Governance
An overview of the governance system for tokenholders of EUL
Overview
The code for Euler Protocol is controlled by a decentralised community through on-chain governance on the Ethereum network. The community are holders of a protocol-native governance token called EUL (pronounced ‘oil’), which enables the community to effect change over the Euler Protocol code. Tokens can be used to propose upgrades to the protocol or vote on the proposals of others.
Protocol Code
Governance can vote to effect change over the Euler Protocol for parameters such as:
- Default isolated tier borrow factor
- Collateral and borrow factors of specific assets
- Inclusion of an asset in the cross and collateral tiers
- Change in choice of risk parameters and general methodology
On-Chain governance, allows unique features such as delegated voting and proposition powers, as well as protocol (and governance configuration) updates via a time lock executor. This ensures the protocol can adapt to evolving market conditions, as well as upgrade core parts of the protocol over time.
On the other hand, for off-chain governance, there is no code to review or implement as such. It is mainly a call for the Euler Foundation to carry out an action. Issue a grant, or pay a bill, for example. Thus mainly used to aid Euler in making difficult decisions in collaboration with the community.
Proposal Process
The General Governance Process is documented on the Governance Forum. The flow of the governance process is as follows:
- Discuss the idea/draft proposal in the Euler Discord #governance channel
- Draft & create a RFC (Request For Comment) Proposal on Governance forum for further feedbacks
- Contact a forum moderator to create a eIP (Euler Improvement Proposal) on the Governance forum
- eIP created on Snapshot (off-chain voting)
This is a necessary step for all types of proposals, and execution will be carried out by Euler Foundation if the proposal is successful.
Optional step — eIP created on Tally (on-chain voting)
If and only if the proposal includes changes to the smart contract, the proposal will be voted on Tally after Snapshot voting. Execution will be targeting Euler protocol smart contract if the proposal is successful.
It is noteworthy that not all off-chain proposals that are either binding or non-binding on the protocols smart contracts will end up having an on-chain proposal depending on the outcome of the off-chain ‘gas-less’ voting and for gas cost savings. On the other hand, not all on-chain proposals will require an off-chain counterpart.
Depending on the outcome of an off-chain voting process, an on-chain proposal might be created which will be executed against a target protocol smart contract if successful.