YIP-57: Funding Yearn's Future

1000-3333-6666,what a move!

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I’d like to:

  1. Mint ~10% of extra tokens (33333 in total) over next 3-5 years
  2. Burn the keys
  3. Split minted tokens in 1 to 5 proportion (20% goes to the key devs & the rest goes to the treasury and gets distributed later).

We shouldn’t compare this process to the other projects because when you start a new thing you’re trying to:

  1. play it safe and mint some extra tokens to make sure devs will get paid well even if the token doesn’t reach the “target price”.
  2. mint tokens before starting the project, so people & investors know the amount of tokens in advance & the rules are clear. In this case (YFI) we’re in the middle of the project & people were promised to have a limited supply of 30k tokens, so now they’re losing confidence in the project.

Regarding the concern that “we” went from 1000, to 3,333, to 6,666 . . . I have to say this makes me laugh, and cry a little too. It just shows how different yearn is as an entity and how little it’s understood. And it seems no matter how hard we try to communicate and be transparent, there is still so much we all need to learn about this new form of organization.

Imagine a traditional company wants to print new shares. They come out with their messaging “we want to print 10,000 shares for x, y, and z reasons.” It’s a solid plan and sounds great. People vote yes and hooray! Do you think they didn’t consider other numbers? Do you think they just immediately created a perfect plan with no experimentation first or brainstorming? Of course not, they tried 1,000, they tried 5,000, they tried 25,000 and their models landed on 10,000. They just did it in secret.

We do it in the open. We do it in the open and some people are so used to being manipulated by media campaigns they see our sincere and open process as a scam. It’s disheartening, but in the age of conspiracy theories it’s something we all have to get used to.

Just to take it a step further, let me explain from my PoV how this process has gone.

We’ve been running yearn on a shoestring budget from the get go. I took a salary 1/10th of my previous compensation because I love Yearn and it’s literally the most exciting thing in the world to me. So have many others. We work nonstop. We ship like no one else. Do we make mistakes? Yes we do, and we learn, and we do it all messy in the open because we are something new, we’re a decentralized network, not a top-down company.

I’ve seen our team get poached. I’ve seen other protocols offer $90,000 PER WEEK to attract devs. We pay most of our devs NOTHING. Some get ~$10k PER MONTH. The fact that we have any team left is astounding, the people at yearn are not here for the money. But how is that sustainable? We are going to keep losing people. And we are burning out because we are under-resourced.

The amount of audits we are doing is crazy, some cost over 6 figures. These new bills come in and do you know what the discussion is on the ops team? It’s about giving up our ~$10k per month salary to pay them. We pay people out of pocket to make things happen fast and avoid worrying the team. We’ve paid the whole team a month late once.

In DeFi today, how does this make any sense to you?

In recent months we’ve seen the cracks forming. Money has become an existential problem for Yearn. How is YFI going to do with no Yearn team? Or a Yearn team of burned out underpaid workers doing 10 jobs and unpaid volunteers flowing in and out picking up the pieces?

So we came up with BABY. At that time we hadn’t even considered minting as an option. BABY didn’t get us to where the rest of DeFi is in terms of compensation or treasury, but at least it might help staunch the bleeding. And once v2 TVL kicks up it starts looking pretty good. But as you can see from the sensitivities in our proposal, it’s not enough.

We thought we didn’t have any other options, so BABY was it. Then @yfi_lit made his proposal for a mint. For the record, no one on the core team knew who @yfi_lit was. Then all of a sudden, while the BABY proposal was already in progress, minting was an option.

Why was it an option? Not because the devs decided to ram minting through – because we listen to the community and the community told us it was an option.

At this point, seeing the feedback we were getting, and the incredible amount of support we had, creative energy just started exploding. Why 1,000? Maybe 3,333 was better? 33,333 is a nice meme, boom, now there’s a meme. But then we set in for the hard work of actually crunching the numbers and it turned out 6,666 was a better fit (see our reasoning in the proposal).

Now while most things in yearn happen in the open, some do not. Yes, there are many private discussions in yearn, just like in any other network. One of these discussions is around compensation packages. I and a few others built a number of detailed models for compensating the team. We consulted top industry experts, some of whom are coauthors of this proposal. We arrived at a reasonable and face melting plan. We are not sharing it yet because it’s really fucking sensitive and not finished! It’s an estimate done to arrive at the mint number. It needs more work. I’m not going to share an estimate for how much each contributor is going to get paid before it’s ready to offer to each team member. They deserve to hear it first and only after it’s been fully vetted through a solid process.

