Impermax’s IMX token is a simple ERC20 governance token modeled on top DeFi protocols like Compound. The governance infrastructure is planned to be functional by mid-summer 2021, about two months after IMX token launch. IMX holders will own and control all income (profits) generated by Impermax.
Putting IMX Holders In Charge
Impermax has a minimal governance philosophy centered on the decentralized network of IMX token holders. In particular, IMX governance can be divided into two important categories: 1) direct adjustments of parameters within the protocol and 2) creating proposals and allocation of funds for development and profits. Here are a few examples of governance items in these two categories.
One important direct adjustment parameter is the reserve factor. This is the cut that Impermax takes from each loan. Whenever a borrower pays interest on an Impermax loan, a certain percentage of the interest is automatically paid to Impermax reserves for development and/or profits. This percentage is set at 10% by default, but it can be adjusted anywhere between 0% and 20%. This lets IMX holders allocate more profits towards lenders or more profits towards community reserves as desired.
Interest Rate Curve
Another important adjustable factor is the curve that determines the interest rates charged to borrowers and earned by lenders. Impermax uses an adaptive interest rate model. This means that the rate automatically changes depending on how much of the supplied funds are currently used in loans. On top of that, the curve’s rate of change will also adapt after a certain utilization ratio of loaned/available funds. The governance community might want to adjust this curve if the market rates change enough to make Impermax’s rates too high or too low compared to competitors.
Controlling Profit Distribution
This is one of the main rights that gives IMX value. As profits accrue in the reserve account, voters have control of their use. At some point voters will probably start to distribute some of those funds to themselves. They can do this in one-off events or through automatic periodic distributions. We can already see how well this works as a strong driver of value in similar lending protocols like Compound, Aave, and Maker.
Voting On Development Proposals And Funding
As the development team looks to add new features to the Impermax protocol, the governance community will have the ability to approve or reject each improvement proposal. They will also vote to allocate funds from the reserves to pay developer salaries, partnerships, marketing, and other development activities. And it’s not just the development team that can make new proposals. Anyone holding IMX can make new proposals and submit them to the governance community. To make sure proposals are serious, there’s a requirement that the account holder must get 1% of active voting supply delegated to them before they proceed to voting.
Voting On Other Financial Decisions, Management, and Governance Rules
IMX holders can make and vote on all kinds of proposals, such as those we see in top DeFi projects. For example, the governance community could propose, approve, and implement token burns if they want to increase scarcity of supply. Uniswap’s first governance vote was a proposal to make it easier to approve all other governance proposals. (It failed.) Compound has demonstrated the success of this governance model with many successful proposals such as improving their price oracle, interest rate model, and of course token distributions. In this way Impermax governance can evolve and adapt to the needs of the industry and owners.
Decentralized Governance With IMX
Impermax is opening up a new category of LP token based lending markets. As the category grows, IMX holders will ultimately control the direction of the project and the funds it generates. The IMX token is planned to launch in the second quarter of 2021, so keep an eye out because IMX is your opportunity to be part of this new area of DeFi by participating in its governance.