Governance

In an endeavor to ensure a high degree of decentralization, PhronAI introduces an on-chain governance model predicated on a vote-escrowed mechanism. This approach empowers token holders to influence the ecosystem dynamically, aligning with the principles of decentralized autonomous organization (DAO) governance.

Vote-Escrowed Tokenomics

Vote-escrowed tokenomics grants token holders the autonomy to determine a lock-up period for their tokens, effectively tying the token’s utility to the duration of its lock.

The extended commitment to lock up tokens translates into enhanced influence within the network, manifesting in:

• Enhanced governance voting power.

• Increased staking rewards.

• Amplified voting impact on specific liquidity pools.

veTokens Align Incentives: The veToken model is designed to synchronize the protocol’s success with that of the token holders’. A prolonged lock-up period symbolizes a vested interest in the protocol’s prosperity.

VeTokens Encourage DAO Participation: By offering additional voting power for longer lock-up periods, the protocol incentivizes users to ”max time-lock” their tokens, thereby strengthening their governance voice. This mechanism ensures that token holders who are deeply invested in the DAO’s future are rewarded with greater influence.

Quadratic Voting

To further democratize the governance process and mitigate the risks of centralization and collusion, PhronAI will employ a quadratic voting system. This system ensures that as token holders acquire more tokens, the marginal increase in their voting power diminishes, promoting a more equitable distribution of governance influence.

The governance voting power, V , is determined by the equation:

where:

• V represents the vePhron balance, indicating the voting power.

• R denotes the Phron native token quantity.

• L is the token lock-up period multiplier, enhancing the token’s voting power.

The vePhron balance declines linearly from the initiation of the lock-up period to its end, at which point stakeholders can reclaim their Phron tokens. However, token holders are afforded the flexibility to extend or renew their lock-up duration at any juncture, enabling them to either augment or maintain their vePhron balance and, by extension, their governance influence.