Funnel some small percentage of rewards towards a socialized insurance fund denominated in a mix of BTC/ETH that will be used to protect Yearn platform users from suffering losses in the event of hacks/smart contract issues.
If implemented, a percent of yUSD rewards that goes through TreasuryVault will be redirected to an insurance fund account, where they will be swapped for a TBD mix of BTC/ETH to minimize USDT exposure and smart contract risks carried by yUSD. These rewards will accumulate and be used to help cover losses for platform users affected by hacks/smart contract issues. Fund accumulation will occur until a community-determined dollar amount and/or a certain ratio of insurance fund to AUM is reached, allowing the insurance fund to scale along with the amount of assets on the platform. This complimentary insurance would cover as much as possible per user affected in any incident, taking into account the size of the fund. Payouts will be controlled by the multisig holders.
Insuring the safety of our users’ funds aligns with Yearn’s ethos of doing what it can to provide for the public good. Currently, we have some systems in place to wind down and prevent liquidations, but there remains risk from hacks and smart contract bugs. At a minimal cost to governance, this insurance fund will give users more confidence in the protocol and as it grows in size it will also function as an additional value add that cannot be easily replicated (moat), protecting YFI against protocol fork risk going forward. Lastly, it moves the DeFi space forward in general, as only reputable CEXs have implemented programs like this - it would be a first for DeFi.
Implementation TBD, but based on previous YIP by @banteg, if ratified, the easiest way to achieve the result may be to add to the middleware contract that already splits rewards between Governance and Gitcoin wallet. We would add another split for the insurance fund with conditions added. Multisig would be in control of distribution of the fund itself.
For: In favor of directing 0-5% of rewards towards insurance fund
Against: No Insurance fund
- In favor of directing 0-5% of rewards towards insurance fund
- No insurance fund