Flare Finance will operate as a decentralized autonomous organization (DAO) meaning it will rely heavily on holders of its two governance tokens YieldFlare (YFLR) and YieldFin (YFIN). Flare Finance governance is performed in a trustless manner through the utilization on token holder voting coupled with smart contracts that allow for approved changes to be made to ecosystem infrastructure, additions, and parameter settings. Holders of YFLR and YFIN will be able to propose and vote on a variety of options, which means voter participation will be highly important to the continued progression of the Flare Finance ecosystem. As participation in governance voting is voluntary, Flare Finance provides a governance staking rewards mechanism to incentivize governance token holders to participate in the democratic voting process.
It is important to note that due to the supply difference between YFLR and YFIN that each unit of YFIN holds 10k votes compared to each unit of YFLR holding 1 vote. Additionally, 1K YFIN and 20M YFLR are being allocated to the Flare Finance Foundation to be utilized by members of the DAO for enhancements to the network, operations, legal fees, and more. Holders of the governance tokens also reserve the right to vote to dissolve the foundation and have all of its governance tokens burned. This leaves governance token holders with options and ultimately the power over the direction of the network.
Governance staking presents holders of YFLR and YFIN with the option to earn guaranteed yield by locking their tokens in the FlareGov application to be accessed through the FlareFarm platform. Users can freely enter in and out of the governance staking pool at any time. The benefits of governance staking include rewards in the form of YFIN, YFLR, FLR, and F-Assets. Additionally, stakers will be allowed to submit and vote on governance proposals through this staking pool. Governance staking rewards are distributed daily through the Kakeibo – APY Cloud, which can be thought of as an ecosystem-wide yield aggregator. Governance staking rewards will vary dependent on the total supply of governance tokens locked, amount staked by a user, current protocol revenue, total value locked (TVL), and the minimum/maximum APY set for the pool.
Flare Finance stakeholders can utilize the proposals feature of the ecosystem to incite change across the entire platform. Only governance token holders participating in the FlareGov platform (i.e. governance staking) can submit proposals which will cost a variable fee based on total USD value staked. The fee decreases in percentage amount as more YFLR and YFIN is staked in the governance staking pool. Fees collected from denied proposals circulate back to the APY Cloud and the ones associated with approved proposals burning the fees paid. Proposals will allow users to suggest changes to parameters like fees, listing additions or removals, and additional product features across the Flare Finance product suite. Additionally, proposals will allow for users to request for new products be created through grants. Even more powerful, FlareGov grants governance token holders the ability to utilize the reserves of YFLR and YFIN whether that be through remediation or burning.
Voting periods last for 14 days and allows participants in governance staking to review the detailed proposals during that time period. If at any time during the voting period the minimum vote threshold is reached, then the voting period will accelerate to 3 remaining days. The minimum voter turnout is calculated by taking 10% of the total YFLR and YFIN staked in the governance staking pool. Once a vote is passed, it is automatically configured on the system in situations where that is applicable. Failed proposals are then recorded in the proposal history database. In short, the Flare Finance governance system allows users to truly control the ecosystem they are participating in an extremely flexible and efficient manner.