Proposal: Change Governance staking rewards to yUSD

Summary:

This proposal would change the governance rewards for staking YFI from yCRV to yUSD. (yUSD is the yearn Vault for yCRV).

Abstract:

Currently the governance staking model rewards YFI stakers with yCRV. This will change staking rewards to yUSD. This will maximize the yield and compounding of the governance staking rewards, and reduce the friction from gas.

Motivation:

Currently there is 53k yCRV in rewards that have been accrued and haven’t been claimed. Due to high gas costs, many smaller stakers may leave yCRV unclaimed. There is high friction from gas transaction costs, from claiming the rewards, and then depositing them to a yVault. By using yUSD as the governance reward, rewards will have a much stronger compounding effects for stakers.

Specification:

The governance reward address will be changed to yUSD.

For: Would replace yCRV governance rewards with yUSD.

Against: Keep governance rewards as yCRV.

Poll:

  • For
  • Against

0 voters

4 Likes

@FutureFund Can you quote the error, if there is still any?

1 Like

I am for this but unclaimed rewards is MORE likely due to a bug preventing rewards from being claimed.

I have not claimed any rewards (with hundreds of yCRV sitting there) even having voted in ALL YIPs due to the fact the claim rewards button has never activated.

If you voted with say 10 YFI, and you were rewarded yCRV, the you reduced your YFI to say 8YFI and voted, it may not work. Need to have the highest amount of YFI since day 1 of earning and voting. @banteg please confirm if I’m correct.

I have more YFI now than I ever have.
Still not working.

I think this is FAR too complicated.
If you’re staking and have the right to a reward then you should just be able to claim. Any time irrespective of how many YFI in your wallet at the time of the claim.

Ie.
If I have 10 YFI and earn $1/day per YFI for 10 days. ($10)

Then I add 10 YFI and earn the same rate per day for 20 YFI over a further 10 days. ($10+$20)

Then I withdraw it ALL and a month later decide to claim, then I should be able to claim the total ($30) without restriction.

2 Likes

Rewards should be based on staked YFI over time (only) and voting is:

A. Used to unlock rewards earned to date
B. Separated from claims entirely

The above is in line with recent gYFI discussions

1 Like

This seems like the most practical approach

“This will maximize the yield and compounding of the governance staking rewards, and reduce the friction from gas.”

How?

I’d like to understand this better too. @jiecut
Re. @jimsox question.

Do we need to make a yip to fix this or is it in the works?

I wonder if switching from ycrv to yUSD will take the same amount of gas or more? Are goverance rewards then subject to a withdrawal fee? Are they now subject to it, or nobody will ever get enough rewards to warrant a fee for withdrawal? I would vote for this proposal.

1 Like

Why not make the rewards to vaulted yUSD instead?
Everyone holding YFI should be comfortable enough to get their rewards in a vaulted asset.

2 Likes

YUSD is the vaulted ycrv token

5 Likes

Ok that makes sense now. Didnt realise that yUSD is yCRV locked in the yVault.

So governance rewards are deposited on your behalf, into the yVault and then you have to collect them from the yVault and not the governance smart contract?

Will they still be unclaimable if you don’t vote? and if you do vote will they be locked for 3 days?

How will this effect the current yVault? can that even be done without effecting regular yVault users? (i dont know, im not a dev)

Will the governance smart contract become a yVault depositor instead?

I can see the benefit of yUSD but the logistics of getting it to work seem really complex and could upset what is already working.

How do you see it working @jiecut ?

1 Like

I think this is an excellent idea. In this case, there would be one transaction depositing the yCRV into the vault, and then the yUSD would be distributed to everyone who is staking and voting.

@jimsox @Dark I don’t think the logistics are too complex. Unless yUSD can’t be transferred between users, then it should be a very simple procedure. The governance contract would deposit the yCRV, would receive the corresponding yUSD, and then simply distribute it. yUSD is just a token that essentially corresponds to a fraction of the yearn vault, which is why the value of it is consistently increasing (in yCRV).

I do still think there is more governance work to be done regarding staking/claiming, especially for users who may not have much YFI. My main concern is the gas cost associated with claiming rewards may be higher than the rewards themselves, leading to only those with more YFI actually receiving voting rewards. Is there a way we could implement something like Disperse.app? This way, again, gas costs would be subsidized by the protocol, and could simply pay out to a generated list of addresses holding gYFI who have voted on a proposal in the last x number of days (since voting is all on-chain, I don’t imagine this would be too hard to pull).

1 Like

If you want to compound your governance rewards you need to,

  • Claim Rewards
  • Deposit yCRV into yVault

This uses a lot of gas. That’s the friction on compounding your governance rewards.

3 Likes

@jimsox @dudesahn

If you don’t know. yUSD is the tokenized form of the yearn vault for yCRV. It’s a simple erc20 token.

The great thing is that it compounds your yCRV for you. yUSD will be worth more and more yCRV. If you let it sit unclaimed, you’ll be automatically compounding your governance rewards. Once it gets big enough, you can claim it. Also when you do claim it, you’ll get yUSD, and you can let it compound in your wallet too.

The gas shouldn’t be a big problem for small users as they can leave the rewards unclaimed, it’s not a big opportunity cost to leave it unclaimed. You’re receiving great yield on your governance rewards.

2 Likes

Alright cool, this was my biggest concern with claiming rewards– I wasn’t sure if there was some sort of timer where if you didn’t claim your rewards, they went back into the pool.

I don’t know enough about the gas costs of these various contracts, but would it maybe be more efficient to simply have a button that is “claim rewards and vote”? I’m just thinking this might save users gas costs and could encourage continual participation– when you vote for your next YIP, you can claim the rewards from previous ones at the same time.

@dudesahn Much cheaper gas costs to just do voting and not needing to claim rewards. Combining them doesn’t really make it cheaper.

Also, voting might be gasless soon.

1 Like

I’m in favor of this change but it presents some issues.

  • 0.5% fee + gas fee to exit to yCRV (if wanting fiat, for example)
  • Increased systemic risk with yUSD vs yCRV
  • Underlying strategies of yUSD can change introducing an attack vector with governance rewards

The last two aren’t as big of a concern in the short-term, but should still be considered.

However for the first point, since there are now markets with yUSD on Uniswap and other places, people can freely exchange yUSD for ETH or other tokens, so the exit fee isn’t presently a huge concern unless you want to unwrap to get the underlying yCRV.

But I would feel better about this change if we had our own community incentivized yUSD/yCRV liquidity pools to facilitate this, perhaps YFI holders could opt-in to this trading pool if they intend to keep their funds parked (maybe because of tax implications or high gas fees). This has the side-effect of adding trading fees on top of the protocol fees. The swap fees would need to be below 0.5% to make sense, and would effectively be subsidizing the vault exit fees by reducing the total earnings generated by YFI governance participants that exit yCRV vaults, but it would allow for less friction in claiming rewards for governance participants as a trade off. The challenge would lie in limiting the pool to only YFI holders.

This could potentially be achieved with a private balancer pool and a smart contract acting as a smart pool. YFI holders could then claim a BPT token representing their share in the index of pooled governance funds, choosing to liquidate it into the token of their choice, use it as collateral to fund protocol initiatives, or a myriad of other potential use cases.

This approach adds even more platform risk than just switching the rewards to yUSD but I believe it could be a better solution, given the vault exit fees and the cost of claiming governance rewards. If the trading pool is opt-in, then that could cause a chicken or the egg problem, so the pool would need to be incentivized by additional governance rewards for participation.

Any interest in exploring this option further?

2 Likes