportunity to protect the protocol from policies that could harm the protocol via a coordinated attack by malicious actors or economic black swan events.
The GSU Protocol Governance process will be conducted in two steps. A proposal polling and executive voting.
Proposal Polling is done to educate and gauge community opinion before any votes are cast.
Executive voting is used to decide whether to accept or reject changes to the system.
Anyone with an Ethereum address can propose changes. GSUp token holders then cast approval votes for which proposal they want to become Active. The proposal with the most votes is activated and can make changes to the protocol’s internal variables.
More information about delegates and progressive decentralisation of the protocol and its components (oracles, keepers, DAO guilds etc.) will be introduced over time. Decentralization is a journey, and we are looking forward to sharing it with all of you!
GSU Protocol Auctions
Liquidating vaults that are below the collateral threshold is a very important aspect of sustaining a secure and overcollateralized system. The GSU Protocol has 3 different auctions that are open for users to participate in.
Collateral Auction is where the Protocol sells the collateral from the Vault and uses the GSUc earned from the sale to cover the Vault’s obligations, including a Liquidation Penalty fee set by GSU Protocol voters. If enough GSUc is offered in the auction, the Protocol will attempt to sell as little collateral as possible and return the rest to the Vault owner. If not, the deficit is converted into debt that gets covered by the GSUC in the GSU Protocol Buffer.
Debt Auction is triggered when the protocol buffer does not hold enough GSUc in the system. It will create more GSUp tokens (diluting the supply) and then sell them to the bidders in exchange for GSUc which is then used to balance the system debt.
Surplus Auction happens when the amount of GSUc received from auction and fees is more than what the GSU Protocol Governance has set as the Protocol Buffer limit. During this auction, users can bid on a fixed amount of GSUc by offering more and more GSUp tokens. After the auction is over, the GSU Protocol will burn the collected GSUp tokens which will decrease the total amount of GSUp in circulation.
Thanks to these mechanisms the protocol can maintain a safe collateral ratio and protect the integrity of the system. Therefore, at any moment all the issued GSUc is backed with more crypto collateral than the amount of GSUCoin issued in a permissionless and transparent manner.
This is how we achieve a shared stability that is not dependent on single point of value determination, together.