In contrast to EUSD which is a stablecoin that is suitable for payments and savings, EGR is a token that has a volatile price because of its unique supply mechanics and role on the Egoras protocol. EGR is a utility token, governance token and recapitalization resource of the Egoras system. There exists 100M EGR in total at the launch of Egoras Microfinance protocol V2.
As a utility token, EGR is required for paying the interest accrued on Loans that have been used to generate EGR in the Egoras Protocol. Only EGR can pay these fees, and when paid the EGR is burned, removing it from the supply. This means that if the adoption and demand for EUSD and Egoras Credit system increases, there will be additional demand for EGR so users can pay the fees. It also means the supply will decrease as EGR is burned.
As a governance token, EGR is used by EGR holders to vote for the risk management and business logic of the Egoras Protocol. Risk management is crucial for the success and survival of the system and is done in practice by voting on specific risk parameters for each loan and lending partners. The risk parameters need to be set rigorously to correspond to the risk profile of the loans and the lending partner in the system.
The voting process for the governance of the system is done through continuous approval voting. This means every EGR holder can vote for any number of proposals with the EGR he holds and can submit a new proposal, or withdraw his votes at any point in time. The proposal that has the most votes from all EGR holders becomes the “top proposal” and can be activated to implement changes to the risk parameters of the system.
There will be a simple dapp available that allows any EGR holder to easily vote with their EGR by using metamask, ledger and fortmatic. More advanced features are planned for the future, such as delegating your votes to a proxy voter, and the ability to safely vote with EGR held in cold storage. If EGR holders are highly competent and govern the protocol well, The egoras credit system will get adopted and will always remain overcollateralized. However mistakes or unforeseen circumstances can happen, and as a result, it is possible that parts of the insurance portfolio become undercollateralized. When this happens the last function of the EGR token is triggered: automatic recapitalization through forced EGR dilution. This means that the Egoras automatically creates new EGR tokens and sells them on the market, instantly raising money to recapitalize the shortfall of value in the system and bring it back from insolvency. This means that EGR holders are held directly accountable for their actions since bad governance will result in their tokens becoming diluted.