Term Vault Governance

The governance infrastructure of Term Strategy Vaults is built on a foundation of clearly defined roles and permissions. This structure ensures secure and transparent management while allowing for operational flexibility and depositor protection.

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Role Architecture

The governance system defines two primary roles in Strategy.sol: MANAGER and GOVERNOR_ROLE, each with distinct responsibilities and permissions.

Role	Responsibilities
MANAGER	Executes auction-related operations and manages auction offers.
GOVERNOR_ROLE	Oversees governance actions, risk parameter configuration, and emergency controls.

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MANAGER Role:

• Responsibilities:

  • Submitting auction offers.

  • Managing and canceling existing auction offers.

• Permissioned Functions:

  submitAuctionOffer()   // Submit auction offers.
  deleteAuctionOffers()  // Cancel or remove auction offers.

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GOVERNOR_ROLE:

• Responsibilities:

  • Configuring protocol risk parameters.

  • Managing governance and integration updates.

  • Executing emergency controls.

• Permissioned Functions:

  // Pause Controls
  pauseDeposit()
  unpauseDeposit()
  pauseStrategy()
  unpauseStrategy()
  
  // Governance
  setPendingGovernor()       // Initiate governor transfer.
  setTermController()        // Update TERM protocol version.
  setDiscountRateAdapter()   // Update price oracle.
  
  // Risk Parameters
  setTimeToMaturityThreshold()  // Set max duration risk.
  setRequiredReserveRatio()    // Set minimum liquidity ratio.
  setRepoTokenConcentrationLimit() // Set position size limits.
  setDiscountRateMarkup()      // Set pricing premium.
  setCollateralTokenParams()   // Define collateral requirements.
  setRepoTokenBlacklist()      // Blacklist specific tokens.

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Governance System Overview

The governance system integrates vault LPs as DAO members, providing them with direct oversight and the ability to veto proposals during the timelock period. This layered framework balances operational efficiency with depositor protection.

1. Governor Implementation:

   • Gnosis Safe with a 7-day timelock via the Zodiac Delay Module.

   • Actions are initiated through a Proposer Safe for review before execution.

2. Proposal Flow:

   • Flow: Proposer Safe → Delay Module (7-day timelock) → Governor Safe → Vault.

   • Review Period: Proposals are reviewed and discussed during the timelock.

3. Veto Mechanism:

   • Vault LPs, as DAO members, can veto proposals by voting to skip the transaction.

   • If the DAO vote passes, it triggers a call to setTxNonce on the Delay Module, invalidating the transaction.

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Governance Flow Example

1. Proposal Initiation: Proposer Safe submits a governance action (e.g., parameter change).

2. Timelock Period:

   • Proposal enters the 7-day timelock in the Delay Module.

   • Vault LPs, as DAO members, review and discuss the proposal.

3. Veto Option:

   • If the community opposes the proposal, the DAO votes to skip the transaction.

   • If passed, setTxNonce is called, invalidating the transaction.

4. Execution:

   • If no veto occurs, the proposal executes after the timelock.

This system empowers vault LPs by giving them direct control over governance decisions, ensuring their interests are safeguarded.

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Event Monitoring

Key governance actions trigger the following events to ensure transparency:

Event	Description
TimeToMaturityThresholdUpdated	Logs updates to duration caps.
RequiredReserveRatioUpdated	Logs changes to reserve ratios.
RepoTokenConcentrationLimitUpdated	Tracks updates to position size limits.
DiscountRateMarkupUpdated	Tracks changes to rate premiums.
DepositPaused, DepositUnpaused	Indicates deposit state changes.
NewGovernor(address)	Records governor role transfers.
RepoTokenBlacklistUpdated	Tracks updates to repoToken blacklisting.

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Summary

Starting with a clear Role Architecture and integrating vault LPs as DAO members, this governance system ensures secure, transparent, and efficient management. With defined roles, multi-layered protections, and direct community oversight, it balances operational flexibility with depositor protection.