DAVOS is a fully crypto-collateralized stable asset that is soft-pegged to the US Dollar. All collateral is held on-chain and therefore fully decentralized. Users that have added collateral to the protocol have the capability to take out a DAVOS loan against their deposit. DAVOS's Liquidity DAVOS is minted into circulation when users deposit collateral and take out loans for DAVOS tokens – which is one way users gain liquidity. Another way to gain liquidity is to obtain DAVOS from decentralized exchanges with DAVOS in liquidity pools (ie: Uniswap Quickswap).
Once a user holds DAVOS in their wallet, they can use it similarly to any other cryptocurrency in the market.
The DGT token is the protocol’s governance token with real world value. When a user takes out a DAVOS loan they receive DGT tokens as a reward for engaging with the platform.
DGT tokens can be used to participate in protocol governance on decisions like: adding accepted collateral, changing protocol fees/rewards and much more. DGT holders can submit proposals for a vote. In the future, modifications to the governance variables of the protocol that are approved by voters are unlikely to take immediate effect. This delay gives DGT holders the chance to safeguard the system against any malicious governance proposals with a time buffer between proposal and enactment. All in all, we want to protect against proposals that contradict established monetary policies by altering collateral parameters or those that enable security mechanisms to be disabled.
Furthermore, Davos Protocol is governed by a Council of 7 members (inspired by the Synthetix Governance Model) . Each member is voted in by the DGT holders and has a mandate of three months.
Ultimately, DGT tokens are a tool to work with the Davos monetary supply/demand as a tool. By changing the reward rates of DGT the protocol can incentivize more or less DAVOS borrowers.
Like DAVOS tokens, the protocol plans to release the functionality to stake DGT or earn DGT rewards by implementing farming liquidity pools on various decentralized exchanges to compound the user’s yield even further.
Due to a portion of the underlying collateral being staked through a low-risk strategy called liquid staking, staking rewards can be generated. These rewards accumulate on a daily basis and are converted into DAVOS on a weekly basis.This in addition to the borrowing interest that accrues will be redistributed to the protocol's stakers and liquidity providers in the form of DAVOS.
When users take out collateralized DAVOS loans against their MATIC, they are required to pay a borrowing fee of 2%. These borrowing fees are then accumulated in the Davos Revenue Pool. In addition to the rewards generated from staking the underlying collateral, the borrowing interest is also converted into DAVOS. This means that the accumulated borrowing interest is redistributed to DAVOS stakers and liquidity providers.
When a user borrows DAVOS they’ll receive rewards in the form of DGT. These rewards are calculated based on the current DGT reward rate (determined by the governance process) and the user’s total debt in DAVOS.
The Davos Protocol will distribute DGT in the following ways:
- 54% — Borrowing and Other Incentives
- 10% — Incubation
- 8% — Private Sale
- 8% — Team and Advisors
- 8% — Davos Liquidity
- 6% — Strategic Sale
- 3% — Seed Round
- 2% — Marketing
- 1% — Public Sale
For more details, see the table below showing the allocation and initial distribution scheme: