Governance Tokens and Incentives

Glue's governance and incentive strategy is designed to foster a competitive, innovative, and user-centric ecosystem. By maintaining credible neutrality and implementing effective governance structures, we ensure that each protocol operates in the best interest of its users. The use of the Glue token for stablecoin governance aligns incentives with the overall health and stability of the ecosystem, while separate governance tokens for other protocols promote focused and effective governance. Through well-structured incentives and a fair token distribution mechanism, Glue aims to build a robust and resilient decentralised financial system that attracts and retains a vibrant community of users and developers.

A crucial part of the dApp deployment strategy is maintaining the Glue foundation’s credible neutrality. This ensures that the foundation helps launch dApps without creating conflicts of interest that could stifle competition and innovation within the ecosystem. Effective governance structures and incentive mechanisms are essential to achieving this balance.

Credible Neutrality for dApp Governance

The Glue foundation aims to launch and support dApps while remaining neutral, avoiding any conflicts of interest that could hinder the competitive environment necessary for innovation and optimal user experience. Below the approach to governance for different components of the ecosystem has been described.

1. Decentralised Exchange and Lending Protocol Governance

   Some major protocols, such as the DEX and lending protocol, will have their own governance token. This ensures that governance decisions are made in the best interest of the specific protocol, rather than being influenced by the foundation or other competing interests. By not owning the governance tokens of these protocols, the Glue Network avoids a negative incentive spiral where the Network might favor its own protocols over third-party solutions. This creates a healthy competitive environment that encourages innovation and improves user experiences. Additionally, individual governance tokens allow for the development of dedicated teams and communities around each protocol. This decentralised approach enhances the resilience and adaptability of the ecosystem.

2. Stablecoin Governance

   Unlike for the DEX and Lending protocols, the stablecoin, USDg, will use Glue tokens for its governance. Governance tokens for stablecoins that solely represent the yields of the stablecoin often incentivize high-risk strategies to maximise returns. In contrast, Glue token holders are incentivized to maintain the stability and utility of the stablecoin by selecting low-risk collateral. This approach maximises the stablecoin's reliability and utility across the ecosystem. Glue token holders benefit when the entire ecosystem grows and gains adoption. Thus, they are naturally inclined to make decisions that favor the long-term stability and usability of the stablecoin, avoiding risky strategies that could undermine trust and utility. That is why the stablecoin, USDg, will be governed by the Glue token. This ensures that the governance decisions for the stablecoin are aligned with the overall health and stability of the Glue ecosystem.

Incentive Mechanisms

Incentives play a critical role in the adoption and success of the protocols within the Glue ecosystem. Glue’s strategy ensures that incentives are aligned with the long-term goals of the ecosystem and the users’ best interests.

1. DEX and Lending Protocol Incentives

   Each protocol will have its own governance token, which will also be used for incentive purposes. This aligns the interests of token holders with the growth and success of the specific protocol. Incentives will be provided to liquidity providers and active users of the protocols, ensuring that there is sufficient liquidity and engagement. This helps maintain healthy and active markets within the Glue ecosystem.

2. Stablecoin Incentives

   The Glue token will be used to incentivise the minting of the stablecoin USDg. This promotes the stablecoin's adoption by rewarding users who contribute to its liquidity and stability. Incentives will be structured to favor low-risk collateral, ensuring that the stablecoin remains stable and reliable. This approach helps build trust and encourages wider usage within the ecosystem.