That’s why we will do the Compensation Working Group. This is the way. This is how Yearn actually works: small groups of dedicated people doing the work, getting feedback, and submitting it to the multisig for approval. We are actively working on this plan. We can only do so much at once. We would love your feedback on this process. I am fine trusting our dedicated team and supportive community to do this properly after the mint has been passed (if it passes).

35 Likes

I will vote yes.

Long term, this is very good for the project :slight_smile:

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A car without fuel cannot move forward, so yes, let’s fill it up and move forward in the long term, obviously I vote yes.

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As someone who’s curiosity to discover this community was sparked by this debate, I strongly support creating more YFI in order to give the development team more skin the game (I must say I’m very impressed by the quality of the discussion so far!). I’m also of the opinion that developers should have as much power over governance as possible, especially in the early days. In short, I don’t really have a problem with the proposal as is.

Given this bias, I want to play devil’s advocate a little.

I must admit that it’s not entirely clear to me why 6,666 is enough of a war chest, but 3,333 isn’t (given the assumptions you’ve laid out).

To take your sensitivity analysis, for example, it looks like it considers 100,000 - 200,000 dollars YFI to be a realistic 2021 target (which i agree is a perfectly reasonable assumption). Within this window however, we see that

6,666 YFI minted (18% of total supply) at

$100,000 per YFI ==> $666 Million in dev funds
$200,000 per YFI ==> $1.3 Billion in dev funds

3,333 YFI minted (10% of total supply) at

$100,000 per YFI ==> $333 Million in dev funds
$200,000 per YFI ==> $666 Million in dev funds

And this is just by end of 2021.

So my question is the following: given that 3,333 YFI has may well be enough to bring dev funds to $500 million by end of year, could you elaborate a little on why 6,666 was chosen over 3,333?

P.S
A relevant quote from your second reference:

a mint of somewhere between 5-15% of total supply is reasonable and puts YFI in an incentive-aligned and competitive position when viewed in the context of the talent market… If we don’t burn the minting key, this can be on the smaller end since there will be corrective power down the line.

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Welcome to the forum @sachayves – and thank you for sharing your feedback and thoughts in this collaborative and supportive way. I can’t tell you how nice it is to have debates on this level, especially considering all the fud in this thread…

We ran numbers on 3 options: 3,333, 6,666, and 10,000. There was a lot of discussion and at various times someone was advocating for each position on that spectrum.

We created this proposal in a novel way, with two interconnected telegram groups. The first was open to anyone who asked to join it via this invitation among others. There are 69 members currently (noice), anyone that asked was let in. From this group we created a smaller group of the coauthors to write the proposal and contain sensitive numbers (like the comp package discussion). We ran numbers and discussed options across both groups, and participated in the larger discussion across twitter, telegram, discord, and this forum.

Speaking for myself, I advocated for 6,666 for the reasons written in the YIP. But to add my personal opinion, and maybe we should have included this, we need to plan for both good and bad outcomes.

What if we hit another bear market and DeFi tanks by 50–80%? We need to be able to survive that too. And also I want this to be the last mint for team and treasury we ever do, so I want to make sure we get it right. Could we manage with 3,333? Probably, but it’s tight. Giving 2,222 to the team (which is a lot less of a chunk than others do) would leave only 1,111 for other uses.

What if we want to do protocol to protocol incentives with our Ecosystem partners to strengthen our mergers? What if we want to do another vault emission? What if the market tanks and we need to staff up but can’t compete with teams that have 10–50x the treasury that we do? What if the community proposes an amazing new initiative like yAcademy?

It takes a ton of energy to do governance processes like this. To our critics who say we just do what we want, I mean, do you think I want to be answering questions all day in here and spending all my time making proposals? Not really, I want to be building yearn, working on the decentralized operations models we have in research, developing the compensation plan, hiring new geniuses, helping our team with their blockers, working on the new website…

That being said, I am actually a huge believer in our community and the value of decision-making processes like this. So I am happy to be working on this for yearn.

But anyway, back to 6,666 – I’ve shared my thoughts, but there are far better tokenomics minds amongst the proposal designers, I’d love to hear from them too.

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True, but why 6666? looks like 3333 should be more than enough.

