Proposal 0 has passed and more YFI will be issued. Currently there is a lot of discussion on what the issuance model should be. Clearly we do need to determine the issuance model, but I think we would do well to take a step back and answer some other questions before we decide on the issuance model.
What is the purpose of further issuance?
In general terms the purpose is to further drive awareness of the yearn.finance platform/protocol and to bootstrap liquidity. But in order to accomplish these objectives efficiently we need to gather more information.
1) Where is the value of Yearn.finance and YFI derived? Which part(s) of the protocol bring in the most value?
Answering these questions will help determine where to target future issuance. More clarity on how the YPool brings in value to the Rewards contracts would be good. Also I am very interested in YSwap.Exchange and the idea of ‘Yield Aware AMMs’ that also allow single asset exposure. My understanding from the Medium posts is that it combines very useful features (mainly Yield capture, Token incentive capture, and impermanent loss abatement/elimination) that aren’t found in another single AMM protocol.
Knowing which aspects of the platform to encourage participation in will help us answer the second question:
2) What level of incentive is enough to be competitive with other yield farming incentives?
Many proposals are, imo, putting the cart before the horse in terms of creating models for issuance without first considering what level of issuance is called for by the market. For example starting from 30,000 tokens and halving to 15,000 tokens keeps our incentives at ridiculous 300% APY levels at current YFI price. Why blow more of incentive provision ability than we have to?
I did a quick and simplistic calculation looking at the current YPool which still has yields of 300%+. I looked at current yield of YPool and sUSD pool, adjusted for the YPool lower staking percent, and then guessed at a hypothetical future distribution between the pools. Supposing my math is correct, YFI can still beat the sUSD pool in terms of token rewards issuing only 500 YFI at a market price of $800. What would make this much more useful is more information on how to calculate the rewards earned by yearn.finance at various TVL in the YPool and interest rates on the assets.
To sum up, we need more answers to questions 1 and 2 above in order to determine a reasonable model for issuance. There is merit in many of the current proposals in a general sense, the Adaptive Issuance proposal or the various halving proposals, but more information is needed to determine where to allocate the issuance and at what level to start the issuance.
As mentioned is this post here by @markpui,
I think there should be a multi week delay before settling on an issuance model.