Last week, we announced our path to decentralization, delving deeper into how we have built Exactly Protocol from scratch allowing users to lend and borrow at fixed and variable interest rates in a decentralized and autonomous way. Today, we are proud to announce our next step in this journey, which involves the launch of the EXA token in OP Mainnet, which will function as the native governance token in the Exactly DAO.

Decentralizing Exactly Protocol’s Governance

Since we launched Exactly on OP Mainnet in March 2023 and subsequently the OP rewards program in April 2023, the protocol has gained popularity at the same time that our number of users (and transactions) in OP Mainnet and our community on Discord has been growing, providing us with certainty about the next steps to be taken so that the protocol can continue to mature.

At this stage of the protocol, we believe that decentralizing governance and enhancing protocol resilience is crucial in our path to democratizing access to financial services in a decentralized, non-custodial, and autonomous way.

The Role of The EXA Token and The Exactly DAO

The EXA token is the necessary means for achieving the fully decentralized status of the protocol and becoming a DAO. With the EXA token, community members can actively participate in the protocol’s governance by voting on proposals for changes and upgrades.

Serving as the governing instrument within Exactly Protocol, the EXA token grants holders the right to vote on system changes and upgrades. Holders of the EXA token will wield power over the protocol’s treasury, risk management, and smart contract upgrades.

Token Allocation

The total token supply will be 10,000,000 EXA and will be distributed as follows:

• Community: 4,500,000 EXA (45.00%) will be distributed to Exactly Protocol’s community to foster community engagement, awareness, and protocol adoption.

• Team, Advisors, and Investors: 4,500,000 EXA (45.00%) will be distributed to Exactly’s employees, advisors, and investors.

• DAO Treasury: The Exactly DAO Treasury will receive an immediate allocation of 1,000,000 EXA (10%) of the total supply. Granting the Treasury immediate access to necessary resources for its role within the ecosystem.

Token Distribution for the Community

The total Community token supply will be distributed as follows:

Airdrop for early users:

The community members that have already used the protocol in OP Mainnet since we launched the OP token rewards program in April will receive an airdrop of 1% (100,000 EXA) of the total token supply, fostering community engagement, awareness and protocol adoption. The criteria will be based on the proportion of already distributed OP rewards through our Rewards Controller, measured on July 18th, 2023 19:00 UTC. Users that were assigned OP rewards but didn’t claim them will also be eligible for the airdrop.

Users will be able to start claiming their tokens on July 25, 2023. We will implement a linear stream of 4 months for airdrop tokens, starting on the actual claiming date, ensuring a controlled and steady supply of EXA tokens. To facilitate token distribution, we have selected Sablier as a platform that meets high security and robustness standards. All the processes will happen through the Exactly app in the new Governance section.

EXA Incentives and Community Grants:

The protocol users will receive an allocation of 5% (500,000 EXA) of the total token supply during 2023 through the current Rewards Controller Contract and other incentive mechanism. The EXA token rewards will start on July 25th, 2023. The remaining EXA tokens will be released over 36 months starting from January 1, 2024.

Another initiative that will soon be introduced is that Exactly DAO will be awarding EXA token grants to those builders who want to build on top of Exactly Protocol to foster the growth of the Exactly ecosystem.

To ensure the optimal use of our available token supply, we have already introduced our Rewards Controller Contract as a distribution rule that adjusts rewards based on the percentage of the target loan volume achieved within the Exactly Protocol, using tokens allocated for community rewards.

In addition, we are implementing a feature that adjusts rewards for borrowers and liquidity providers based on the utilization rate of each pool. These changes align our token distribution with the protocol’s usage and demand and enhance overall system performance.

Traditional reward programs typically rely on fixed emission schedules or predetermined distribution function rules, which may not be effective in attracting a diverse user base and can result in rewards being concentrated in a few select wallets. We have developed an innovative adaptive model at Exactly to address this issue: a continuous recursive token distribution system. This model implements an incentive function based on how closely the program’s objectives are being met during the rewards period.

By implementing this adaptive token distribution system, we believe that we can create a more inclusive and sustainable rewards program that benefits a wider range of participants and aligns with the growth and usage of Exactly Protocol.

The proposed model has two distinct modules:

• The distribution module determines the number of tokens allocated during each time frame (determined by two consecutive protocol transactions).

• The allocation module determines the number of tokens allocated to each protocol user class in each period.

Token distribution for Team Members, Advisors, and Investors

We have implemented a linear lock-up period of 36 months, starting on January 1, 2024.

You can see all the EXA tokens will be distributed in the following graphic:

The Exactly DAO Governance Process

As the protocol develops, EXA token holders will play a crucial role in decision-making, including setting collateral requirements, introducing new collateral types, adjusting borrowing and lending terms, and managing token incentives. These decisions demand thoughtful evaluation of various factors, and the Exactly team will provide research, analysis, and open-source simulations to assist the community in making informed decisions.

The DAO status for the Exactly Protocol will be achieved in two stages, leading to full decentralization using the OpenZeppelin Governance smart contracts for governance and the EXA token contract.

Stage 1: Off-Chain Voting Process

During this stage, actions on the protocol’s smart contracts will be carried out by the Exactly team on behalf of the community. The community will be able to participate in the decision-making process once the DAO is launched. To ensure a seamless and secure experience, we will initially use Snapshot, a widely recognized off-chain gasless voting solution, for our voting processes.

By working with Snapshot and Sablier, we provide our community members with secure and user-friendly platforms to participate in the Exactly Protocol’s governance. Sablier had extensive security audits and robust infrastructure, making them ideal partners for our voting processes.

As we approach the launch of our first voting process, we will provide detailed instructions and guidelines on participating via Snapshot, where a simple majority will approve the ExaIP (Exactly Improvement Proposals). This will ensure that every community member has an equal opportunity to contribute their voice to the future of the Exactly Protocol.

Stage 2: On-Chain Voting Process.

In the second stage, the administrator for the Exactly Governance module will shift from the Exactly multisig to the TimelockController smart contract. Proposals created through the Tally governance dashboard must directly target the Exactly Governance module.

Proposals that receive a sufficient number of votes in support will be executed without the oversight of the Exactly team. During execution, the TimelockController smart contract will activate the specified function in the Exactly Governance module as outlined in the on-chain proposal. Proposers can also include multiple actions or functions to be executed within the Exactly Governance module in a single on-chain proposal.

The First ExaIP (Exactly Improvement Proposal)

The Exactly DAO will be established by the time the EXA token is released. Once the DAO is launched, the first ExaIP will be the proposal of a new Interest Rate Model that our team has been working on, the objective will be to get feedback from our community as the first Exactly DAO initiative.

Rewards Update

Building on our commitment to promote transparency with our community, updates on rewards distributed across all Exactly Protocol markets will be shared every four weeks.

The next update will be on Monday, July 25. This Tuesday at 2 pm UTC, the distribution of EXA rewards will kick off at the same time as the distribution of the EXA airdrop will begin. Additionally, a new cycle of OP rewards will start.

We actively invite all interested parties to join our community on Discord and follow us on Twitter and Telegram to contribute to Exactly Protocol’s decentralization journey. We will be sharing more information soon through these channels.