Why xGovernance?

This page explains the philosophy behind LP Finance's governance structure.

Vote escrowed tokens are commonly used in DAOs to encourage users to stake tokens in a longer lockup period to gain more rewards and governance power. This strategy results in higher stake locked up, reducing supply which might bring a positive effect to the price.

LP Finance does not use the following method for these reasons.

1. Massive unlock events can cause harm to investors

2. Concentrating revenue to non-governance participants

Filter governance participants that are not committed

Regarding LPFi Staking Mechanism, governance participants give up shares in protocol revenue. Additionally, once LPFi is converted to xLPFi, it is much harder to exit as xLPFi should be market sold. This would result in fewer participants in LP Finance Governance, but also means there would be "Committed Participants" that could make better decisions on the future of LP Finance.

Concentrate rewards on non-governance participants

As committed governance participants are not able to participate in staking, the staking pool return would be higher. As the demand for governance is likely to increase as third-party protocol engagements increase in governance, more LPFi would be burnt for xLPFi. In this case, the staking return is likely to increase over time as LP Finance scales.