Proposal 5: Reducing YFI weekly supply

Vote live on https://ygov.finance/vote under “5”

Context:

Currently the weekly supply increase of YFI is 30,000 per week. Vote under proposal #0 is if more YFI tokens should be minted.

I’m voting “FOR” on proposal #0 as I think continuous incentivization of LPs is important for growth of the platform.

However I also think early participants of the platform that are taking more risk should be rewarded with a higher % of YFI supply.

This is a proposal for reducing the weekly issuance rate with a simple halvening model similar to that of BTC but accelerated due to the significant interest in the platform (so a long discovery period is not necessary) and with a inflation floor to always have some level of incentive to attract new users to the platform.

So issuance week 0 is 30,000. Issuance week 1 should be halved to 15,000. (5k per pool). After that every 4 weeks the rewards should half to 7,500 starting from week 5, 3,750 starting week 9, 1,875 starting week 13, 937.5 starting week 17, 468.75 starting week 21 and final halvening in week 25 to a long term issuance rate of 234.375.

Sample table:

In summary. If proposal #0 passes the issuance model should be altered as described above.

FOR - Support the new issuance model
AGAINST - Do not support the new issuance model

4 Likes

I am for this, I think it makes a lot of sense and is modeled well :fire:

I think this is a little bit early.
At least wait for the first proposal to be finished voting and see how things went

7 Likes

Agree here.

Overall, the idea is cool but really want to see Proposal #0 and Proposal #1 to conclude first.

2 Likes

I think this proposal is important now to show everyone what is a possible outcome if we vote for Proposal 0.

Vote for Proposal 0. Liquidity mining is a feature, not a bug.

1 Like

I don’t think this is an aggressive enough reduction. This is a big difference from 30k total cap.

2 Likes

Liquidity mining is a feature, not a bug.

But it takes more than 3 days to come up with final numbers.

Keep in mind that Proposal #0 can be brought to discussion again as another proposal.

2 Likes

This type of proposal is probably why most people are voting no. This is some massive $YFI inflation. If you want to win over No voters,

I think the discussion should be starting at reducing weekly supply increase to 3k YFI. That can still offer attractive yields, won’t be as much of a shock to people expecting a 30k fixed supply.

3 Likes

I like this model but I would alter it somewhat, I think week 20 should be the end of that halving cycle method and from that point it should follow a yearly prime number schedule.

So issuance would go down to 0.32% or 468.75 weekly issuance and this cycle should last for 2 years because 2 is the first prime number, after 2 years you half again, the next cycle would last for 3 years because 3 in the next prime number, weekly issuance would go down to 0.16% or 234.375.

next cycle last for 5 years, next 7 years, next 11 years, next 13 years, next 17 years, next 19 years. maybe after 19 you stop and thats it.

  • Much too aggressive issuance.
  • Much too quick of a half-life.
  • No plan beyond 25 weeks.

I will be voting NO on prop 5.

6 Likes

having two simultaneous votes on issuance is probably not a good idea

4 Likes

Let proposals 0 and 1 finish first.

That said, issuance is still too high with this model. Start at 1K.

4 Likes

Keep in mind that issuance controls 2 things:

  • subsidized yield of the liquidity pools
  • yield on the fee reward distribution

The current yields are 600%+ on the pools and 120% on the fee rewards. These will need to go down significantly. On the other hand these yields also depend on the assets held in the system. If the issuance stops, funds go out of the pools, the party is over. The main driver of the YFI price to go up, the fee rewards, will disappear and the price will collapse to $0.

Ultimately the price of the token will change in a way that these yields will normalize to 5-20% values, so I am not sure if nailing down a perfect issuance will be that important. I think a good enough solution will be to just continue issuing YFI, so that the assets stay within the system and rely on the market to normalize the price of YFI and the yields.

2 Likes

This is assuming yCurve only works because of incentives. This is clearly not true since it has been breaking records in volume for a good while now. As long as there is a value capture mechanism that will flow to YFI token holders the token price will not collapse to $0.

Is there a breakdown where the 52000 yCRV/week comes from? This will give more information, which parts of the system contribute to the rewards and how they will be impact if the yield subsidy stops.

2 Likes

I’m not sure where the 52000 yCRV comes from but we as YFI tokens holders can definitely add a small fee to each tx in yCurve and easily calculate how much value we can extract from the total volume we have been seeing. But even though we still have questions that need to be answered:

  • How much is the ideal amount to extract
  • Should this amount be given to YFI token holders or sent to a DAO where token holders vote on how funds get deployed

It is difficult to determine how much we should reduce in supply if we are not sure what other lever we have available to pull.

We don’t need to run the incentive program that long. I suggest halving the supply every week or two.

How about this?

3 Likes

Can you explain your rational for why 10 weeks and why the chosen decline schedule?

2 Likes

We need to see where 0 ends up before we consider this.