Bootstrap the minting of new yveCRV by creating a (yveCRV, yvBOOST, CRV) Curve Factory Pool with a reward Gauge
Since Convex launched in May, the voting power of Yearn has dropped significantly to sub 7% and yveCRV dramatically lost its peg, trading at a 60% ‘discount’.
As a significant amount of the Yearn strategies currently uses Curve to generate yield, it is important to sustain a decent amount of voting power (veCRV) for the long-term.
This Proposal aims to restore the yveCRV:CRV peg and even incentivizes people to mint new yveCRV, which would mean Yearn would own a bigger part of the veCRV pie again.
This can be achieved by creating a Curve (yvBOOST, yveCRV, CRV) Factory pool with a CRV Gauge. If Yearn allocates all its current votingpower to this gauge, with the current yveCRV and yvBOOST supply this strategy could yield about 90% APR. This APR itself will incentivize the minting of new yveCRV as it is the highest CRV yield in the DeFi space.
The voting power of Yearn for the Curve Gauge Voting and the Governance voting systems has dropped significantly during the past months. The main reason for this is the rise of Convex Finance, which bootstrapped their so called ‘flywheel’ staking mechanism, which made tons of people lock their CRV tokens perpetually in the Convex Protocol.
The price of yveCRV has significantly lost its peg, and as yveCRV lost its peg, there is no incentive anymore to mint any new yveCRV as people can buy yveCRV on the market at a 60% discount as we speak.
As of today (October 12), Yearn owns 7.26% of all the veCRV. Convex currently owns 38.10% of the veCRV supply.
The trend is clear. Convex is taking over the pie, where Yearn is losing its part. In just over 4 months, Convex managed to gather a stunning 38% and kicked Yearn off the veCRV throne. If this trend continuous, the voting power of Yearn might drop to insignificant numbers and it might be lost forever.
This trend is problematic, especially if Yearn wants to maintain its powerful status in the broadening DeFi environment where Curve is an essential part of.
To get out of the current downward spiral I propose to create a Curve Factory pool with the following assets:
- yveCRV (33,33%)
- yvBOOST (33,33%)
- CRV (33,33%)
You might ask yourself, why not just an yveCRV/CRV pool or an yvBOOST/CRV pool? Because this setup allows 66,66% of the CRV gauge rewards to flow to yveCRV and yvBOOST holders, where this else would be 50%. Thus it will also faster create incentives to mint new yveCRV.
The current yveCRV supply is 13.479M
11.482M of this yveCRV is locked in yvBOOST
The daily CRV emission currently is 633.126K CRV
Yearns current votingpower is 7.26%
If the (yveCRV, yvBOOST, CRV) pool is exactly in balance with the current circulating yveCRV supply it could fit: 6.74M yveCRV, 5.97M yvBOOST, 6.74M CRV
This would equal to a value of 20.22M CRV
Based on the daily CRV emission and Yearns voting power this could allocate atleast 633126 * 365 * 0,0726 = 16.7M CRV rewards towards this pool. 16.7M/20.22M = 83% APR in Curve rewards if all yveCRV and yvBOOST in circulation would be locked in this Factory pool.
New yveCRV minting and inflow in this Factory Pool would reduce the APR, but at the same time it would increase the veCRV votingpower of Yearn, which can be used to increase the APR again, during the next Gauge voting rounds.
This YIP proposes to implement the following:
- Yearn will setup a Curve Factory Pool containing yveCRV, yvBOOST and CRV.
- Yearn will create a proposal to add a Gauge to this Factory pool.
- If there are doubts about whether step 2, this Curve Gauge proposal, will pass, Yearn might consider using the Bribe system to stimulate people to vote ‘Yes’.
- yveCRV will likely get back to its peg, and thus incentives arise to mint new yveCRV
- Newly minted yveCRV could increase the relative voting power, which again allows Yearn to increase the Factory Pool APR.
- A future bigger veCRV stake could have a positive impact on the longterm Yearn TVL.
- Yearn will allocate all its votingpower towards this new Factory pool, atleast for the short-term. It could have a negative impact on the liquidity of the ibEUR, ibGBP, ibCHF, ibJPY, ibKRW pools where Yearn currently allocates liquidity to.
Disclaimer: I’ve been a long-term yveCRV and yvBOOST holder. If this proposal passes it would financially benefit me. Please verify and read everything critically as I might have a biased view.