Governance

VESTO Token: Governance Mechanism

Governance Overview

The $VESTO token serves as the foundation of the Vesto Protocol's governance system, allowing token holders to participate in shaping the future development and operation of the protocol. The governance mechanism is designed to be transparent, inclusive, and resistant to centralization while ensuring efficient decision-making.

Governance Rights

Holding $VESTO tokens grants users the following governance rights:

1. Voting Rights: Vote on protocol proposals proportional to staked tokens
2. Proposal Creation: Submit formal improvement proposals (subject to minimum token requirements)
3. Parameter Adjustment: Vote on changes to protocol parameters like fees, collateral requirements, etc.
4. Treasury Management: Determine the allocation of funds from the governance treasury

Governance Evolution

The Vesto governance system will evolve through three distinct phases:

Phase 1: Bootstrap Governance (Months 1-6)

• Core team maintains significant influence over critical protocol decisions
• Community voting on a limited set of parameters
• Focus on security and stability of the protocol
• Minimum thresholds for proposal submission set higher

Phase 2: Transition Governance (Months 7-18)

• Increased scope of community governance
• Reduced team influence as token distribution broadens
• Introduction of delegation mechanisms
• Lower thresholds for proposal submissions

Phase 3: Mature Governance (Months 19+)

• Full community governance across all protocol aspects
• Core team maintains only emergency security controls
• Advanced governance mechanisms including quadratic voting
• Governance participation incentives

Voting Mechanism

Token Staking for Governance

To participate in governance, $VESTO holders must stake their tokens in the governance contract:

• Staked tokens are locked for a minimum of 7 days
• Longer staking periods (up to 4 years) receive voting weight multipliers
• Staked tokens cannot be transferred but maintain full voting rights
• Stakers receive a share of protocol fees proportional to their stake

Voting Weight Calculation

Voting weight is calculated using the following formula:

$$VotingWeight = TokensStaked \times (1 + LockupBonus)$$

Where LockupBonus is a multiplier based on the staking duration:

• 7 days: 1.0x (no bonus)
• 1 month: 1.1x
• 3 months: 1.3x
• 6 months: 1.5x
• 1 year: 2.0x
• 4 years: 4.0x

Proposal Lifecycle

1. Idea Discussion: Community discussion in the forum
2. Proposal Draft: Formal proposal document created
3. Feedback Period: 3-day community feedback period
4. Temperature Check: 2-day preliminary voting
5. Formal Proposal: Off-chain proposal creation (requires 10,000 $VESTO minimum) - Snapshot
6. Voting Period: 5-day voting period
7. Execution Delay: 2-day timelock before implementation
8. Implementation: Successful proposals are implemented

Proposal Categories

Protocol Parameters

Adjustable parameters include:

• Withdrawal fees
• Slippage tolerance
• Supported input tokens
• Oracle update thresholds

Derivative Pools

Governance can vote on:

• Creating new derivative pools
• Adjusting pool compositions
• Setting collateral weights
• Adding/removing supported collateral tokens

Treasury Management

Decisions regarding:

• Funding new development initiatives
• Cross-protocol partnerships
• Liquidity incentives
• Token buyback programs

Technical Upgrades

Governance of:

• Smart contract upgrades
• Integration of new yield strategies
• Security implementations
• Technical parameter adjustments

Fee Distribution

Protocol fees are distributed as follows:

• 50% to $VESTO stakers
• 15% to token buyback and burn
• 35% to protocol treasury

Fee distribution to stakers is calculated proportionally based on:

$$UserFeeShare = \frac{UserStakedTokens \times StakingMultiplier}{\sum_{i=1}^{n} (StakedTokens_i \times StakingMultiplier_i)} \times TotalFees$$

Governance Security

To ensure secure governance processes:

• Multi-tiered proposal thresholds based on risk level
• Time-delayed execution for all protocol-critical changes
• Emergency security council for critical vulnerability responses
• Multiple security audits required for major protocol upgrades

Governance Analytics

The Vesto governance dashboard will provide:

• Real-time voting statistics
• Historical voting records
• Governance participation metrics
• Staking distribution analytics
• Proposal success/failure analysis

Through this comprehensive governance system, $VESTO token holders will play an active role in guiding the evolution and growth of the Vesto Protocol, ensuring alignment between all stakeholders.