Backstops

There are three layers of risk management in Nuon v2.

Firstly, the initial vetoing of proposals by a minority of voting power acts as a filter to the system. This filter primarily prevents bad debt, and secondarily filters for sustainable and sufficiently high yields.

Secondly, veMint holders’ accrued yield funds redemptions when yields are lower than Truflation. When yields exceed Truflation, the excess compounds and remains in the treasury for the vote escrow period, at which time it can be withdrawn.

The system is kept secure if

1. the backstop remains sufficient, and

2. the vote escrow period lasts longer than the low-yield season, ideally still leaving some yields for veMint holders.

To this end, veMint token holders vote to cap minting of NUON proportional to available expected yields.

At launch, however, the system as described lacks an initial excess. In the following section, we explain the mechanisms used in the bootstrapping phase of Nuon v2.