The inspiration behind this vault came from 2 recent pieces:
The second one by the Delphi Digital team, in which they propose an interesting value accrual mechanism for PowerPool, a new governance protocol that will be launching in a few weeks.
So, basically, up until now most of the vaults have been generating yield by farming governance tokens and selling them on the market.
What if, instead of directly generating yield, we created a DAO vault whose objective was to retain governance power over the most interesting farmable projects out there? Instead of immediately selling the governance tokens of such projects, the DAO would hold them long-term and also actively participate in the governance of such projects to increase their long-term value.
Why not just farm those tokens yourself, you may be asking?
Well, because as is already evident, DAOs can generate more value than individuals; the sum of the parts is better than the individual parts put together. Some advantages of the DAO over individual farming I see are:
- The obvious one: Save on gas fees.
- Code assessment: One of the headaches when farming is being able to check the code of the farm is safe. How many of the current farmers are good coders? With the DAO we could have a team of devs checking farm code before beginning to farm.
- General assessment: Probably the DAO would have a greater network and ability to evaluate all general aspects of the projects (team, idea, etc) than any given individual.
- Governance: As part of the DAO, we could have a group of protocol politicians that actively strategize and craft proposals for the long-term value accrual of the farmed protocols.
- Synergies: This overlaps with point number 4, but is basically the fact that the DAO would be able to craft proposals that generate synergies with the yearn ecosystem, thus making both protocols more valuable.
- Curation: In the future, I could see the fact that the DAO is farming any given protocol as a sign of approval for that protocol. I could see the market reacting positively to any protocol being farmed by the DAO, as it would imply good long-term prospects. In this sense, new protocols setting up farms would be incentivized to being farmed by the DAO, potentially creating interesting information advantages for the DAO - not in the sense of a pre-mine, but in the sense of having the knowledge of all upcoming interesting farms. Currently there’s just too much information and little curation. The DAO could serve as a farm curation mechanism.
How would this work?
Well, I can see the mechanism working similarly to the Delegated Funding DAO Vault. YFI holders who wanted to participate in the Governance Black Hole DAO would lock their YFI for a piece of the pie. I think the credit delegation part wouldn’t be needed here, though.
Other details, such as the ability for participants to rage quit, would be needed to be thought out in more depth before structuring the DAO.
Very excited about the potential of this kind of project! Let me know what you think…