Insightful thesis and I enjoyed reading it! Just one specific question to one of your points: Where would the interests come from if everybody borrow or lend or trade in yAsset instead of the underlying itself? Is there going to be an equilibrium and I was wondering what would it look like?
I am in favor of an overall low inflation strategy, but I do think it would be detrimental to permanently close off the possibility of further issuance.
We are at the beginning of a marathon, not a sprint. The DeFi landscape is going to look quite different in 3 years than it does now. While I think something like 8k issuance over the next 2 years is likely sufficient, who knows what things will look like by that point.
I would like to try and find a middle ground where there’s an agreed upon Max Issuance Cap over a given period (2 years for example). As we get closer to the end of that period, (18 months from now for example) we can revisit the question with a better understanding of the current envrionment. I think this solution could provide market participants with the certainty of issuance over the medium term, while retaining flexibility moving forward. I mean the rational expectation is that YFI token holders will be averse to inflating supply in general. Also the “buyback” burn method i’ve proposed in another post is another potential tool to moderate supply inflation.
The drawback i see is that having the mult-sig setup is a vulnerability. If the above medium term Max Cap idea were to pass it would be ideal to have some kind of timelock put on the minting function, such that not even the multi-sig could mint until the agreed time period ends. I don’t know the technical details of implement this, and I suspect it might require a rewrite of the YFI token contract, which is probably not worth it just for this.
Aave, Compound, dYdX, bZx, etc. would function as “exchanges” while yearn would function as a “broker” under a hub-and-spoke model. In the extreme case, each of the downstream projects would only have 1 lender, yearn. Yearn would then have all of the retail customers. Compound would be like NASDAQ and yearn would be like E-Trade. Everyone still gets paid.
Here’s a few thoughts:
Having agreed issuance (3-10k), is it not in our ability to hard code a diminishing rate of inflation from 1% trailing to zero over a 3-5 year period which totals the remaining 2k. (Max total to reach 42k) Capturing benefits of a long trailing incentive.With price advances this should remain enough of an incentive imo.
We hard code in a buyback program, a kitty, where a % of protocol generated cash flow is used to automatically purchase YFI on the open market. This can be done at specific periods OR when price returns to a trailing average. Say if price drops to the 20 dma, all capital raised in the kitty is used to purchase YFI on the open market. This YFI (and/or the kitty) would be accessible to the community for future expansion/developments.
This way, we burn the keys, having built in a means to replenish a supply of capital for future growth.
I would amend the above to say, the kitty would only buy YFI if price falls below the 20 dma. It would continue purchase YFI at or below the 20 dma until the kitty has depleted. If capital entered the kitty and price was still below the 20 dma, purchases would resume.
I’m certain this could be built in as a new smart contract, leaving us free to burn keys that mint YFI tokens.
I am leaning in favor of an automated buy-back and burn plan for some of the reasons described here. To address this specific objection, it makes sense because it gives us two separate tools to use. Sometimes circumstances may warrant adding issuance as the DeFi space evolves, and at other times issuance won’t be useful and being able to reduce supply would be an appropriate tool. Also it is not as contrary to inflation as it seems. The APY of issuance to YPool etc would look just as good and incentivize just as effectively even if we were simultaneously using the fees generated by new TVL to buy and burn YFI.
Part 2 mostly seems reasonable to us. In this case, we would prefer buybacks constantly over time rather than based on price activity. It is best not to manipulate the price (like AMPL) and allow true price discovery.
Understood. Imo burning keys is the goal here. The concern I have with a regular purchase program is that if timing of purchases is known, it can be front run, which in itself is manipulative.
A defensive setup as the example shared would provide added security to the wider and over time newer audience. Forgive me for saying this, but should a whale decide to dump, I, as a minnow would rest a little easier knowing there was a dampening effect in play.
Noting of course that my suggestion is also a manner of price manipulation.
Agreed that front-running risk should be seriously considered. It is not clear that front-running would be detrimental once YFI is listed on a non AMM exchange (e.g. FTX). Too deep of a rabbit hole to explain right now.
I don’t disagree and appreciate the feedback. For context, I was asked to help out by one of the team members and am happy to do so, but I’m just spinning up on the project. Up until a few days ago I didn’t really have much/any context for the project so was just hanging off of my prior experiences. I’m here to serve the community and run some models for yall based on the intention of the community. I.e. I don’t have a dog in the fight (except I think the project is cool so I started farming a bit) just trying to be helpful;)
I just posted this and I think it has bearing on this thread.
There is always the possibility to do a hard fork and those who want to move to a new monetary policy can burn their YFI tokens and mint the new ones with a different policy (Or simply sell their tokens for the new ones). Speaking as a developer and an investor, I want to make sure that the tools I build on top of are going to continue to exist in the future as well as wanting to make sure I invest in assets with a sound and consistent monetary policy.
Ok ok. Time change . Old post.
I think we can do VC.
a 50-week-long YFI VC fund pool. one can stake YFI and withdraw YFI anytime
Strategy like below:
- Borrow USDC with YFI as collateral at AAVE
- Invest USDC to brand new DEFI project’s Dao Token. The whole investment term is locked on smart contract.
- Swap new Dao Token (invested projects) back to USDC after holding the investment for a certain time.
- Pay back USDC.
It’s a pool. one can invest and withdraw anytime. The pool will go on forever. The return will be calculated every 50 weeks. It works like multiple 50-weeek VC funds.
If you don’t withdraw when the first round of 50-week ends, your YFI will be entered into the next 50-week automatically.
Community can decide how long to hold a new project’s token. If the first 50-week ends and community still decide to hold one project’s tokens, the next 50-week fund can buy the investment from the former 50-week found with 30% premium (if the token has no market price yet.). This make sure every LP can enjoy the long-term investment return.
The community will vote for how much to invest, when to invest, when to swap the new Dao token to USDC…etc.
The community will work as the investment analysts in VC firms.
Later, we can create similar VC fund pools of SNX, COMPOUND, UNI, AAVE, CORN, PICKLE, CREAM, COVER…etc.
In this way, we will make YFI great again, and we make the whole DEFI great again.
Harvest pool that aggregate all yfi pools and vaults
- 3% of the harvest is used to market buy yfi and sent to yfi staking holders
- 1.5% of the harvest is used to buy eth and is sent to the treasury
Standard withdrawal fees et at 0.5%
Kind like ‘merkle’ vaults gradually release, combining apys