FDAO: Key Step Towards Decentralization
The emergence of the blockchain concept has catalyzed a more inclusive, transparent, and open digital financial system. Most of the traditional financial institutions act as service hubs, responsible for deposit and lending, financial bookkeeping, counter business, interest rate adjustment, loan collection, risk control compliance, information services and etc. The effective implementation of these businesses not only depends on the professional quality of employees at all levels but also requires a strong management core to sort out, coordinate, and make decisions on business links and processes.
As a DeFi cryptocurrency bank, ForTube is committed to providing decentralized digital asset financial services to users around the world. The business logic of the platform is mainly based on smart contracts, and its business processes and risk control measures are compiled in code and encapsulated in accordance with certain rules, thus realizing automation at the code level. Users only need to visit the webpage and connect to the digital wallet to enjoy decentralized financial services. For example, users can deposit assets to earn interest or pay interest to borrow designated assets. The interest rate level is determined by market supply and demand (funds utilization rate). At the same time, all the crucial information such as financial records and interest rate levels is transparent.
Back in the early stage of its establishment, ForTube took “decentralization” as one of its most important goals. After two years of safe operations and technical iterations, this moment has finally arrived:
We are thrilled to announce that a new governance structure, FDAO, will be launched on December 28, to balance among ForTube’s revenue distribution, risk-taking, and governance decision-making.
ForTube platform fixes the articles of association, management specifications, decision-making system, and organizational structure in traditional financial companies in the form of codes and established a collection of shared rules. At the same time, a Bonding curve model is adopted to connect all stakeholders in the way of FDAO architecture.
The $FDAO token (only available on Ethereum) will be issued on the basis of the Bonding Curve and serves as the value certificate and proof of privileges for the ForTube platform. The Bonding curve is a functional curve describing the relationship between “buying and selling price” and “total issuance”. Its essence is a mechanism of decentralized communication, collaboration, and resource allocation constructed by algorithms.
The exchange between $FDAO and $FOR is based on the Bonding curve. The function calculates the average price of $FOR to buy $FDAO. The function adopted by FDAO is:
y: $FDAO token price; x: $FDAO token supply; A: Slope; B: Intercept.
Note: ForTube team will put 30 million $FOR into the governance pool and burn the obtained $FDAO token to eliminate potential risks and protect the rights of users when the FDAO structure is launched.
Users’ transactions on this line will not affect the slope, but if the following two situations occur, the slope will change:
- Slope increases: 60% of the ForTube platform’s liquidity pool profits will be used to buy back $FOR every month, directly serving as reserve assets to the FDAO structure without generating any new $FDAO tokens. Assuming that the current number of $FDAO tokens is Xt and the number of deposited $FOR is M, the new slope becomes:
2. Slope decreases: When bad debts or hacker attacks occur in the system, the reserve asset $FOR will be withdrawn without burning any $FDAO tokens. Assuming that the current number of $FDAO tokens is Xt, and the number of $FOR withdrawn is N, the new slope becomes:
In order to avoid losses of our community members in the event of defaulted loans or hacking attacks, the ForTube team has prepared 100 million $FOR as a system risk reserve and our supporters are welcomed to donate funds.
When the risk reserve is not enough to alleviate the bad debt losses, the $FOR in the Bonding curve will be sold, thereby decreasing the price of the $FDAO token. Specifically, the amount of $FOR that can be sold in FDAO is only limited to the triangular area shown in the figure.
The maximum FDAO backstop is
When the slope tends to 0, $FOR will no longer be withdrawn from FDAO. The more the system reserves, the higher the number and proportion of backstop assets, the safer the liquidity pool.
The operation of FDAO can be divided into the following steps:
- Users buy a certain number of $FDAO tokens according to their own risk preferences.
- The smart contract collects platform revenues to buyback $FOR tokens and puts them into the FDAO pool.
- $FDAO token holders have certain key decision-making privileges. They can vote through proposals and exercise governance rights including changes, improvements, and decision-making to the core elements of the system, including risk control factors, underlying assets, and interest rate models.
- Users can exchange $FDAO to $FOR at any time.
In conclusion, users are entitled to make business decisions and share the revenues of the ForTube platform through the $FDAO token. Furthermore, compared with traditional financial organizations, the FDAO governance structure redefines the profit distribution model among the ForTube platform, users, investors, and other stakeholders. Anyone can associate their own interests with the development of ForTube and become a substantial investor and beneficiary of the ForTube platform by utilizing $FDAO tokens while entering or exiting the market with less friction and permission.
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