1–1–0. SHIELD VAULT (LIQUIDITY RESERVE)
All accepted assets can be leveraged to farm Shield in the Shield Protocol through smart contracts called Shield Vaults. Users can access the Shield Protocol through a number of different user interfaces (i.e., network access portals), and interfaces built by the Shield community. Shield proceeds from the Asset Auction go into the Shield Bond, which serves as a buffer to overall supply that could result from future Asset Auctions and the accrual of the Shield Savings Rate. If Shield proceeds from auctions and Stability Fee payments exceed the Shield Bond limit (a number set by ShieldDAO Governance), they are sold through a Surplus Auction. During a Surplus Auction, bidders compete by bidding increasing amounts of Shield to receive a fixed amount of SHIELD BOND. Once the Surplus Auction has ended, the Shield Protocol stores the SHIELD BOND in the Shield Vault.
1–1–1. Liquidity Providers
Staking/Farming to Provide Liquidity. Shield holders can become liquidity providers by staking their Shield and other approved asset together in the Shield Pool. Shield’s Liquidity Reserve is a multi-collateral-based fund that ensures the safety of the whole protocol since collaterals will not depreciate due to the drop of a single token. Shield’s liquidity providers can receive staking rewards and a portion of transaction fees; however, there are still potential losses involved. At the launch of Shield, Shield offers generous staking rewards to incentivize Shield Holders to become liquidity providers as well as to encourage early adopters to join and improve the system. Staking Rewards have a specified duration and rewards will decrease over time. The goal is to compensate Staking Rewards with transaction fees.
2–1–0. Shield Holders
Holders shall obtain staking rewards and a portion of transaction fees at the end of each farming period. Stakers shall partake in transaction fee sharing and staking rewards via Smart Contract API or Strike UI. The amount of transaction fee sharing shall be issued proportionally to all Stakers according to their share of FundTokens in Liquidity Reserve. Staking Rewards shall be issued proportionally to all Stakers according to the total share of FundTokens in Liquidity Reserve. Staking Rewards cannot be claimed more than 3 months after being issued.
2–1–1. Shield Savings & Lending Rate
Shield Savings & Lending Rate (SSLR) allows any Shield holder to earn automatically and natively by locking their asset into the SSLR contract in the Shield Protocol. The SSLR can be accessed via the Save portal or through gateways into the Shield Protocol. The SSLR is a global system parameter that determines the amount Shield holders earn on their asset over time. When the market price of Shield deviates from the Target Price due to changing market dynamics, Shield holders can mitigate the price instability by voting to modify the SSLR accordingly. Initially, adjustment of the SSLR will depend on a quarterly process, whereby Shield holders first evaluate and discuss public market data and proprietary data provided by market participants, and then vote on whether an adjustment is necessary or not. The long-term plan includes implementation of the SSLR Adjustment Module, an Instant Access Module that directly controls both the SSLR and the Base Rate. This module allows for easy adjustment of the SSLR (within strict size and frequency boundaries set by Shield holders). The motivation behind this plan is to enable nimble responses to rapidly changing market conditions, and to avoid overuse of the standard governance process of Executive Voting and Governance Polling.
3–1–0. Governance Plan
3–1–1. Improvement Proposals
https://gov.shielddao.app/ shall be the main place to propose and discuss the pros and cons of new ideas in the foreseeable future.
3–1–2. Decision-making
Pending the development of an on-chain governance portal, team members of the Shield Protocol shall make decisions in the best interest of all Shield holders by taking into consideration the Shield community’s feedback and sharing the team’s rationale warranting such decisions. The Shield community’s input shall be collected via polls or surveys in its respective forums.
3–1–3. Use of $Shield in the ShieldDAO Governance
$Shield — the governance token of the ShieldDAO — allows its holders to vote on proposed changes to the ShieldDAO. Note that anyone, not only Shield holders, may submit proposals for a vote. Any voter-approved modifications to the governance variables of the Protocol shall not take effect immediately, should voters decide to activate the Governance Security Order (GSO). The activation of the Governance Security Order (GSO) shall have a delaying effect of up to twenty-four (24) hours, which shall give Shield holders the opportunity to protect the system, if necessary, against a malicious governance proposal (e.g., a proposal that alters Asset parameters contrary to established monetary policies or that allows for security mechanisms to be disabled) by triggering a Shutdown.
3–1–4. Polling and Executive Voting
In practice, the ShieldDAO governance process includes proposal polling and Executive Voting. Proposal polling is conducted to establish a rough consensus of community sentiment before any Executive Votes are cast. This helps to ensure that governance decisions are considered thoughtfully and reached by consensus prior to the voting process itself. Executive Voting is held to approve (or not) changes to the state of the system. An example of an Executive Vote could be a vote to ratify Risk Parameters for a newly accepted collateral type. At a technical level, smart contracts manage each type of vote. A Proposal Contract is a smart contract with one or more valid governance actions programmed into it. It can only be executed once. When executed, it immediately applies its changes to the internal governance variables of the Shield Protocol. After execution, the Proposal Contract cannot be reused. Any Ethereum Address can deploy valid Proposal Contracts. Shield holders can then cast approval votes for the proposal that they want to elect as the Active Proposal. The Ethereum address that has the highest number of approval votes is elected as the Active Proposal. The Active Proposal is empowered to gain administrative access to the internal governance variables of the Shield Protocol, and then modify them.
