Hello Yearn fam … I would like to share the best tokenomics for yearn in a forum post here, the same as I shared on discord.
I have written an article which explains the Diamond Hands Staking Model (DHSM):
Benefits of DHSM for Yearn
Long-Term Pumpamental of YFI:
- Turn Yearn community into Diamond Hand Believers & boost Network Effect
- Allow Yearn community members to take a long-term view (5–10yrs as opposed to 5–10 months)
- Reduce YFI token gambling and speculation by weak hands (this will always exist, but we can lower it)
- Prevent revenue treasury YFI shareholders from being their own worst enemy — when their tokens are locked up, they cannot sell the lows in panic.
- Shift rewards to YFI Token Holders with 10yr view, instead of benefiting short-term dumpers
In a nutshell, what would it do?
All we do is emulate HEX method to pay rewards out (which emulates certificate of deposit). However, instead of inflation rewards, Yearn will pay out its treasury.
Stakers can choose to stake between 1 day to 10 yrs. The maximum (10yrs) gets 3x more than someone who does 1 day, it scales along time.
If you exit your stake earlier than you said you would, 50% is given to Yearn Treasury, 50% is given to the rest of the stakers in the system. This is a penalty system. The more time remaining to end of stake, the more harsh the penalty.
This will significantly punish speculation and weak hands exiting → and reward people still holding in the system. Win/Win.
This will also shift our network thinking from “6 months” to “5yrs-10yrs” for everyone in the community. It aligns all incentives the best.
If you stake longer, you have a higher claim to the treasury. And you should, you are locking your money up in a smart contract and you can’t sell! This is the ultimate form of committment
Thanks for checking out this idea.
So who would be against this idea?
The only people who are against this idea are short-term gratification people. They want to use YFI to earn Treasury Rewards and dump instantly.
This type of behaviour should not be condoned. However, if people want to do it, they can, and they will lose YFI-share over time (because the rewards are all going to the Long-Term believers)
In HEX, the “T-Share Price” goes up every day that an unstake is done (claim on Inflation rewards). This means if you keep short-term staking (i.e. 7 days), you are slowly losing market share to someone who just did a 10yr or 15yr stake for example.
I believe Yearn can benefit from this because we will stop people dumping the lows, and we will stop people having a “gotta sell the next cycle top” mentality.
The Yearn empire grows strong with this system.
Just remember, you dont have to stake EVERYTHING at one point! You can ‘ladder’ your stakes. For example you might do 30% of your YFI at max length (e.g. 10yrs), and then you might have a stake ending every 1 year for 9 years… this already turns the community into long-term mindset people
Please share thoughts and comments!
Note: We have not discussed how this would impact VOTING power. If anyone can think of potential ways it can be abused, please share. This is only a guaranteed optimised way for a claim on Treasury… but Voting Power we have not thought out.
The issue: If someone buys lots of YFI and stakes for 10yrs, they get 3x leverage essentially on their voting power. Can this be abused? And also we want to think → If someone does this, shouldnt they get more voting power than someone who staked the same amount but only for 1 yr? The person locked in up for 10yrs is VERY committed after all…
Share and communicate
If you emulate the HEX staking system, you can see in the code & maths that compounding your stake is mathematically inferior to doing 1 long-term stake. This is because the price of the “share” goes up over time.
When you end your stake every 7 days, you have to constantly buy a higher share price. Where-as, if you just do a single 10-year stake, you lock in the “share price” today and earn all the treasury rewards from now until 2031.
So for example someone who would keep re-staking 7-days of YFI treasury share would lose market share to somebody who did 1 stake for 10-years for the same YFI.
This is because the system is coded to equate itself to compound interest for holders.