# Governance Framework

Ledgity Yield is governed through a hybrid structure that combines **regulated financial oversight** with **decentralized, on-chain participation**.\
This ensures:

* Legal and operational continuity
* Transparent economic alignment
* Community-driven control of protocol parameters

***

#### Governance Structure

The protocol operates across three coordinated layers:

| Layer                        | Entity                               | Responsibility                                                                         |
| ---------------------------- | ------------------------------------ | -------------------------------------------------------------------------------------- |
| **Legal & Compliance**       | **Ledgity SAS** (PSAN-registered)    | Regulatory obligations, onboarding, custody workflows, development & operations        |
| **RWA Portfolio Management** | **SARR Fund** (Luxembourg-regulated) | Allocation of fiat collateral into short-duration, cash-flow-generating RWA strategies |
| **Decentralized Governance** | **Ledgity DAO** (veLDY holders)      | Controls protocol parameters, performance fee routing, and strategic direction         |

This separation allows Ledgity to merge **institutional-grade asset management** with **permissionless on-chain governance**.

***

### Token Governance (veLDY Model)

Protocol governance is powered by the **$LDY token** and its vote-escrowed representation **veLDY**, issued as a **veNFT** when tokens are locked.

| Action                         | Result                                                             |
| ------------------------------ | ------------------------------------------------------------------ |
| Lock LDY for a chosen duration | Receive veNFT containing veLDY voting power                        |
| Longer lock duration           | Higher voting weight + higher share of reward distributions        |
| Hold veLDY                     | Participate in DAO governance and receive real yield distributions |

veLDY holders can:

* Vote on governance proposals (Snapshot)
* Influence protocol yield mechanics and treasury usage
* Receive LDY rewards from real-yield buybacks
* Access boosted vaults & priority features
* Submit proposals (threshold: **10,000 veLDY**)

***

### Revenue Allocation and Distribution

Protocol revenues flow through on-chain smart contracts.\
They originate from:

* Performance fees on RWA yield
* Early withdrawal fees (if applicable)
* Integration and partnership incentives
* Institutional vault servicing agreements

**Distribution Model:**

| Destination              | Allocation | Purpose                                                            |
| ------------------------ | ---------- | ------------------------------------------------------------------ |
| **veLDY Community Pool** | **80%**    | Distributed to LDY stakers as real yield                           |
| **veLDY Council Pool**   | **20%**    | Distributed to Council stakers to compensate execution & oversight |

There are **no emissions-based inflation rewards** — distributions come from **actual economic yield** generated by the RWA portfolio.

***

### Operational Sustainability (Ledgity SAS)

Maintaining a regulated RWA yield protocol carries **fixed structural costs**:

* PSAN regulatory compliance and reporting
* KYC/KYB onboarding and AML monitoring
* Custody + settlement infrastructure
* External audits and legal supervision
* Product development and security operations
* Institutional account management

These are required to ensure **continuity and legal security**.

To support this, a **baseline operational budget** is recognized:

| Protocol TVL | Required Annual Operational Budget | Covered By                                                    |
| ------------ | ---------------------------------- | ------------------------------------------------------------- |
| Up to €10M   | \~€750,000                         | Initial investor + revenues (Setup fees + service fees + OTC) |
| €10M–€50M    | \~€1,000,000                       | Share of DAO performance fees (governance-approved)           |
| Above €50M   | Scales proportionally (≈1–2%)      | Combination of DAO revenue + institutional fees               |

**Governance Safeguard**

The DAO may adjust this operational contribution **only** if an alternative sustainability plan is approved.

Changes require:

* **⅔ supermajority** DAO vote
* **Council validation** to ensure operational continuity

This prevents governance attacks that could jeopardize regulatory compliance or investor protection.

***

### Governance Procedures (LIPs)

Governance decisions follow the **Ledgity Improvement Proposal (LIP)** lifecycle:

| Phase             | Description                                                              |
| ----------------- | ------------------------------------------------------------------------ |
| **Discussion**    | Open debate on forum or Discord                                          |
| **Snapshot Vote** | veLDY holders vote on proposal parameters (quorum 5%)                    |
| **Execution**     | Council implements approved actions via multisig (⅔ signatures required) |

Major economic changes (e.g., performance fee adjustments) require **supermajority approval**.

***

### Council Responsibilities

The **Council** is the operational execution and protocol risk oversight layer.\
It **cannot override** DAO decisions — it **executes** them.

Responsibilities:

* Execute governance-approved parameter changes
* Monitor RWA portfolio repayments and liquidity buffer health
* Maintain operational security and protocol stability
* Coordinate incident response when predefined conditions are met
* Publish periodic reports for transparency

#### Council Membership Requirement

| Requirement                                 | Purpose                                       |
| ------------------------------------------- | --------------------------------------------- |
| Stake **≥ 500,000 LDY** in the Council Pool | Ensures economic alignment and responsibility |

Council incentives scale **only when the protocol performs**, aligning execution with sustainability.

***

### Transparency & Reporting

Ledgity commits to **real-time and verifiable transparency** through:

* Public dashboards (Dune, DeFiLlama, TokenTerminal)
* Smart contract audit publication and open-source repositories
* Quarterly governance & financial performance reporting
* Clear separation between **on-chain revenue**, **off-chain treasury**, and **corporate operations**

No hidden accounts, no opaque yield sources.


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