A Solution for Accumulating Governance Power: Introducing PowerPool's Meta-Governance

By insidetrader | HODL the Universe | 9 May 2021


Greetings Publish0x community, today I want to introduce you to the newest crypto index protocol I just discovered on the ecosystem, PowerPool Index, and its governance model to achieve better composability across multiple different DeFi products. PowerPool is a protocol launched in 2020 summer when DeFi popularity at its ATH. The core aim is to manage portfolios in a decentralized way, generating yield for believers, as well as addressing the next stop in the growing DeFi ecosystem. After a short introduction, let's start with discussing its basics. 

 

What are PowerPool and PowerIndex, briefly?

PowerPool is an automated token portfolio management tool built in mid-2020 on the Ethereum blockchain. The core aim of the PowerPool team is to make the yield generation much easier and more effective via pooling them under the name of indexes. Indexes have some similarities with real-world ETFs. You can collateralize your capital into separate baskets of investing tools, generating different kinds of value, and making it more powerful for you. On the other hand, the crypto indexes offer you to participate in the process of deciding the project's future. It is named ''governance'' and many DeFi products have different tokens to realize on-chain governance. 

After a brief explanation about what PowerPool is, let's come to the basics of the PowerPool Index. As I have stated previously, almost all DeFi protocols have their native token to decide the next step in the project's roadmap. Some examples are UNI, AAVE, YFI, or SUSHI. You should hold all of them separately to participate in on-chain governance actions. Here comes the innovation of the PowerPoo Index: PowerPool Index consists of 8 different governance tokens (GTs) in equally-weighted allocation. All of them have a 12.5% allocation from the launch of the index and it's still the same! 

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(The composition of PowerIndex. Source)

As you can understand from the picture above, PowerIndex consists of YFI, UNI, MKR, NXM, COMP, SNX, AAVE, and CVP. I think you're all familiar with most of these governance tokens except CVP. CVP or PowerPool Concentrated Voting Power token is the native token of PowerPool protocol. On the other hand, if you want to have that index in your portfolio, you should supply its contract with ETH or any kind of stablecoin. After liquidity supplementation, you will receive a PIPT token. PIPT represents your share in the total PowerIndex portfolio. The more you supply the contract, the more you mint (and have) PIPT! Please check this guide for more information about how to add PIPT to your portfolio. 

 

Now You've PIPT. So What's Next?

If you are one of the 5445 PIPT or CVP holders, you have the right for participating in decision-making councils and/or forums. In addition to that basic governance action, you manage the capital in a cost-efficient way. But none of them is enough to attract a DeFi enthusiast to join the pool nowadays. The possibility of generating income from just holding a token is not selected by newbies anymore. So what does PowerIndex offer to overcome that situation?

As I explained in the previous chapter, PowerIndex consists of 8 different governance tokens. In other words, you decide not to generate additional income with these tokens (or the ones that you decide to mint PIPT). Here comes another innovation of PwerIndex: The index contract automatically utilizes the total value locked/TVL to generate yield farming rewards and distributes them to holders. For example, the allocated YFI and/or SUSHI tokens are staked in the corresponding pools to generate secondary income. 

PowerIndex efficiently uses the capital in pooled the contract for generating additional value and cashflows to index users (PIPT holders). It allows our users to earn cashflows just by holding a basket of DeFi tokens and participate in the governance of 8 protocols as well. Pooled assets must and will work. 

 

Until now, all my words are about PowerIndex and its numerical values. But the main focus of this article is the meta-governance model of PowerPool. Simply, you can participate in voting events on any DeFi product by holding the relevant token. For example, you can discuss any topic in the Index Coop forum freely but you should own some INDEX tokens to join the polls. It's true for any other DeFi protocol as well as PowerPool. On the other hand, PowerPool products give you the right to participate in other DeFi product governance via its Meta-Governance method. Let's see what Meta-Governance is and how it influences the upcoming changes in several ways.

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What is Meta-Governance, briefly? How it Aims to Change the Current Status?

At the title of this article, I give you some clue about that: a solution for accumulating governance power... It means that PIPT token holders (PowerIndex investors) can consolidate their allocated governance tokens to address the upcoming events. According to the PowerPool docs, COMP and UNI governance are already implemented into meta-governance. Now it's time to see how it works. Please refer my previous guide about DeFi protocol DAOs and governance models if you are not familiar with what actually is. 

Almost all DeFi protocols have their own DAOs (Decentralized Autonomous Organizations). Via DAOs, the token holders have the right to vote for next option for project development. It can be related to anything that community wants to change or modify. But as you can imagine, there are several problems on that section. For example, some governance participants should stake their token(s) into a smart contract. By doing that, you will have the voting power but why does anyone want lock their token into a non-profit generating contract? Or for some protocols, there are some whales that dictate what they want even though many holders think opposite. In such an ecosystem, PowerPool offers a new solution for any of 8 protocols that included in PIPT token allocation. So how can meta-governance model will innovate the future DAOs?

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(Source)

The PowerPool team classified its users into 3 main groups as you can check from the picture above. They are ''Minor Holders'', ''Major Holders'', and ''Politicians'' respectively. As the name implies, holders are token owners who want to contribute but at the same time they need some incentives. On the other hand, politicians can be imagined as ''ambasadors'' of PowerPool who are the core leaders trying to expand the awareness of PowerPool all over the world. After grouping people, the team concludes their needs in 3 parts. And the solution creating part started...

According to the ''docs'' page of the PowerPool, meta-governance is defined as a inter-protocol collection of governance token holders. It looks like quite complicated at first but basically you should have a ''host'' DeFi protocol and the selection of remaining ones. We've already 8 selected participants, so it's much more clear now. Via meta-governance method, TAMs (Total Addressable Market) can be created. After that, greater liquidity becomes dominant in DAO. At the same time, token holders' yield generation continue as well as ''Minor Holders'' can participate in any kind of interaction without worrying about high fees or non-effective voting system. 

After successful establishment of meta-governance, meta demcoracy just appeared. Meta-governance requires inter-protocol relationships so meta democracy does. But here, the decisions will become cross-linked! It means that Offer A can only be approved in a forum if only another Offer B is accepted in another forum. So that, almost all DeFi protocols can become inter-related and organize the ecosystem in a fair way. 

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*This article is created to spread the awareness of PowerPool and its features by utilizing my own experiences, the Docs, and the PowerPool Medium Blog. None of the words above contain any kind of investment advice! Please DYOR (Do Your Own Research) before investing.*

***If you are interested in writing articles about ANYTHING on Publish0x, you can follow this link.**

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insidetrader
insidetrader

Freelance crypto writer & translator


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