BABY should work as the supporting mechanism quite well. I mean 3333 tokens + BABY should do the trick. Also if you really care about money maybe there’s a reason to increase the treasury limit from 500k to let’s say 10m and use that pool when we are in the “bear market”.

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Thank you for your work.

I voted yes for the proposal. Two suggestions that I think would satisfy some tailwinds I’ve noticed here:

  1. Need to introduce some opportunity cost of not staking. Assuming the mint goes, BABY buybacks should be re-directed to gov vault. Directing all the BABY buybacks to the operational fund while also minting will leave a sour taste in a lot of good intentioned peoples mouths as there is the perception of “double dipping”. Also, some of the newly minted tokens like (1/20th, or w/e) should be distributed to YFI stakers. This will help satisfy some from the “numba go up” crowd as more folks have a reason to stake, less supply float, etc. at a cost that is minimal to the original reasoning for pursuing these proposals in the first place. This is not permanent and if in the future we need more $$ in the ops fund and the revenue from our ecosystem is substantial, can obviously tweak in the future. But for now with the minting about to go live, BABY should be modified to incentivize staking and support the price of the token.

  2. We need a commitment to bring a binding vote on burning the minting function after we mint. Like immediately after the mint is in effect, we go back to square 1 and have a real up/down vote on burning the minting funciton. I do not think we should but there seems to be alot of confusion regarding this. Let’s wipe the slate clean and vote after we mint. Irrespective of outcome, it will put all the confusion etc to bed.

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Thanks for the hard work of all the developers, the sleepless nights and the great project that YFI became, I am only a Holder but I have come to have a very great feeling for this project and it is the crypto that I love the most. We all have to think about the team and in the future the results will be seen there, they only want 1YFI = $ 100K with no work involved, that is mediocre and speculators. Let’s not be selfish this is going to be very big, it is going to be the core of the finances of the future, of our children and our grandchildren. I give you a YES bros

Regards of Ecuador
South América

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I love the passion and diligence that has gone into this proposal. Congratulations to all involved.

As we enter what I hope pray will be a great 2021 for crytpo, DeFi and especially Yearn, I do think maybe 6,666 might be too much, but I am all in favor of taking the conservative approach and hoping to avoid another issuance or risk this community loosing key contributors if we do enter another bear market.

Apologies if a lot of this has been said, but I think there are two key aspects of this proposal that some that are against it may be overlooking:

  1. This should not an 18% dilutive event (immediately). With only 2,222 going to the team and the rest going to a community treasury, at most it is 6.9% dilutive. But then if you consider the vesting it is likely under 2%. Further, if you take a step back and look at who is receiving these assets, and the contributions they have done for passion and pennies, I doubt 75% of that makes it’s way to market in 2021. This means that the dilutive impact in 2021 is likely under 0.5% (maybe optimistic but at least how I am thinking about it).
  2. Largely to date, crypto markets don’t care too much about fully diluted value (unless it is ridiculous and there is a high inflation rate attached). Just look at projects like Uniswap, Chainlink and Synthetix (heck even XRP and XLM etc) for confirmation of this. I would argue, there might even be an investor premium since it provides confidence that the team is long term aligned and incentivized to stay. Not be lured to competing products because they can’t pay rent of get offered 10x plus what Yearn can offer.

Does inflation suck, yes…
Does a ghost protocol suck more, yes…
Is face melting development, innovation and protocol growth enjoyable, yes…

#SecureTheFuture

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when? and how? there is no specific about who gets what and when and what incentive is it tied to. whats the day one inflation? 2222, yearn should just hire a cfo and ceo devs are great but managment is shit

I broadly very much in favour of this as a proposal. I’ve seen through the open telegram working group the effort that has been put into putting this together. Very impressive and an excellent example of collaboration.

I’m firmly of the view that 6666 is the right mint for today. Read @tracheopteryx 's various posts above for reasoning – I won’t repeat.

As a holder and not a core team member, I do get the view that this proposal plus recent YIPs that have seen staking rewards cut back then (through BABY) removed completely is quite a lot to take in. But I am certain that this proposal should be implemented for the future of Yearn to be a successful one.

So – compromise. It seems from this thread like the two compromises that might help build broader community support are:

  1. Mint but don’t implement BABY (dilution but no loss of income)
  2. Mint but also burn keys (dilution but supply then capped ‘forever’)

Personally, I’d prefer to see (1) than (2).

