Create a Safety Module

Simple Summary

Create a Premia Safety Module as a capital backstop in the case of a financial shortfall event.

Abstract

This proposal is to add a new tool to Premia's tool chest in helping mitigate and backstop an unexpected financial shortfall event. A shortfall event can be caused by any number of reasons such as exploits, unknown corner cases, unexpected behavior within the smart contract ecosystem, etc. A safety module allows Premia stakers to secure the protocol in return for protocol incentives.

Specification and Implementation

A safety module (SM) would be created as a primary mechanism to secure the protocol in the case of a financial shortfall event. A financial shortfall occurs when there is a deficit in the system caused by any number of reasons (exploit, unexpected SC behavior, etc.) and a backstop is needed to restore the deficit and make users whole.

To compensate users for the risk they are taking in helping to secure the protocol, SM stakers will receive incentives in the form of additional yield via PREMIA emissions. The SM incentive rate will be decided by the Premia team in conjunction with the community to find the appropriate balance of incentives to the risk being taken. The emission rate can be adjusted via governance vote. To prevent gaming of the SM a cooldown of 7 days will be placed on unstaked tokens.

The specific technical implementation details of the SM will be decided by the team. That includes decisions on whether or not to use an AMM pool to store the SM deposits, to use an auctioning system to auction vs market sells vs an internal Premia<->Treasury swap, etc.

Motivation

To add to the number of tools available to Premia in helping secure the protocol and its users. These types of security mechanisms also signal to the broader community that Premia is focused on the safety and security of its users funds.

Clarification

Vote For/In Support of: A safety module mechanism will be researched further and placed on the roadmap for implementation

Vote Against/In Opposition of: A safety module mechanism will not be researched further