Governance

LiQ Governance Structure: Decentralized Governance Framework

LiQ’s Governance structure is designed to be a decentralized, transparent, and participatory framework that empowers $LIQ token holders to shape the protocol’s evolution. As a DeFi-native liquid staking protocol, LiQ requires robust governance mechanisms to manage its staking infrastructure, DeFi strategy allocations, liquidity incentives, treasury funds, and long-term sustainability.

The governance framework operates through a DAO where $LIQ holders have the ability to propose, vote, and implement changes to the protocol. With a hierarchical governance structure, on-chain voting mechanisms, and a multi-sig controlled treasury, LiQ ensures that the decision-making process remains transparent, democratic, and resistant to centralization.

Governance Model Overview

LiQ follows a progressive decentralization model, transitioning from initial foundation control to full community-driven governance as the protocol matures. Governance operates on a token-weighted system, where $LIQ holders determine key protocol parameters and strategic decisions.

Governance Layers & Roles

$LIQ Token Holders (General DAO Members)

  • The core governance participants, responsible for voting on proposals.

  • Stakeholders who hold $LIQ can participate in governance.

  • Their voting power is proportional to the number of $LIQ tokens staked in the governance contract.

Governance Proposal & Voting Mechanism

LiQ governance operates through a structured on-chain proposal system, ensuring that protocol upgrades, economic policies, and treasury decisions are made transparently and democratically.

Proposal Lifecycle & Submission Process

  • Proposal Creation

  • Any $LIQ holder meeting the minimum token threshold can submit a governance proposal.

  • Proposals must be structured, detailed, and contain clear execution parameters.

  • A preliminary discussion phase on the governance forum ensures community feedback before formal submission.

On-Chain Voting

  • The proposal is published on-chain, and $LIQ holders vote via the governance contract.

  • Voting power is determined by staked $LIQ balances at the snapshot block.

  • Voting Period: Typically 5-7 days, ensuring fair participation.

  • Quorum Requirement: A minimum percentage of total $LIQ supply must participate for a vote to be valid.

Voting Outcomes:

  • Yes → Proposal moves to execution.

  • No → Proposal is rejected and cannot be resubmitted immediately.

Proposal Execution

  • If approved, the Governance Council (multi-sig) executes the decision.

  • Some changes require timelock delays before implementation to prevent governance attacks.

Voting Power & Delegation

  • Token-Weighted Voting: Governance power is directly proportional to the number of $LIQ tokens held and staked in the governance contract.

  • Delegation System: Users can delegate their voting power to trusted representatives who participate in decision-making on their behalf.

  • Quadratic Voting (Future Implementation): To balance governance influence, quadratic voting may be introduced, preventing large holders from dominating the vote.

Key Governance Decisions & Control Parameters

LiQ governance oversees all major protocol decisions, ensuring that community stakeholders control key parameters affecting staking rewards, DeFi strategy allocations, and treasury management.

Governance-Controlled Parameters

1. Protocol Fees & Revenue Allocation

  • Adjusting protocol performance fees and revenue distribution mechanisms.

  • Deciding how revenue from DeFi yield strategies is allocated to staking rewards, treasury reserves, and buyback programs.

  • Staking & Yield Strategy Management

  • Determining how MNT deposits are allocated between lending, yield farming, cross-chain strategies, and vaults.

  • Adjusting stMNT reward rates and incentives for liquidity providers.

2. Treasury & Liquidity Fund Allocation

  • Managing treasury reserves, liquidity mining programs, and ecosystem grants.

  • Funding new partnerships, cross-chain expansions, and research initiatives.

3. Protocol Security & Risk Management

  • Approving security audits and implementing safety measures to protect stMNT and governance funds.

  • Authorizing emergency actions in case of an exploit.

4. Tokenomics & Emission Adjustments

  • Adjusting $LIQ staking emissions to ensure sustainable long-term token distribution.

  • Implementing buyback & burn mechanisms to support $LIQ price stability.

Treasury Management & Fund Allocation

LiQ’s governance oversees a decentralized treasury, ensuring that funds are used efficiently for protocol growth and sustainability.

Treasury Composition & Revenue Sources

  • Protocol Fees: A portion of yield farming, lending, and cross-chain strategy profits.

  • Liquidity Incentives: Funds allocated to DEX trading pairs & liquidity providers.

  • DAO Reserve Funds: A governance-controlled treasury used for ecosystem expansion & security grants.

Treasury Fund Utilization

  • Liquidity Incentives (stMNT/MNT pairs) – Ensuring deep liquidity for efficient trading.

  • Ecosystem Development & Grants – Funding DeFi integrations, developer bounties, and research projects.

  • Security & Audits – Allocating funds for ongoing smart contract audits and risk mitigation measures.

Governance Security & Safeguards

Governance Attack Prevention Measures

  • Timelock Delays: Critical proposals require a 48-hour timelock before execution, preventing flash governance attacks.

  • Multi-Sig Execution: Governance proposals must be approved by multi-sig signers, ensuring decentralized oversight.

  • Emergency Pause Mechanism: A failsafe allowing the Security Council to temporarily halt protocol functions in case of an exploit.

Long-Term Decentralization Roadmap

As LiQ evolves, governance will progressively transition from foundation-led oversight to full DAO control.

  • Phase 1: Governance begins with multi-sig execution & community voting.

  • Phase 2: Staking rewards & treasury management shift to fully decentralized control.

  • Phase 3: Full on-chain execution of proposals, removing reliance on manual execution.

Conclusion

LiQ’s governance model is built for decentralized, transparent, and community-driven decision-making. Through on-chain voting, treasury oversight, and protocol governance, $LIQ holders play a direct role in shaping the future of liquid staking, DeFi integrations, and ecosystem expansion. With structured proposal mechanisms, secure execution frameworks, and progressive decentralization, LiQ governance ensures long-term protocol sustainability and alignment between stakeholders.

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