Key burning is, for me, too final. We should keep the ability to mint just like a company retains the ability to issue shares. Let’s say we come across an acquisition opportunity, or need to incentivise a much much larger team. It’s short-sighted to burn IMO. More arguments in various posts above.

I am much more pro (2) as a compromise – to see some form of staking reward reintroduced.

  • It would give token holders a direct link from TVL > Fees > income which would be good for gathering the community around the promotion and enhancement of v2 vaults
  • I suspect it would make YFI more attractive to hold, therefore pushing price up and actually giving a post-mint Yearn treasury more firepower
  • The treasury won’t need the additional income, at least not in the coming year or two, given the YFI it will hold post-mint. And if it is needed later on, it’s a much easier to go back to a 100% diversion of fees to the ops than it is to get around a previous mistaken key burn

Of course BABY has been passed on-chain already and contains elements such as the YFI buyback mandate that should probably be kept – but I’m assuming we could tack on to this proposal a line to redirect the YFI bought back under BABY to staking rewards rather than the ops fund.

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Here is some reasoning behind minting a quantity of 6666 over say 3333.

Mint Objectives

Before figuring out an actual number to mint, we know that whatever printed is to be allocated between:

  • a: retaining existing contributors
  • b: retaining future contributors
  • c: giving the treasury a war chest for future use

Allocation ratios

Thinking about what the right allocation between these three should be, an equal allocation feels reasonable, as they are arguably equally important in this context. Given that both b & c are allocated to the Treasury until deployed, this becomes what is simplified as the 1/3 + 2/3 split in the proposal, i.e. a ratio 1:2.

Size of each chunk

So knowing that we want to print tokens to create two chunks in the ratio 1:2, the question then becomes how big each of those chunks should be.

We thought a good way to work that out was to solve a and use that to work out b+c = 2a. So we drew a mock, a skeleton, a high level and unfinished compensation plan for existing contributors, using benchmarks, comparisons with our peers, and compensation data for similar jobs.

Using this plan, we were able to conclude that in order for the compensation plan for a to be competitive, while still equating to roughly 1/3rd of the total mint amount, the total mint would need to be in the order of 20-25% of existing supply. We then further validated this finding against industry precedent (see footnote [1] in proposal) before settling on 6666, or 22%, for its memetic value.

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Thank you for taking the time to write such a thoughtful response.

It’s true, 6,666 makes sense if you want to be prepared for a very bad bear market and there is no chance of you being able to mint again.

On the other hand, there may be an under-appreciated risk associated with having too many resources. What if YFI does 10x this year (arguably as (or more) likely than a prolonged and severe bear market)? The feeling of unlimited resources may make it harder to focus on what really matters. It’s an open secret that creativity needs contraints to flourish. Will you all stay hungry and focused?

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who are the team, and who is to be paid what, not very transparent for defi/openfi.
are we to assume 2222 will be minted at once, one day very soon, is there time lock to stop dump. we all know whales and devs are close, insiders always win. whats to stop devs from getting paid leaving and starting own project, or getting rich and just not working, 2222 is 66M

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I see many concerns regarding the proposed amount to mint. What is completely missing in this and related discussions is the vision of Yearn. In an early interview, Andre stated he wants to build an empire. Is that still the case? Is that also the vision the team has in mind?

When thinking about minting YFI for the team and as a treasure battle chest, which I am in favor of, it is of immense importance to shine a light on what Yearn’s long term vision is. Currently, I am missing that in the discussion.

It seems that the decision to mint and how much to mint becomes a lot clearer when knowing a certain goal to achieve, what steps need to be taken (acquisition of projects and/or solving novel problems), and how much capital it requires to get there. Once the mission is clear or reiterated, the team and its community can then deduce the inherent risk and potential upside affecting the evaluation to mint. It will become easy for the community to greenlight a compensation package that outlines yearns mission, the necessary steps, and potential upside with it. It will also clear up how to community can further foster and support its team to succeed.

Let’s agree on the mission, the plan, and the figures.

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true, harvest has done better job of agg yield

This all sounds great to me and makes a lot of sense. I’m especially excited to hear that there there is a “high level and unfinished compensation plan for existing contributors” in the work.

One reservation I still have though is regarding how the action of minting more YFI may fall under Securities Law. See my previous post:

Can one of the authors of the proposal comment on whether or not this question (would YFI be deemed as a security based on the Howey Test if new YFI is minted?) was considered, and if so, why it was ruled out as a legitimate concern?

Once again though, great work in putting this together guys!

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