PCV Use Restrictions

This document is intended to define the types of activities that are explicitly forbidden uses for the VOLT PCV.

Ultimately any change could be proposed through governance, and VOLT holders at the time can choose to veto. This is not a VIP or on chain change, but a common source of truth/place for discussion.

Below are a few types of forbidden activities and reasoning.

Asset Liability Mismatch
Volt Protocol should not back VOLT, which is dollar-denominated, with other denominations like ETH except when lending against overcollateralized user positions. This exposes the protocol to an unacceptable level of risk in the event of market volatility. It is possible to mint VOLT against ETH in overcollateralized and liquidatable user positions, or to hold a hedged staking yield exposure, but the protocol should never back VOLT directly with unhedged ETH or anything except USD-denominated stablecoins, deposits, loans, and other yield assets.

If the protocol integrates ETH into market governance it should be as backing for an ETHERVOLT, ETHV, not as backing for the USD-denominated VOLT.

Volatile/Equity-like Assets
Volt Protocol will not hold the governance tokens of other protocols, for the liability-mismatch reason and because speculative risk of volatile assets is outside the scope of market governance and too risky for the surplus buffer. VOLT may be mintable against various DeFi tokens in an overcollateralized lending system, but any tokens acquired by VOLT as yield will be either liquidated and incorporated into the VOLT rate and surplus buffer, or passed through to the VOLT holders directly. Volt Protocol will not engage in token swaps with any protocol.