Risk Management

Apart from emergency governance votes to freeze additional UNIT borrowing, governance decisions only affect newly created vaults. For instance, if the vault liquidation threshold is changed, that change only applies to new vaults or new incremental borrowing from existing vaults. All vaults remain subject to the terms of the Master Canonical Reference Sets (mCRS) under which they were instantiated, not the current mCRS.

The DUCAT token serves as the governance token for the following types of votes:

1. Modify vault borrow collateralisation threshold: Change the minimum collateralisation level required to mint additional UNIT from a vault (currently 160%).

2. Modify vault liquidation threshold: Change the collateralisation level at which a vault becomes eligible for liquidation (currently 135%).

3. Modify borrow fee: Change the up-front borrow fee (currently 1%).

4. Modify liquidation tax: Change the tax rate applied to liquidated vault assets (currently 15%).

5. Allocate governance emissions: Authorise transfers of DUCAT from the Foundation wallet to specific wallets for governance-agreed priorities, such as an airdrop to users who met specific criteria.

6. Designate BTC price oracles: Define the primary source of truth for Bitcoin’s market price.

7. Designate backup oracles: Appoint fallback oracles in the event that the primary oracle’s data is no longer trusted.

8. Add or remove guardian(s): Adjust the set of validators in the guardian network.

9. Freeze borrowing: Immediately halt new UNIT issuance, for example, if a borrow-related exploit is discovered and needs urgent patching.

   1. This last type of governance action must be executed rapidly upon reaching a 51% quorum, in contrast to the usual multi-day voting period.