Let's build a (bigger) warchest

We should pause gov rewards again for ~1 month (or longer) and build a significant – ~7-8 figure – yUSD warchest for future operations and proposals that require cash.

IMO, a large community-controlled warchest is a huge positive signal of Yearns intention to operate far into the future, and scale massively.

These funds should be used to cover growing operational expenses, build a world-class in-house auditing academy, and fund community members to mobilize on important proposals.

Gov rewards are great; but we should earn them. I know there are lots of background discussions about this, but let’s mobilize for the long term. Hope for the best, but prepare for the worst; let’s built a warchest for Yearn to survive and grow on for the medium term.

The current treasury funds are great, but we should grow that by at least 10x while we have the opportunity.

See this great comment on Twitter (and this great thread for context):

[…] I love tokens that generate cashflow to holders. Its validation of token value accrual and alignment of interest.

But its pretty unusual for high growth projects not to reinvest earnings into more growth.

Startups don’t pay out dividends so early, they reinvest in growth.

Paying dividends = admitting there is nothing better to do with the cash than paying out.

This is not the case in such nascent and quickly growing industry. We are not making bubble gum here.

Thoughts? Who would support such a proposal?

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There already is a treasury.

I am aware, as referenced in my post. I’m saying it should be grown.

Perhaps the post should be rephrased

We should definitely increase the treasury to fund more rewards for the developers who build on Yearn.

DeFi is a hyper-competitive space, we need to prioritize incentives for developers instead of extracting governance rewards ourselves.

Given there will be no further YFI token issuance, the major financial incentive we can give to developers is yUSD or YFI which comes from open market buyback using Yearn treasury.

I would rather sacrifice governance rewards received today for long-term growth of Yearn in the future.

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Couldn’t have said it better myself.

i would vote for this

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I think this is a good idea and would support it. I think the more money yearn has the better. Maybe keep the treasury at 7 figures and make redirecting of funds from treasury to stakers faster and more efficient if possible. I think, currently, it takes quite a bit of time for this to happen. Also re-enable it so that treasury will auto fill when it gets depleted, currently this is on hold.

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I think this is a great idea.

I also think it might be worth diversifying outside of only yUSD for the treasury, especially with yields so low on the Y pool. Perhaps a mix of yUSD, ycrvBUSD, and ycrv3pool?

Freezing rewards flowing to YFI may also have the unintended effect of spooking off speculators—which I don’t completely hate, either. I would like to think that many of us here are holding YFI because we want to grow the project, and the price appreciation/earnings are just a nice bonus on top of that.

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I agree. I actually would like to see 50% of rewards go to treasury for the next several years. I believe growth > dividend. Any organization that can effectively deploy capital is much much better than one that gives it back to investors to deploy.

The ability to deploy capital is one of the reasons why Bezos is such a phenomenon CEO of Amazon.

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True. In most businesses dividends are only paid when a better allocation of capital cannot be found. Since YFI is so young I think there are many better uses of capital than just giving it back to speculators. Long-term investors understand this and should be aligned with the interests of their biggest asset which is the code devs and strategy devs.

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+1, to @byolo and @ejbaraza as well

if there is sufficient interest, I think a formal proposal makes sense. I think it is worth putting some time in to consider allocations (as @dudesahn mentioned) and duration of the pause on gov staking rewards (as @byolo mentioned).

I personally would be in favor of a range of possibilities, including something like splitting rewards between treasury + gov (majority treasury) for a long time period.

glad to see others like the idea! very worthwhile to scale the direct investment in YFIs future from within, IMO

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I’m not a huge fan of some of what I see in this thread - that being a complete lack of consequential consideration. I am, however, a fan of those who are thinking about long term growth and viability.

It’s never a poor idea to have a full back pocket for the pursuit of new endeavors or operational costs, but, in a perpendicular stance to last time, I’d like to make the argument that we’d benefit far more from a more dynamic and less jarring approach to this - avoiding the 100% stop in cash flow to governance rewards. Hell, even 50% - at least not all at once. For perspective ~1500 USD/yfi annually, we’re looking at around 45,000,000.

The rate fluctuates greatly - assuming vault v2 and then outward expansion allow us to take on more TVL before diluting the yield to these levels, I’d say it could wind up (reasonably) doubling TVL as more non-stable assets are incentivized and being deposited.

It’s not difficult to imagine building upon the current TVL x APY% x FEE% amount when new vaults with multiallocational strategies are a play, vault framework and efficiency increases, and better frameworks being done allow contributors to turn towards expanding into other assets. But even then - let’s for a moment stick with 45,000,000-

How many people work on the project? Can we get an actual, circa grounded in reality, estimate for operational costs? For reference, 45,000,000 annually is enough to hire nearly half a thousand full time employees, at 100k a year, if yfi were to go the true decentralized route.

