Simple Summary

This SIP introduces a new governance body called the Risk Council, this council will consist of three members directly elected by token holders. The Risk Council will be responsible for risk analysis within the Protocol.

Abstract

The Risk Council will be responsible for:

• Establishing an initial process for the analysis of risks within the Synthetix Protocol in the form of a SIP (i.e monetary policies, external partnerships/programs)
• Carrying out the risk analysis to be introduced in the SIP life-cycle
• Providing risk analysis summaries for the Spartan Council to take in consideration when debating and voting on SIPs
• Ensuring that the implementation of SIPs to be deployed by the protocolDAO match the specification voted on by the Spartan Council.

Motivation

In a complex system such as the Synthetix Protocol, there are significant risks to modifying the Protocol. These risk can be introduced via changes internally, such as through the SIP process or externally, through ecosystem economics that may affect the Synthetix Network.

As we continue moving towards decentralized governance, it is important we establish a body that solely focuses on risk.

Specification

Overview

The Risk Council (RC) will be in responsible for managing and responding to the risk within the Synthetix Protocol. More specifically the RC will initially be responsible for:

1. The "Risk Analysis" stage that will be introduced in the SIP workflow
2. Protocol Risk Oversight
3. Recommendations for SCCP based parameter changes
4. Ensuring SIP implementations match specifications and community expectation

SIP Workflow

The RC will be responsible for an additional step in the SIP workflow which will run in parallel with the engineering "feasibility". In this step, the RC will conduct an in-depth risk analysis to provide to the Spartan Council to utilize during their debating and voting process.

Each SIP will be assigned an extra status decided on by the RC, from the following:

• Acceptable
• Caution
• Review Required
• Non-Acceptable

Acceptable

If a SIP is assigned this label, the RC has found that there is negligible risk in the proposed SIP.

Caution

SIPs marked with this label require additional review of the highlighted risks by the Spartan Council when debating and voting on the SIP.

Unacceptable

This label should be used by the RC if they believe a SIP creates an unacceptable risk to the Synthetix Protocol.

The assignment of each label will be based on a 2/3 majority vote, if all members wish to assign a separate label to a SIP they must each present their reasoning in an individual report to the Spartan Council prior to the SIP being presented.

Protocol Risk Oversight

Historically the management of risk has been dealt with on an ad-hoc basis by Core Contributors. The RC will be appointed the governance body responsible for managing risk in protocol policy changes (usually via SCCPs - such as proposed inflation or c-ratio changes). For SCCPs, the same process outlined in the SIP workflow applies.

For external risk, the RC is responsible for providing a public forum to dfiscuss and address any community concerns in relation to ecosystem developments that may impact the Synthetix Protocol as well as be proactive in managing overall risk.

The Risk Council is an informational body, they are responsible for assessing and reporting on protocol risk for the benefit of the community, the Spartan Council and protocolDAO retain ultimate responsibility for enacting and implementing recommendations by the Risk Council.

Rationale

The existing system whereby risk asesment is not assigned to a particular individual or body presents an existential risk to the Protocol. There have been several incidents over the last year where a more thorough risk assessment could have significantly reduced the risk of SIP implementation. The rapid growth and development of the Synthetix Protocol and ecosystem has increased the bandwidth required to manage risk within Synthetix.

Operation

1. Risk Council Members elections will utilise the voting strategy of the Spartan Council elections (quadratic-weighted debt)
2. Risk Council members will be made known to the community and the Treasury Council will assign a budget to pay for the RC members stipends
3. The SIP workflow will be amended to include the "Risk Analysis" stage

In addition the TC will set a budget for external risk assessment by the Risk Counciul through engagement with external service providers.

Examples

Risk Analysis

A community member authors a SIP, to create a new string of liquidity incentive pools. The SIP is merged by the SIP editors and labeled as "Draft". During the CC Sprint Planning, an engineer is assigned to the SIP for feasibility, and the assignee notifies the Risk Council members via Discord that there is a new SIP that they are conducting feasibility research on.

The Risk Council schedule a meeting to discuss how the introduction of liquidity incentive pools (in which sUSD is part of the proposed plan) might affect the system and they come to conclusion that it might cause the sUSD to de-peg. They label it "Review Required" as they think it might be viable to pass if they remove the sUSD pool from the proposal.

Internal Protocol Oversight

A SCCP is made that proposes to decrease the c-ratio to 10%, the Risk Council upon seeing this SCCP holds a discussion and ultimately comes to the conclusion that it has failed their internal criteria and assigns it a risk summary of "Not Acceptable".

Configurable Values (Via SCCP)

• Number of Council members

Copyright

Copyright and related rights waived via CC0.