How It Works

Prior Work

Frax Governance is based largely on Compound/OpenZeppelin Governor contracts. The lifecycle of a Governor proposal is covered here: https://docs.openzeppelin.com/contracts/4.x/governance#proposal_lifecycle.

Frax Governance

Frax Governance is a dual Governor system consisting of FraxGovernorAlpha and FraxGovernorOmega. Alpha and Omega have different uses and configurations.

FraxGovernorOmega

FraxGovernorOmega has limited control over the underlying Safes. Only the Frax Team / Safe owners can create Omega proposals. Each proposal is mapped 1 to 1 to a Safe transaction. Omega is configured as an additional Safe owner and must approve of a Safe transaction before Safe owners can execute it. This is enforced using a custom Gnosis Safe Guard (https://docs.safe.global/safe-core-protocol/hooks).

Omega has a very short voting delay, a short voting period, and a low quorum value. Safe owners can only add proposals to Omega after getting the Safe’s threshold number of signatures for that Safe transaction. For example, if a Safe is a 3/6 (5 owners + Omega) 3 owners must sign before the proposal can be put into Omega.

After adding a proposal to Omega, it follows the same lifecycle as a Governor proposal. If it passes, Omega calls approveHash on the Safe and the proposal can be executed by any owner through the Gnosis Safe UI as usual. If the proposal fails, rejectTransaction can be called on Omega to approve a 0 ether transfer. Other owners can sign and execute the same 0 ether transfer, which just increments the nonce on the Safe, allowing creation of new Gnosis transactions.

Omega has a feature called the short circuit threshold. If 51% of the total veFXS supply votes for an Omega proposal, it will immediately succeed and be executable. This helps in extraordinary circumstances, when the Frax team needs to take quick action to protect the protocol.

Omega cannot change its own governance parameters or change any configuration on the underlying Safes. FraxGovernorAlpha must be used to change these values.

FraxGovernorAlpha

FraxGovernorAlpha has full control over underlying Safes. Any veFXS holder with a veFXS balance meeting or exceeding the proposal threshold can create a proposal. FraxGovernorAlpha is nearly identical to OpenZeppelin Governor. It has full control over each Gnosis Safe because its TimelockController is configured as a module (https://docs.safe.global/safe-core-protocol/plugins) on the Safe and can execute any action. Modules are not constrained by Gnosis Safe Guards.

Alpha has a long voting delay, long voting period, and much higher quorum than Omega. Once an Alpha proposal passes, it must be queued and after the configured timelock period, it can be executed.

veFXS Holders

veFXS holders are the most important part of the system. Proposals succeeding or failing is ultimately up to veFXS holders because they directly vote on them. Your veFXS balance is equal to your voting power. veFXS holders can delegate their voting power to others. If a veFXS holder has sufficient veFXS voting power between their own stake and delegated stake, they can propose anything with FraxGovernorAlpha.

Through Alpha, veFXS holders can replace owners on the Safes, change governance parameters on Alpha or Omega, change parameters on any Frax smart contract, remove/add protocol owned liquidity to/from liquidity pools, etc. veFXS holders have ultimate control over the entire Frax protocol.

Frax Governance Proposal Lifecycle