Governance as a Regulator

Acknowledgment Much of the thinking in this section builds on ideas from Nour Haridy, whose insights around modular risk and governance were foundational. Thanks to Dodecahedr0x for initiating the conversation and contributing key insights.

Fragmentation vs. Market Discovery

Hard-coded global parameters limit market discovery. Static settings may offer simplicity, but they fail to accommodate the diverse risk profiles and behaviors of different assets. In a world of thousands of markets, a single set of parameters is both less safe and less adaptive.

There are two general approaches for introducing mutability in DeFi protocols:

1. Governable Parameters — like Curve’s A parameter

2. Market-driven Configurations — like Rari Capital’s Fuse protocol

❌ Problems with Each

• Governable Parameters become impractical at scale. It’s infeasible for DAO voters to micromanage configurations across hundreds or thousands of pools.

• Market-driven Parameters open the door to:

  • Liquidity fragmentation, as each pool may silo assets.

  • Parameter abuse, especially without safety guardrails — as seen in the ICHI pool 136 incident, which led to a liquidation cascade and >90% drop in pool value (source).

Market-driven with governance as a regulatory authority

Omnipair embraces market-driven configuration but couples it with tight protocol-level risk levers and futarchy-based regulation. This hybrid design enables:

• Permissionless pool creation with flexible parameters

• Regulatory oversight to enforce boundaries and mitigate abuse

Unlike Fuse, GAMM pools in Omnipair do not expose collateral factors to pool creators. Instead, slippage-aware collateral factors are embedded in the AMM logic, providing a built-in defense against risk manipulation. Read more: GAMM slippage-aware collateral factor

This architecture preserves pool reusability — creators can evolve existing pools by modifying parameters — while minimizing, but not eliminating, fragmentation.

Fragmented liquidity is a cost — but one that enables experimentation, discovery, and ultimately better markets.

By allowing specialized pools, Omnipair promotes:

• Open experimentation in market structure

• Discovery of optimal configurations across different asset types

• Organic liquidity routing to the best-performing pools

Pool Creation and Specialization

Anyone can deploy a GAMM pool with custom parameters and earn a creator fee (up to 5%). Key customizable settings include:

• LP swap fee: 0% – 20%

• EMA half-life: Minimum 3 minutes

• Interest rate model: Chosen by the creator

• Pool creator fee: Capped at 5%

Each pool operates independently, allowing for specialization by asset type, volatility profile, or strategy — a critical feature for long-tail and volatile tokens.

While pool creators manage their own pools, governance can:

• Veto scheduled changes before execution

• Adjust the rules for those changes (e.g. timelock, bond size, cost)

These governance actions require capital and bonding, which ensures:

• The DAO is compensated even for failed changes

• Malicious or reckless proposals come with economic risk