Mars Protocol
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Mars Tokenomics
In some ways, Mars can be thought of as a bank of the future, operated and governed by a decentralised community via a transparent governance process. Like banks, Mars aims to attract deposits and lend out that money safely without incurring excessive risk. Mars launched with a token (MARS). MARS’s token economics, incentive design, and governance system are critical to achieving this goal.
The Martian Council β€” a DAO of xMARS token holders β€” governs the deployed instance of the Mars Protocol smart contract system which is embraced by the community as the canonical β€œMars.” The parameters that can be set by the Martian Council include which assets are subject to borrowing and lending by the system, the risk parameters for those assets, which third-party smart contracts are eligible for C2C lending and the risk parameters for those contracts. These decisions have consequences on third parties (users) and, in extreme cases, can lead to Shortfall Events.
The guiding principle behind MARS’s token economics is that of skin in the game: those making decisions should bear the consequences of those decisions, both positive and negative.
In order to provide the Martian Council with an incentive to govern well, Mars distributes a portion of its fees to xMARS stakers on an ongoing basis through purchases of MARS, as further described below.
In order to provide the Martian Council with an incentive to assume responsibility for governance failures, Mars: (1) requires that members of the Martian Council stake their Mars to activate governance power; and (2) continuously routes a portion of fees generated by Mars to a Safety Fund which can be tapped by the Martian Council to compensate users for Shortfall Events attributable to governance failures.
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