YIP-66: Streamlining contributor compensation

Proposals YIPs
1

Authors: 15 members of the Compensation group inc @0xJiji

Summary

Builds on top of the recently adopted YFI Tokenomics program to simplify Yearn contributor compensation through the introduction of a yDiscount program. Migrates and retires the previous contributor vesting and strategist compensation schemes.

Status

Voting
This proposal is currently in the voting phase. Cast your vote on Snapshot.
You can learn about our voting rules in YIP-55.

Abstract

If adopted, this proposal seeks to streamline future Yearn contributor compensation through the following steps:

  1. Establish that contributors moving forward should all be primarily compensated using the same baseline mechanism, consisting of payouts in stables.
  2. As an extension to the baseline mechanism, introduce a new method of rewarding Yearn contributors with YFI tokens, yDiscount, where:
    • Contributors will be able to purchase discounted YFI up to their current monthly compensation level.
    • All the purchased YFI gets locked into veYFI immediately.
    • The discount ranges from 10-60% of current market price, determined by the duration of each contributor’s veYFI lock.
  3. Retire the use of YFI vesting contracts, and migrate existing contracts to the new mechanism, giving those with remaining vests two options to choose from, either:
    • Lock their entire remaining vesting YFI amount into veYFI for an equal or greater duration; or
    • Release them from their vesting contracts, taking a haircut on the YFI they receive, determined by the remaining duration of their vesting package.
  4. Retire Strategist performance fee sharing, and “buy out” existing Strategies in production from this system:
    • Each affected strategist receive a payout based on their net earnings from Strategies.
    • The payout is a multiple of their average historical monthly net earnings, paid out as locked veYFI.
    • The multiple ranges from 3-18 and is determined by the duration of their veYFI lock.
    • Strategist total compensation (including migration) is expected to be be more or less on the same level as before.
  5. Instruct yBudget to set funds aside for a dedicated team budget for Strategists, to be used at their discretion, including to help onboard and retain new team members.

Background

An extension of YIP-65

This proposal picks up one of the future possibilities outlined in YIP-65: Evolving YFI Tokenomics[1] where a future time-locking mechanism of YFI is integrated with how contributors get rewarded. While it is not required, it is recommended that the reader first familiarize themselves with the concepts of YIP-65 in order to better understand this proposal.

Out of scope

The following topics were intentionally not covered by this proposal:

  • Coordinape & one-time grants. Coordinape[2] is used as a mechanism to distribute rewards for smaller and/or less regular contributions. Occassionaly one-time grants are also being paid by Treasury. These mechanisms are not covered by this proposal and remain as is.
  • Contributor compensation specifics. This is not a proposal about who should get how much, or how this is decided. For the sake of this proposal, it is simply assumed that there is some group of contributors getting some compensation, which is allocated in some pre-determined way.

The evolution of compensation

  • Strategists get 10% performance fee.
    YIP-52: Make Strategist Skin in Game Partner for Make Benefit of Glorious Brain of Yearn[3] makes a distinction of “Strategists”, the group of individual contributors that write autonomous investment strategies to be attached to vaults, and considers them separate from the rest of the contributors.

    With the passing of YIP-52, the 20% performance fee from vaults and strategies is split equally between Treasury and Strategists, with the intention that this is going to be the only compensation for the latter:

    Survival of the fittest. Strategists should “eat what they kill”, rewarding only the most ambitious and best performing, filtering out the rest.

    Regular protocol contributors are being paid in stables from Treasury, income which is formalized by the establishment of the Operations Fund with the passing of YIP-54.[4]

  • The mint introduces vesting YFI to new and existing contributors. The Treasury receives 6,666 YFI with the passing of YIP-57: Funding Yearn’s Future[5], and a mandate to allocate ~1/3rd of those to existing contributor vesting packages. Four strategists also receives vesting packages at this point[6], in recognition of their service, and in an early contradiction to the “eat what you kill” spirit of YIP-52.

    The Yearn treasury explicitly has a right of first refusal to buy back YFI from team members, and selling tokens is explicitly frowned upon and strongly advised against.

  • Governance 2.0 and beyond. From the passing of YIP-61: Governance 2.0[7], the yPeople team is responsible for making final compensation and onboarding decisions, guided by the advice of other contributors, and with the backing of a budget allocation from yBudget / Treasury. Newcomers joining full time tend to get rewarded with stablecoins and YFI vesting packages. Strategists earn the 10% performance fee, and as they get onboarded to become regular contributors, they also earn YFI vesting packages.

