Arc Finance -DAO Governance
Today, we shall be exploring the world of Arc Finance, focusing on their DAO Governance. Before we dive in, let’s go through a brief introduction on what DAO is.
DAO stands for Decentralized Autonomous Organization. It is a non-centralized entity. Decisions get made at the bottom of the chain and sent upwards, all of it governed by a community organized around a set of rules enforced on a blockchain.
These decisions are made through proposals that the group votes on over a set period of time. A DAO operates without the need for hierarchical management and can serve a variety of functions. With these organizations, freelancer networks where contracts pool their funds to pay for software subscriptions, charitable organizations where members approve donations, and venture capital firms owned by a group are all possible.
Because decentralization is a feature of blockchain, DAO essentially improves the blockchain's efficiency and security. For most protocols, adopting governance tokens for DAO governance is the way to go. With the governance token, individuals can vote on issues raised by the protocol, deciding what the protocols should do and how it should be done. However, the main issue here is a low participation rate. This is primarily due to the fact that participants' interests are not directly related to the DAO.
This is where Arc Finance’s DAO governance method comes in. As Arc Finance is a liquidity-as-a-service (LaaS) provider, it adopts LP as a voucher of governance qualification. This method of governance really optimizes DAO governance as it works to make sure that user interest aligns with that of the protocol too, ultimately leading to better prospects in the future. LP holders are more likely to have a direct interest in the project, which motivates them to actively make meaningful contributions to DAO governance.
Here is how it works …
As earlier mentioned, decisions in a DAO are made through proposals that the group votes on over a period of time. In Arc Finance’s DAO, the community nodes are the ones who make the proposals. By staking LP vouchers, any user can obtain DAO voting rights, with the weight of the user's vote based on the number of LPs staked. That is to say, one vote for every LP voucher staked.
Community nodes with the proposal right must first stake the required number of LP vouchers before voting on proposals. This process is reminiscent of a parliamentary system of voting, put in place to protect DAO members and the community nodes.
Benefits of Arc Finance DAO
For starters, liquidity providers can earn market-making income from liquidity. Aside from the market-making income, community nodes that participate in the verification of project tokens will receive the majority of the transaction dividends of such tokens. At the same time, they can earn money from mining. Fantastic, right ?
Ordinary DAO members, on the other hand, will receive a small sum of transaction dividends of those project tokens based on the number of LP vouchers staked as an additional reward for actively engaging in platform governance.
In conclusion
Arc Finance’s DAO Governance approach is definitely going to bridge the gap between the interests of both the participants and the protocol. It will really bring out the best of DAO governance. To all blockchain and crypto enthusiasts, Arc Finance is the place to be !
