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Incremental governance

Nirvana’s governance is unique among DeFi protocols: it is incremental, fully decentralized, and automated. There are many parameters that can be adjusted to improve the protocol’s performance. These parameters are managed by the protocol through a series of incremental changes on a 1 week cadence. Every week, the protocol automatically tallies the global ballot of votes, and makes small adjustments to protocol parameters. This system takes all central human intervention out of the equation, and instead relies on the global community to collectively steer the protocol in the best direction.

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Governed parameters

The parameters that can be adjusted are:
  • prANA emission rate: the rate at which prANA is emitted to ANA depositors.
  • Buy ANA fee: the fee paid when buying ANA.
  • Sell ANA fee: the fee paid when selling ANA.
  • Realize prANA fee: the fee paid when realizing prANA.
  • Withdraw ANA fee: the fee paid when withdrawing staked ANA.
  • NIRV origination fee: the fee paid when minting NIRV.
Each parameter has a current value. After 1 week voting period elapses, it will change by a small percentage either up or down.

Global ballot example

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Floor raise

A special case for governance is whether the protocol should raise the floor price of ANA. The vote on the floor raise does not take effect once every week, but instead holds constant influence on whether the floor will rise. If the majority decides to keep the floor static, the floor will not rise even when it satisfies the necessary conditions to rise. If a majority vote is in favor of allowing the floor to rise, the floor will rise automatically once the conditions are met.

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Voting with prANA

The governance token of Nirvana is prANA. Each prANA token held endows the holder with 1 unit of vote power on the global ballot. Allocating votes to the ballot does not “consume” the prANA tokens. They can be de-allocated or re-allocated at any time. Once a week, the protocol tallies the global ballot of votes, and makes small adjustments to protocol parameters depending on the majority vote for each parameter (either to raise it or lower it).

Example of a user's prANA ballot

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Guardrails

Even though the governance process ensures slow changes to the protocol, there are hard maximum and minimum values that cannot be exceeded. It is unlikely that these guardrails will ever be hit, but they are there to prevent potential long-term majority attacks.

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Alignment

Governance is powered by prANA, the protocol’s native governance token. Vote power is equal to the amount of prANA held. This prANA is also actively earning a share of the protocol’s revenue. With this in mind, the voters are economically aligned with the health of the protocol. They have a rational incentive to balance fee rates so that they get the greatest revenue. Without revenue sharing, the prANA voters would instead be most likely incentivized to minimize fees entirely.