Key Learnings

  • Strategists are a part of Yearn. They are not outsiders, they are a fundamental part of the Yearn community.
  • Strategists work as a team. They do not work as single individuals following the “you eat what you kill” logic, they work in groups and as a team of teams, some of the most sovereign and well functioning within the Yearn community. They have established profit sharing amongst themselves, strategy committees, and a “Strategist Multisig” pool in which strategists donate 5% of their earnings to spend on various initiatives.
  • Performance is a team job. While Strategists write profitable strategies, they are not alone responsible for vault performance. Protocol developers write vault upgrades, Security reviewers audit both vaults and strategies, the Web teams maintain the front-end, yMechanics protect against MEV and improves harvesting margins, the Growth team promotes the product, and the Partnership team helps integrators bring TVL, while banteg keeps the morale up across the board with exquisitely curated hentai. To name a few. It’s a team effort that makes Yearn into what it is.
  • Contributors work fluidly across teams and roles. Contributing to Yearn comes with a lot of freedom, and trying to “assign” a contributor a role or a particular team or identity is more odd than helpful. One contributor can have many roles at the same time: They might be a Strategist, but also work in the Web team, while taking onboarding decisions in yPeople.
  • Legacy compensation packages cloud forward looking compensation. The first vesting packages were awarded to long time contributors that contributed Yearn in the very early days, with no expectation of compensation. These are naturally greater than the packages awarded to new joiners today. Contributors still get anchored to the legacy packages.
  • The “No YFI dumping” rule is unfair and strikes unevenly. Some contributors are forced to sell YFI to pay for their taxes, others are not. YFI is fairly liquid, selling these quantities does not impact the markets. And even if it did, it’s not clear that it would be a net negative for Yearn: If a contributor dumps their YFI making the YFI price drop, it creates a buying opportunity for Treasury buybacks.
  • YFI price volatility makes vesting unfair. Joining when the YFI/USD $60k or $30k gives you at completely different perspective on vesting amounts. It is extremely difficult to account for this fairly when onboarding new contributors and avoid some from feeling short changed.
  • Complexity and effort does not scale with TVL. The 10% performance fee to Strategists was a wild success. So much that our TVL and Yearn community grew and evolved. Yearn is completely different at $5bn TVL than it was at $500m TVL.
  • Unclear what happens once the vesting expires. The vesting packages are for 3 years, with the olders having ~1.5 years left to vest. It’s undetermined what will happen once these expire.

Snapshot of current state

Vesting packages

As of Jan 06 2022 there were 35 active vesting packages, with a total of 1689.91 YFI remaining to vest. See below chart for a breakdown of duration.

Strategists performance share

In Q4 2021, contributing Strategists earned $5,142,137 in performance fees net.

From this, they donated 5%, or $257,107 to a Strategy Multi-sig treasury that gives grants to newcomers and strategists who do not have a strategy in production.

There are in total eight strategists who are considered full-time contributors with strategies active in production.

These eight received on average ~$203,543/month in Q4.

Q4 2021 10% perf fee share, net     = $ 5,142,137
less 5% sms donation                -     257,107
per full time strategist                      / 8
per month                                     / 3
-------------------------------------------------
avg strategist $/month              = $   203,543

Motivation

Benefits

The following are some of the ways how the new compensation process is expected to improve over the previous state:

  • All contributors come under one single system
  • Historical vesting packages and strategist comps are removed from the compensation equation, making only recent contributions relevant
  • YFI allocation is handled by the contributors themselves, reducing process and decision complexity, and improving decentralization of decision making
  • Allows all contributors to align themselves to YFI according to their own preferences
  • Directly ties into the veYFI tokenomics design
  • Removes the need for a “no YFI dumping rule”
  • Supports contributors working in many different roles and teams at the same time
  • Can run autonomously for an indefinite period, there’s no expiry date on the design

Expected financial impact

yDiscount

  • Generates revenue for Treasury that can be spent on more YFI buybacks
  • Depletes treasury of YFI from the mint, at the rate contributors decide to spend their earnings on buying YFI.

Vesting migration

The impact can be said to be somewhere inbetween the two extremes of possible outcomes:

  • If all choose to migrate and lock for at least as long as their current vesting package, then the impact on Treasury funds is 0.
  • If all choose to take the haircut, then the Treasury would stand to save 394.6 YFI in returns from the vesting packages, using the Jan 06 data provided above, or ~23% of what’s remaining in the active vesting packages.

In other words, migrating the vesting contracts will result in immediate savings of 0-394.6 YFI. The saved YFI can subsequently be used in the yDiscount program.

