There has been some debate on whether a time-weight to YFI should be weight-building or weight decaying. However, before talking about those, I think we should address something more fundamental: Preventing Attackers from Attacking with Borrowed YFI
I’m bring this up because this popped up when people were debating whether time-weight should be weight-building or weight decaying.
Which means, when the value of YFI drops, instead of costing the attacker like it traditionally would (buy YFI, attack, sell YFI to recuperate some cost). A drop in YFI price after an attack actually reduces the cost of attack if the attacker borrows YFI.
At first, I tried to solve this issue by comparing weight-gain or weight-decay, but after giving it some thought I found:
No matter if the time-weight effect is weight-gaining, weight-decaying or even a combination of the two (gaining to peak, then start decaying), as long as attackers have a cheap way of obtaining 51% of voting power, other than to buy out YFI holders, we lose.
Since there’s no way to stop people from loaning out YFI, I’m thinking we should come up with some novel approaches to discourage borrowing YFI. (Control the borrowers, not the lenders)
As yearn is in its growing stage, the risk of borrowers liquidating is large since YFI price grows with yearn. But as yearn progresses, yearn will turn from a growing project into a semi-stable project. At that point, the price of YFI will become less volatile as well.
And since YFI is a governing token, I’ve placed the importance of governance ahead of the price of each YFI. Instead, I think the price should be attached to the portion of YFI out of all available YFI. Like how each YFI holder can claim a portion of protocol earnings based not on the price of each YFI, but based on how big a portion you hold in the governance contract.
All of this being said, my first, not exactly thought out idea is to introduce truly random rebases (both positive and negative) to YFI. With the idea that each YFI holder retains the same portion of total YFI in their wallets. This raises volatility of YFI and discourages borrowers since they have no idea when they will be liquidated. And YFI holders will still be able to access the same voting power and yCRV reward based on their ratio.
However, I see a lot of issues with this idea (not an exhaustive list):
- It will be a nightmare to redesign all YFI related SC’s to work with a rebasing YFI
- Such as the governance contract or even calculation of claimable yCRV
- Discourages investors who will see a random YFI price everyday
- Hard to teach the public how if they’re losing nominal YFI, they still have the same voting power and can still claim the same amount of reward
- Liquidity providers to AMMs might get rekt or might get lots of trading fees
- Statistically they should have minimum divergence loss if the average price of YFI over a period of time is stable. But short term AMM providers can get rekt.
I expect my rebasing idea to be rejected. I mostly just want to throw at least one idea out to get the ball rolling and bring awareness to prevent attacks from YFI borrowers.