Governance structures offer far more than democratic participation. Their true potential is the distillation of intelligence from within what can often be the white noise of crowds. The creative and intellectual intelligence of a committed user population with highly aligned agendas, is indisputably powerful. However, capturing such user value is not necessarily simple or easy.
Foundational for any community seeking to capture value, is to harness the protocol’s ability to sustain financial incentives over the long-term, in a non-dilutionary manner. Empowering people to participate in new ways due to new, sustainable financial incentives means the model of a lending protocol like Minterest is best designed to capture value in new ways but such that it is also enabled to be newly distributed for the future benefit of the protocol’s community of users.
To manage key decisions and the growth of the Minterest protocol, Minterest will be governed by a Decentralized Autonomous Organization (DAO). Initially this will involve a structure supporting management simplicity and composed of members of the team behind the protocol’s development, key partners and industry experts. The exact nature of the DAO organization and governance structures will be further developed to be as decentralised as possible with such structures occurring post the protocol’s Public Launch. The evolution of the Minterest protocol will therefore require regular decision making to be undertaken by its key stakeholders, the holders of Minterest MNT tokens.

MNT Governance Token

The economics behind the MNT token have been designed within a framework of supporting and incentivising user participation in the protocol’s governance. MNT tokens allocated for the protocol’s community are distributed equally to both lenders and borrowers at a rate of 27,415 tokens per day, issued per block over a period of 5 years.
Additionally, users who provide liquidity and stake their MNT tokens in Minterest’s governance processes earn Buy Back Rewards in the form of MNT tokens acquired on-market via the protocol’s Buy Back mechanisms. As the Treasury’s surplus tokens are exchanged for MNT tokens via the Buy Back, users are incentivised to participate in such staking. Governance staking therefore results in a reduction of the overall on-market supply of MNT tokens, which further assists in supporting the MNT token’s value, and thus as detailed above, overall APYs provided by the protocol to its users.

Governance Voting

Minterest token holders can opt to stake their MNT tokens in the protocol’s governance processes in order to participate in voting on governance proposals. Staked MNT enables voting rights on key proposals where the number of tokens staked determine the voting weight for each user with each token representing one vote. Participation in governance voting is further incentivized through the distribution of MNT rewards from the Minterest Buy Back feature. The health of the Minterest ecosystem necessitates regular participation in governance, so each staker is required to participate in voting at least once per year, i.e. once within a 12-month period, in order to continue receiving Buy Back Rewards.

Loyalty Rewards

Users who opt to stake their MNT tokens in governance may withdraw their tokens at any time. However, staking for a period of time results in users earning an additional Loyalty Reward benefit. This is an adjustment applied to their Buy Back Rewards, and is dynamically adjusted based on the time each user’s MNT has been staked.
Loyalty Rewards calculations are adjusted to take into account the total MNT staked even though the sum of these MNT tokens has been aggregated through the supply of various MNT token deposits or via Buy Back processes. The economic modelling of how this is achieved is detailed in an appendix to this white paper.
In order to maintain this Loyalty Rewards benefit, users are required to vote, or delegate their vote, in protocol governance proposals at least once in every 12-month period, otherwise the multiplier benefit they have attained is forfeited and the clock reset.
The same applies to users who withdraw their MNT tokens from staking. The calculation of their Loyalty Rewards multiplier benefit is restarted from the time they again stake their MNT.