Vaults: Community Governance & Decentralization

June 01 ,2023

In the first and second installments of our Vaults blog series, we delved into the concept of IST Vaults, their functionality, and the various product features that have been developed to uphold the reliability and safety of IST.

In this article, our focus shifts to exploring the multiple levels of decentralized governance that are integral in managing and sustaining IST today and in the future.

The state of the market

Following the difficulties with UST in May 2022, we've observed a shift in preference from algorithmic stablecoins to more centralized alternatives, with coins like USDC gaining more prominence in the crypto market. However, innovative CDP (Collateralized Debt Position) based stable tokens are starting to gain traction as Web3 continues to demand safer and more decentralized solutions that are backed by on-chain assets. This demand is particularly evident within the Cosmos community, known for its governance-driven approach.

Inter Protocol offers such a solution by ensuring that IST remains fully decentralized and over collateralized. This is achieved by making certain that the value of the collateral users lock up in a Vault always exceeds the amount of $IST minted against it. Moreover, robust liquidation mechanisms are in place to mitigate the impact of high volatility, providing confidence to IST holders that the token will maintain its intended peg to the USD.

Crucially, the collateral eligible for use must receive approval from the community, as well as the Economic Committee (more on this below).

Community governance

The community plays a pivotal role in guiding and shaping the direction of Inter Protocol, and ensures the protocol remains decentralized. In fact, the protocol includes multiple levels of community governance.

BLD stakers govern chain-level votes. This includes voting on implementing new governance processes as well as approving new collateral types for vaults, and stablecoins for the PSM. They also determine new asset price feeds for the oracle network required for collateralization ratios.   

Even the Reserve, which functions as a smart contract designed to hold crypto-assets as "protocol controlled value", has its allocation of funds within the pool determined by BLD staker governance.

Governance is managed through discussions on our forum, including proposals and voting at the chain level.

Economic Committee (EC)

The other governing entity is the Economic Committee or “EC”, which is a body elected by BLD stakers to make informed operational decisions around the Protocol with the ability to act as a fast response team if necessary. 

The first Economic Committee was elected on 16th September 2022 from this on-chain vote.

The EC take action on behalf of BLD holders and play a role guiding economic strategy, managing risk parameters, evaluating new collateral types, and monitoring operations.

The EC has direct control of contract parameters and the ability to pause contract functions if necessary. This could be required in the case of a significant asset or bridge failure, or an ongoing exploit, and ensures IST has a failsafe option to protect token holders.

How IST shapes the interchain

We believe to drive the next stage of growth across the interchain there is a need for a liquid, reliable, and decentralized stable token that is IBC native. This will ensure that current and future users feel safe engaging with such a stable token across multiple IBC zones.

IST presents such a solution, constructed from the ground up to equip the Cosmos community with a reliable stable token. Its inherent adaptability has been built with the foresight to thrive within the ever-evolving landscape of Web3.

If you’d like to take part in shaping the future of the interchain and the development of IST, you can keep up to date and join our vibrant Inter Protocol community using the links below.  

Join the community discord Follow us on Twitter Participate in our forum