The DSN Token’s Role in Recapitalization
In addition to its role in Descent’s Governance, the DSN token has a complementary role as the recapitalization resource of the Descent Protocol. If the system debt exceeds the surplus, more DSN token may be minted and sold for Currencies(xNGN) to recapitalize the system.
DSN Holder Responsibilities
DSN holders can vote to do the following:
- Add a new collateral asset type with a unique set of Risk Parameters.
- Change the Risk Parameters of one or more existing collateral asset types, or add new Risk Parameters to one or more existing collateral asset types.
- Modify the Currency Savings Rate.
- Choose the set of Oracle Feeds.
- Trigger Emergency Shutdown.
- Upgrade the system.
Descent DAO is a lending institution, like a Bank. Any bank needs to find good customers which repay interest and principal on time, to lend. Loans lead to interest creation, called stability fees in the case of Descent. These stability fees accumulated by the DAO are used to buy and burn $DSN.
💡 Better $CURRENCY lending decisions -> higher stability fees generated -> more $DSN bought and burned -> reduction of $DSN in circulation -> appreciation in $DSN price.
Better lending decisions and more demand for loans leads to a better $DSN price for $DSN holders.
💡 Poor decisions in the $CURRENCY lending system -> losses incurred by the system -> additional $DSN minted to cover the losses -> increase in $DSN in circulation -> depreciation of $DSN prices.
When mistakes or unforeseen circumstances happen, the Descent portfolio becomes undercollateralized. To cover the loss new $DSN tokens are minted, which leads to price erosion of $DSN tokens.
The governance mechanism of the Descent Protocol is designed to be as flexible as possible, and upgradeable.
How Descent DAO generates revenue
The protocol’s revenues are derived from two main sources:
- Lending income: Interest revenues from overcollateralized loans (Stability Fees)
- Liquidation Income: Liquidation revenues from fees charged on liquidated vaults
$DSN holders can also allocate funds from the Descent Buffer to pay for various infrastructure needs and services, including Oracle infrastructure and collateral risk management research. The funds in the Descent Buffer are revenues from Stability Fees, Liquidation Fees, and other income streams.