How Governance Works

Frankencoin uses veto-based governance. Anyone can propose new collateral types or methods to mint Frankencoin. FCS holders accumulate voting power over time, and a holder or group with more than 1% of voting power can veto proposals. This allows the community to block harmful changes without requiring a majority vote on every proposal.

Frankencoin Share Token (FCS)

The Frankencoin Share Token (FCS) is the tradeable governance token of the Frankencoin protocol. It gives holders economic exposure to the equity reserve and voting power that accumulates over time. Protocol income can strengthen the reserve, while expenses and losses reduce it. Minting new FCS supplies equity capital to the protocol; buying existing FCS on a secondary market transfers ownership without adding new capital.

How Value Accrues to FCS Holders:

• Interest Income: When users borrow ZCHF against their collateral through minting positions, they pay interest. This interest income flows into and supports the equity reserve.

• Liquidation Profits: The protocol’s share of liquidation proceeds can strengthen the equity reserve. Losses can reduce it.

• Governance Fees: Governance actions generate fees that flow to the equity reserve, rather than being paid directly to individual voters.

Costs and Economics:

The savings yield paid to users of the savings module is a cost borne by the equity reserve. Borrowers pay interest and savers receive yield; the difference contributes to the protocol’s net income, while losses can reduce equity capital.

Valuation and Pricing:

FCS can be traded on secondary markets, where its price is determined by supply and demand, available liquidity and expectations about the protocol’s future performance. Minting new FCS follows the protocol’s equity pricing curve, with fees and price impact depending on the amount invested. The market price can differ from the protocol’s minting and redemption quotes. The reserve-based figures shown above are reference metrics, not an executable FCS market quote or a guaranteed valuation.

Risk Profile:

FCS holders bear the residual risk, similar to bank shareholders. If liquidations result in losses that exceed the minter's reserve contribution, these losses are absorbed by the equity pool. This gives FCS holders an incentive to govern the system responsibly and approve sound collateral types. Neither profits nor increases in token value are guaranteed.

How to Get FCS

There are two main ways to acquire FCS:

1. Buy on secondary markets: Trade FCS against ZCHF on CoW Swap. Check the available quote, liquidity and price impact before trading.

2. Mint new FCS: Deposit ZCHF through the FCS contract to add capital to the equity reserve and receive newly minted FCS. Review the current minting quote, fees and price impact before confirming.

Proposal Process

The governance process is open and transparent. Proposals for new collateral types or minting mechanisms can be submitted by anyone. The community reviews proposals, and FCS holders exercise voting power that accumulates over time. A holder or group with more than 1% of voting power can veto proposals.