(where do I sign, says the dev who builds capital efficiency strategies for fun and is writing a blog post ~few~ will read)

What the hell are we going to spend 45,000,000 dollars on, some new houses for those who hold quorum? Before even beginning to aggressively pack away funds into a “growth vault” I’d love to know where we’re moving as an entity.

To begin, active participation in polling - some months ago - was so driven by hype, that cutting the fee emissions to governance stakers didn’t deter people from keeping their YFI locked simply to vote on the early foundation.

We’ve grown beyond that - if the growth rate with respect to time is significantly impacted negatively (Δδ < 0 :: {$YFI | APY} –> 0) and becomes predictably unfavorable for extended periods of time, we also now have the ability to utilize the asset to provide collateral in Aave, and take out a loan on it for capital efficiency and increased growth. One might argue that the number of participants that would move HK this would be inconsequential, but adding temporary sell pressure to the asset, coupled with those who seek to be more capital efficient as they have a smaller share by weight anyways, would mean that diversity and number of participants in voting would reach all time lows, and with it, a mix of good takes and opinions.

This above worse-case scenario would also create temporary sell pressure and throw a discount on the asset, which I’m sure those who control a larger share of the network and have disposable capital would really consider “…unfortunate.“

Without data on operational costs, grants, etc… I’ve got no idea what is appropriate in terms of what the project needs outright. Without knowing that I’ve got no idea what is a generous tack on, and what is a decent reserve target. What is the business attempting to push into for growth? How will the money be allocated there?

But to dump all of the revenue into a bucket, with very little information on expansion, set it on for several years, and watch a large portion of participating voters unstake or sell, begin sweating about reaching a quorum, and finish it off with the deepest pockets / multi sig access hugging us for discount representation to that cool 45,000,000$ aum network share.


Instead, let’s consider n sum of fees waiting for a distribution event, and some function f(n) represents the amount in a given time frame the chest should be given vs normal emissions to stakers and voters.

In my opinion, it would be much healthier to calculate the amount taken to the chest with respect to the TVL, time since last claim event, a specific target in mind, and a specific time frame we’d like to have it filled by. Set a target to fill, make a function of how we get there, and once attained, close the faucet. Use that as a performance data set and reevaluate from there.

That way we’d retain vote participation, potential v2 fee attraction, vote diversity, and not create a market event where half of the universe shorts this asset since everyone is an insider when it comes to public crypto governance

But what’s the worst that could happen, because we all know it isn’t the institutions that could possibly want to buy a discounted quorum… right guys?

Tldr - Need more data need more plan.

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I agree that we need to have a budget before doing anything drastic. Once we determine how much is necessary for example $5 million for code devs, then we just stop all distributions to YFI holders until hitting that target and resume distributions afterward. Use the treasury to buy YFI in the open market and use it to incentivize retaining good devs for the long-term sustainability of the protocol.

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I don’t think people would want the treasury to hold 45m, but maybe 5m or a number that is decent to fund development for a while if yearn fees drop significantly / another bear market comes around. Even 1m is better than what we currently have. I would like to see more full time devs to help build out the protocol faster.

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Agree with Chevis here

All for increasing the warchest, but just saying we need more or x10 isnt enough
Need to plan it and having reasons for it

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would definitely support this

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I agree and support this. I have to add a suggestion.

I think governance should have monthly budget votes on community proposals.

Once passed, a portion of the warchest’s money should be earmarked for the proposal. On the completion of the proposal, another vote will be made to release any to all of the earmarked money.

Many cryptocurrencies such as Dash already have a proposal system for their DAO and it works incredibly well to fund and maintain a vibrant developer community.

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Seems the sentiment is “wing it, put money in the treasury because it’s better to grow.”

Well, grow where? What are we going to allocate the capital to? I’d be more than happy to go over some ideas with people in discord, but I’m really hoping that the community DAO does function as… well, an organization. What I see now are people throwing money to a team that doesn’t even really exist (formally) with the idea that “they’ll do it.”

We either need to change that community offload of responsibility, or we need to have someone relegated to the task of financial and business transparency with direction - since this isn’t a business, any smart group of mathematicians and strategists would make a world of difference if they came together.

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Devs and more devs. We need more full time developers. We have alot of R&D products that could use devs. Also setting aside funding for future audits to name some things.

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+1 to this

Solidity/Vyper devs, in-house auditors, economics researchers, and one or a few project managers who can interface with the community and assist in organization of R&D projects.

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