Announcing bZx DAO

bZx is becoming a DAO. Starting the week of Aug. 2, bZx will begin converting to a fully decentralized organization (DAO)

The process of bZx becoming a DAO is part of bZx’s broader roadmap and a long awaited milestone. Today we are excited to bring this milestone to fruition in conjunction with the equally anticipated rebrand of bZx. Over the next week, the bZx legal entity will be dissolved and replaced with the DAO as the primary governance entity controlling the organization. As part of this process, the keys to the bZx treasury, will be turned over to the DAO and bZx tokenholders will be the main drivers of governance and decision making of the bZx platform going forward. At the time of writing, the DAO treasury contains over $80mm worth of assets.

The purpose of the transition to a DAO is so that bZx can become managed entirely by the community of bZx tokenholders. Until now, bZx has been developed primarily by a core team of developers. This structure leads to a few drawbacks including centralization. bZx’s treasury has until now been under the control of core founders and team members, resulting in centralization of decision making authority. One of the drivers towards transitioning to a DAO will be to distribute among the tokenholders the decision making authority relating to treasury control, protocol parameters, and roadmap.

Going forward, DAO expenditures will be submitted as proposals by community members and approved by tokenholders through a system of governance proposals and voting. As part of the DAO transition, the bZx treasury funds will be moved to and held in a time locked contract controlled by the Compound Bravo governance module. Upon successful passing of governance proposals, the funds will be released. Decisions approved through governance votes will be carried out by bZx team members who will receive salaries from the DAO.

🗳️Role of bZx token holders in the bzx DAO

BZRX is the primary governance token of the bZx ecosystem. BZRX token holders will play a critical role in the community going forward. Until now, BZRX holders have been able to receive a portion of platform fees by staking BZRX. They have also voted informally through snapshot governance votes. This process has proved successful, with high levels of participation, readying us for the next stage of decentralization: to move the treasury funds under the control of the DAO entirely and transition to a closely coupled on-chain governance system.

Going forward after the DAO transition is completed, BZRX token holders will be able to submit and vote on proposals including but not limited to the following: guiding the direction of the protocol through snapshot votes, and forum discussions, and onchain governance decision such as various protocol changes, funding decisions, and development direction decisions.

Who can participate in the DAO?

Token Holders with DAO voting rights is not limited to BZRX token holders. Ability to vote and participate in bZx DAO governance is extended to holders of: BZRX, vBZRX, iBZRX, and the Sushiswap BZRX/ETH LP token. All of these tokens can be staked on the staking dashboard and will factor in to a user’s voting power.

The new LP token used for staking rewards and governance votes will be the Sushiswap BZRX/ETH LP token. Users still staking the Balancer LP will be able to unstake if the wish.

🗺️ Protocol for submitting proposal

The bZx DAO Contract Addresses are:

The bZx protocol is governed and upgraded by BZRX token holders using three distinct components: The BZRX token (BZRX, vBZRX, iBZRX) , the Governance Module(Compound Bravo), and the Timelock.

As part of the DAO transition, bZx will use the Compound Bravo framework for the governance contract and transition control over the protocol from the former bZx legal entity to the DAO. This DAO structure is currently the most battle tested governance framework in the industry. The contracts have been fully audited by Open Zeppelin, are fully covered by extensive test suites and have been utilized successfully by Compound Finance and numerous other protocols.

In this way, bZx will be breaking it’s governance process down into three primary stages: Forum Discussion, Snapshot Vote, and Ratification. This process will combine both on-chain and off-chain governance mechanics. Holders of any amount of bZx can vote, and in the future delegate votes to other people. The governance process will be as follows:

Stage 1: Forum Discussion

Proposals will be initiated in the bZx forum for community discussion, input and buy-in. During this stage new suggestions and changes will be discussed and debated by anyone in the community. Proposals can range from changing fees, adjusting ecosystem parameters, to new marketing initiatives, or new integrations with DeFi apps. Proposals should be outlined and discussed at this stage until community consensus and buy-in is reached.

