Governance

Governance plays a key role for the Lazy Summer protocol. Governance ensures Fleets remain permissionless and transparent.

Effective governance is essential to ensure the system can scale, preventing user switching fatigue, and to maintaining a trustless environment. Governance enables Protocol upgrades such as the addition or removal of ARKs or the adjustment of ARK parameters. Concretely, this could be a new ARK for a recently launched protocol. Via Governance, a new Ark could be integrated and configured with a low deposit cap and reduced rebalance limits. Over time, as confidence and TVL in a new protocol grows, (see the Lindy effect https://en.wikipedia.org/wiki/Lindy_effect ), then Governance can increase deposit caps.

A Protocol's growth and ultimate success depends on the ecosystem - specifically the individuals and groups who work on and around the protocol. To attract good actors, they'll need to be both compensated and willing to be held to account. This is a core function for Governance - attracting, electing and compensating these organisations or individuals. The Governance contract handles the electing of key protocol actors and the TipJar contract establishes compensation for these actors (Tip streams). Examples of the roles protocol actors are anticipated to perform are: financial protocol risk management, technical reports, smart contract audits, and protocol "Keeping".

The Governance Module introduces the concept of Voting Power Decay. Beyond the traditional delegator → delegate (governors) mechanism, the Protocol layers in voting power decay to erode inactive voting power and rewards. With this mechanism, inactivity leads to voting power being reduced with time. In addition to inactive governors having voting power eroded, any corresponding rewards for participation will also reduce with time. Similarly, delegators that are backing inactive governors are also subject to staking rewards decay. The design goal is that voting power and rewards are eroded for both inactive delegators and inattentive delegates. Delegators must remain cognisant of how active their delegate is if they wish to benefit to the fullest extent.

Why? This mechanism is designed to align governance incentives with active participation and ensure that active community members are maximally rewarded for their time and effort. We believe this mechanism represents a healthy approach to governance.