Functionality and Governance Synergy

The functions of Cyclic Protocol are closely integrated with community governance to ensure that the protocol can be continuously optimized as the market environment changes during operation.

The following is the relationship between the key functions of the protocol and the governance mechanism:

1. Lending function and governance

   • Dynamically adjust lending rates: CYC token holders can vote to determine the lending rate model to adapt to market demand and ensure the balance of capital liquidity and yield.

   • Adjust the collateral rate and liquidation ratio: Governance voting can optimize the collateral rate (LTV) and liquidation ratio of lending to ensure the security of the protocol under different market conditions.

2. Liquidation mechanism and governance

   • Liquidation parameter optimization: Community governance can adjust the liquidation discount (Liquidation Bonus) and penalty (Liquidation Penalty) to optimize the fairness of the liquidation mechanism and prevent malicious liquidators from exploiting users.

   • Liquidator incentive adjustment: Governance voting can set a liquidator reward mechanism to incentivize DeFi participants to perform liquidation operations and ensure the stable operation of the lending pool.

3. Governance tokens and sustainable

   • development of the protocol CYC token economic model: The governance token CYC is not just a voting tool, but is also embedded in the economic system of the protocol to achieve a virtuous cycle: ① Users holding CYC can obtain a share of the protocol revenue (such as partial dividends on loan interest and liquidation fees). ② CYC can be used for mortgage loans, allowing users to obtain additional income while participating in governance. ③ Part of the protocol income can be used to repurchase and destroy CYC, reduce market supply, and increase token value.

   • Staking CYC increases governance weight: ① Users who hold CYC and lock it for a long time (Staking) will obtain a higher voting weight in governance voting, which encourages users to hold tokens for a long time and participate in governance. ② Staking CYC can also enjoy the protocol's transaction fee discount, increasing the long-term benefits of holders.