Stage 2: Snapshot Vote

Upon receiving community input during a discussion period in stage 1, the proposal moves to stage 2 where there will be a snapshot vote. During this stage, token holders can voice their support for or against a proposal by voting with BZRX. Depending on the results of this vote, whether it is approved or rejected, the proposal will either be tabled, go back to the forum for further discussion, or proceed to the next stage. This phase requires the following:

Stage 3: Ratification

After the prior two stages have been completed successfully, the third stage of governance is the on-chain governance portion. A fork of the Compound Bravo Governance Module will be utilized to manage the operation of the DAO. In the future the community may at its discretion choose to utilize a different governance module.

After a proposal is submitted to the Governance module, there will be a formal voting period. At the end of the period the proposal will be either approved and implemented or rejected.

In order to create and submit a proposal to the governance module, an address must have at least 5,150,000 BZRX (0.5% of the total supply) worth of voting power staked in the staking module, to create and submit a governance proposal for voting.

When a governance proposal is created, it enters a 2 day review period, after which voting weights are recorded and voting begins. Voting lasts for 3 days; if a majority, and at least 41,200,000 votes (4% of the total supply) are cast for the proposal, it is queued in the Timelock, and can be implemented 2 days later. In total, any change to the protocol takes at least one week.

This phase requires the following:

The front end UI the bZx DAO will be utilizing in order to interact with the DAO governance system will be tally.com or boardroom.info.

❓ What kinds of things can be proposed?

Various ecosystem parameters can be decided on by the community. As the governance process formalizes and evolves, these parameters will grow. A few examples:

The proposals are generally intended to give high level guidance for team members to implement, and not to control granular decision making processes.

🤓 The bZx Community

The DAO, now armed with tens of millions of dollars, will take up the task of maintaining the protocol, building new products, marketing the brand, and managing the community. The legal entity bZeroX LLC will cease to exist, and in its place the DAO will remain. The core team has a strong desire to continue working on the project and welcomes this new chapter as the start of something even greater than what came before.

The transition to the DAO opens the opportunity for greater community driven participation in the direction and development of the platform. This is also a call for community members to become more involved in the operations of the protocol. There is always a need for more developers, leaders, and creators to grow the impact and scope of bZx.

The bZx legal entity will be dissolved after the keys are handed over to the DAO treasury. From that point forward, the protocol will be managed by the DAO and the community of token holders.

📈 Changes to settlement of positions

UPDATE 8/16/2021

THE BELOW PARAGRAPH DESCRIBING IMPLEMENTATION OF A MAXIMUM POSITION DURATION IS OUT OF DATE. THIS CHANGE WILL NOT BE IMPLEMENTED. POSITIONS WILL REMAIN OPEN PAST 28 DAYS WITHOUT RISK OF CLOSURE. CONTRARY TO THE PARAGRAPH BELOW, THERE ARE STILL INDEFINITE ROLLOVERS AND YOU ARE NOT FULLY LIQUIDATED AFTER 28 DAYS. WE WERE PLANNING TO IMPLEMENT THIS CHANGE ON THE ADVICE OF OUR COUNSEL, BUT IT TURNS OUT IT’S NOT NECESSARY, SO WE DIDN’T.

For the sake of CFTC compliance, prior to transitioning to the DAO, bZx will be adjusting the parameters to the maximum allowable duration for trades to a maximum of 28 days for margin long/short positions. Any positions which remain open for longer than 28 days will be automatically closed. This applies only to margin long or short trades, not for borrowing. To repeat, this does not apply if you have simply borrowed assets against your collateral; it only applies if you’re in a leveraged trading position. The way this will be implemented going forward is as follows: Any currently open margin positions will remain open for at most 28 more days. All new positions will have a max duration of 28 days going forward.

Conclusion

As we embark upon this milestone of becoming a DAO over the coming week, our primary goal will be to decentralize the decision making, distribute bZx treasury funds to the DAO treasury, and dissolve the bZx legal entity. bZx token holders will be able to participate in governance voting through the Compound Bravo DAO governance module, vote on which proposals should receive funding, and submit new proposals.

In the next few days we will be announcing additional information relating to the bZx DAO transition, outlining firm dates, deadlines, and additional details. In the meantime, please join the conversation and provide feedback in our telegram, discord, and twitter channels.

About the author
Tom Bean
Community Member