Having thought things through, I have decided that I will be voting AGAINST / NO on Proposal 0 (i.e. I am voting for no further YFI issuance) for the following reasons:
I am in favour of an emission model, particularly that shared by @brisket
Proposal: Adaptive issuance
I am still reading the one proposed by @Daryllautk
Request for Comment : Proposal for YFI Inflation and Supply Mechanics
However, while I am in favour of a continued emission model, I think there is merit to voting for an emission model once there has been ample time to debate and consider it, rather than to rush it through.
Furthermore, taking a step back, the idea behind implementing (or permanently rejecting) an emission model is based on its potential impact on existing liquidity provision & its ability to competitively incentivize future liquidity provision. The idea (or fear/worry) as it stands is that liquidity provision will dissipate if YFI issuance ceases.
The truth is: We do not know what the impact would be.
However, if YFI issuance ceases, we don’t know if it will be (for example):
i. 30% reduction (dissipation of some TVL market share gained, some stickiness present),
ii .60% reduction (dissipation of all TVL market share gained),
iii. 80% reduction (dissipation in excess - superior offerings by other players in response).
If we refer to the table below, which charts the effective competition for liquidity among the top 6 players, we can see the impact of liquidity competition on market share. We can clearly identify points at which Compound, Balancer and Curve rose in prominence (and in particular, we can see how Compound’s & Maker’s relative market share has been declining).
Therefore, I think:
(1) Having a period of 1-4 weeks with no YFI issuance to understand the “residual stickiness” of liquidity after ceasing issuance of YFI will be helpful. This helps us better assess & compare the cost & potential impact of any future incentives.
(2) Based on the residual stickiness and assuming there is some normalisation of liquidity competition across the ecosystem, a properly designed emission model can be debated, implemented and further adjusted based on observable outcomes.
Therefore, on the basis of the above, I am voting AGAINST / NO on Proposal 0 now, with a view towards the future, where I am looking forward to positively voting for a proposal that has an emission model that takes into account some normalized level of competition in the overall ecosystem.
I also think that the overall system of distributing rewards (that some may perceive as excessive & unsustainable) leads one to wonder if crypto money printing is worse than Federal Reserve money printing. While one worries about hyperinflation risks in the conventional fiat economy, I wonder if the risks are equally present - or worse - in the crypto economy today. I am seeing an increase in the number of protocols that want to engage in rewards-based liquidity provisioning/lockups seems to growing every day as more & more projects “emulate” yield farming concepts.
I think, end of the day, something has value when people are willing to pay for it. If we live in an “airdrop” style of economy, there will come a point when the amount of reward airdrops will overwhelm the amount of fiat needed to prop up all the reward airdrops. In that case, we will really need to pray for Federal Reserve fiscal stimulus to keep the party going
In fact, perhaps I would argue that an emission model of YFI should also consider an alternative: A weekly auction of YFI in which the proceeds are used to reward the protocol’s liquidity providers. If people are given the weekly right to purchase YFI, they may accord real value to that YFI - and this acts as a form of price discovery. Under this model, people would buy the YFI because they value its use in governance, they receive a share of the transaction fees in the protocol. This is similar to an equity capital subscription, in which the proceeds are used to further develop the business (in this case, the proceeds are used to fund the rewards). If the business is truly good, we won’t need that much capital. If the business can only survive because of the “rewards juice” being given out - that tells you a lot about the business.