The goal of our decentralized autonomous organization (DAO) is to encourage more favorable terms (liquidity) within the protocol around KSP holders and to give them increasing incentives as KLAYswap grows.
KLAYswap’s governance has established mechanisms to achieve this and to promote economic flow in the protocol. This can be summarized with two key points:
Governance participants using KSP are given responsibility and authority on determining key issues such as changing various policies and setting the distribution rate of KSP per liquidity pool.
At the same time, the pool’s transaction fees and KSP can be further distributed as incentives for initial liquidity, compensation for infrastructure contributions, and continued motivation for the protocol’s growth.
Generally in the KLAYswap economy, each governance participant will support the liquidity pool that is most directly advantageous to him/her, as more KSP will be distributed the more support is behind any particular pool. This leads to a strong incentive to supply liquidity, and this rich liquidity formed by KSP in turn can lead to an influx of “Takers” on the Klaytn network for various trading (swap) purposes, which then in turn will generate ongoing transaction fees. We expect this to create a positive feedback loop in which the accrued fees will be redistributed back to the liquidity providers and governance participants who support the pools.
Eventually, we expect that activities of individual participants — liquidity providers, governance participants, and traders — will be directly linked to the interests of the KLAYswap community as a whole, sharing significant value as the protocol grows and expands. This will accelerate the influx of new users into the community and eventually enable the completely decentralized operation of the protocol by KSP holders.
In the following content, we will share the policies of and how to participate in determining KSP mining distribution rates and transaction fee reward distribution rates using vKSP obtained by staking KSP.