The Hifi Governance and ERC-20 token implementation both derive from the foundation established by Compound's GovernorBravo Smart Contracts. Our ERC-20 token implementation originates from Uniswap's fork of Compound Governance, while the Governance smart contracts are adopted from Ampleforth's fork of Compound Governance.
We selected the Uniswap fork for our token implementation as it includes the features of ERC-2612 approvals and governance-based minting that we require, whereas our governance contracts are based on the Ampleforth fork of GovernorBravo primarily because—like Hifi and unlike Uniswap or Compound—they did not possess legacy GovernorAlpha smart contracts prior to their GovernorBravo implementation.
We believe that the best way to scale a decentralized finance protocol is via progressive decentralization. Hifi is ultimately a startup, and we have to deal with uncertainty when it comes to:
- Product/market fit
- Smart contract security.
Because achieving both is no easy feat, we will not focus on decentralizing governance in the initial phase of the protocol.
Being able to unilaterally make decisions about the smart contract code speeds up the development process and enables us to get to a point where users love our fixed-rate lending product. The ephemeral nature of the hTokens permits us to make changes to their source code on the fly.
Smart contracts are powerful technology, but the fact that they are immutable once deployed brings risks. We hedge against these risks in the following ways:
- We designed the BalanceSheet contract to be upgradeable. This is the contract that holds all users' collateral deposits.
- We enforced caps on how much debt can be taken on by borrowers.
- We gave ourselves the ability to pause most operations (except for collateral withdrawals).
With time, the protocol will become more resilient and safe to use. We will subsequently change and remove these precautions.