Governance
Given that Dahlia is a permissionless protocol, anyone can create a lending market. This significantly reduces the need for heavy-handed governance and instead shifts focus to managing risk and setting key parameters. Dahlia’s governance plays a limited but critical role in ensuring the stability and safety of the protocol through carefully controlled pre-deployment and post-deployment parameters.
Pre-Deployment Parameters
LLTV Range: Defines the permissible range of Liquidation Loan-to-Value (LLTV) ratios that users can apply when creating new markets. The default LLTV range is set to 10%-98%, offering market deployers flexibility to align with specific risk profiles.
Liquidation Bonus Range: Specifies the range of liquidation bonus rates, determining the portion of collateral awarded to liquidators during liquidation. This ensures bonuses remain attractive without imposing excessive penalties on borrowers.
Allowed Interest Rate Models (IRM): Controls the list of interest rate models that can be used to regulate interest accrual. By maintaining a whitelist of IRM models, governance ensures predictable and consistent protocol behavior.
Post-Deployment Parameters
Protocol Fee: A percentage fee deducted from the borrower’s APY and directed to the DAO treasury. This fee is set at 3% of the interest earned by lenders and can be adjusted by governance to fund protocol improvements, development, and community initiatives.
Reserve Fee: A fee collected to form a reserve or insurance buffer for each market, helping protect against bad debt. The default reserve fee is set to 0% but can be adjusted by governance as needed.
Flashloan Fee: A fee applied to the use of the flashloan feature. By default, this fee is 0%, though governance can update it to align with market needs.
Repay Period: The duration allowed for borrowers to repay their debt and claim collateral in the event of a stalled market. It is set to 2 weeks by default and can be adjusted by governance.
Dahlia Registry Control: Manages protocol-wide settings such as addresses for critical integrations (e.g., Royco IAM), ensuring smooth and secure connections across the ecosystem.
Market Actions:
Pause/Unpause Market: Allows governance to temporarily pause or unpause a market in the event of emergencies or risk concerns.
Market Deprecate: If a market is deemed unsafe or inactive, governance can permanently deprecate it, preventing further interactions.
Stall Market: In the event of an oracle malfunction or data delay, governance can place a market in Oracle Stalled Mode. During this period, no actions requiring fresh price data (e.g., borrowing, liquidations, collateral withdrawals) can occur.
Interim Governance Structure
At launch, Dahlia will operate under an interim governance structure until decentralized governance contracts are fully deployed. During this period, a Guardian Multisig will manage the protocol, consisting of 5 members with a voting threshold of 3 out of 5. This multisig will include Dahlia Foundation members and core protocol contributors to ensure fast, reliable decision-making while maintaining decentralization.
Future of Governance: The Default Framework
Dahlia’s governance will evolve to adopt the Default Framework, a modular system that allows governance interactions through policies and modules. This flexible architecture empowers the community to implement governance upgrades, manage risk parameters, and adapt to evolving market dynamics efficiently.
The Default Framework prioritizes:
Decentralization: Shifting control to stakeholders and the broader community.
Scalability: Allowing governance to adapt to new features and markets without requiring core protocol changes.
Security and Stability: Ensuring governance changes maintain the safety and integrity of the protocol.
By embracing the Default Framework, Dahlia will achieve a governance structure that is robust, adaptive, and inclusive, empowering its community to actively participate in shaping the future of the protocol.
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