Strategist performance fee migration

Similarly, if we as per above assume eight strategists that earn on average $200k/mo net, the impact of retiring the perfomance fee sharing can be measured against the possible extreme outcomes of their choices.

Total net strategy earnings = 8 strategists x $200k/mo = $1.6m/mo
veYFI_lock Combined Monthly Multiple Amount to lock in veYFI (USD)
All lock min: 6 months or less 3 $4.8m
All lock for 1 year 9 $14.4m
All lock max: 4 years 18 $28.8m

In other words, buying out strategists from the 10% performance fee arrangements is likely to result in YFI in the range of ~$5-25m to be locked into veYFI. In addition, at current performance, Treasury will be earning an additional ~$5.1m per quarter from increased performance fees. This will in turn be partially offset by an increase in the costs of compensation as the eight strategists now come to earn in the same system as all the others contributors. Strategist total compensation (including migration) is expected to be be more or less on the same level as before.

Mechanics of the design

Both the migration of vesting packages and the performance fee sharing, as well as the yDiscount program creates a trade-off for contributors that can be expressed as:

The longer you lock YFI as veYFI, the more rewards you earn.

This by design allows each contributor to lock veYFI in whatever duration they feel suitable, and acts as a proxy to their long term conviction of Yearn’s future. Those with the longest time preference, benefit the most. In turn, since each contributor can only have one veYFI lock in the address where they receive compensation, they will need to continuously extend the lock in order to earn the same benefit. This in turn creates a trade-off where:

If you want to exit veYFI, you will earn less and less until your lock period expires.

This suggests that while the migration and the yDiscount program as proposed may offer seemingly generous rewards at a first glance, the impact of time-locking (and the required constant extension of the lock in order to continue earning the same rewards) should not be underestimated.

Future possibilities

  • Simple, self-governing compensation mechanics can be used to make onboarding and offboarding more autonomous, reducing the decision making burden

Risks

  • Individual contributor tax position may become negatively affected. This is highly dependent on the tax jurisdiction of contributors and their personal tax situation. All contributors are advised to seek relevant tax advice to meet their individual needs and circumstances.
  • Migration offers may be too generous. By design, this proposal errs on the side of being more generous towards contributors than less. The reason for this is simple: Yearn’s most valuable assets are its group of contributors. The current onboarding climate in web3 is extremely competitive. Saving a couple of YFI for the Treasury is simply not worth while if it risks alienating key contributors in the process.
  • The migration process is one way. Once vesting contracts and strategists payments have been migrated, resulting payments cannot be clawed back. There is no return.
  • Existing contributors may leave. Further to the previous point, once the migration has happened, it’s possible that current contributors decide to leave as they now have less to lose in doing so. To be clear, this is not considered a likely outcome, it is the opinion of the authors of this proposal that those who contribute frequently to Yearn today do so primarily out of a high degree of conviction. Nevertheless, this is by design considered an acceptable risk, and may be a net positive if it was to materialize: The migration creates a natural moment of opportunity for those that are less motivated to contribute to Yearn to exit. This in turn creates opportunity for others to step up and fill their shoes. By ensuring that only those with true conviction remain, this could be a chance to make Yearn’s culture stronger.
  • Onboarding of new strategists may be negatively affected. Currently the 10% performance fee acts as a form of marketing tool to draw attention and attract new talent to write strategies for Yearn vaults. Whilst the strategists would still be compensated, this marketing tool may be lost and this may adversely affect onboarding. On the other hand, the way it is advertised today might also be considered “false advertising”, as it’s hardly a “set it and forget it” type of task that earns passive income. Instead it’s a complex effort to maintain a Yearn strategy and vault in production, requiring more resources than its single author, and as committees have shown, rewards end up being shared among several either way. There is currently no strategy live at Yearn that is the result of a solo effort. Part time strategists would be able to contribute and be compensated as they are today, through grants from the Strategist’s multi-sig.

Alternatives considered

  • Rather than YFI discounts when purchasing, instead offer bonus YFI when contributors make veYFI deposits. This however means it’s hard to track where this YFI comes from and opens up for this to be gamed.
  • Traditional options model detached from the YFI Tokenomics program.

Specification

0. The below goes into effect with veYFI

  • This entire proposal is blocked by the introduction of veYFI, as outlined in YIP-65 (phase 2 and onwards).
  • None of these changes go into effect before veYFI has been released to production.
  • Once veYFI has been released, these changes may be implemented at the discretion of Yearn’s community of contributors.

1. Contributor compensation is streamlined to one single process that is equal to all

  • All frequent and regularly contributing members are paid the same way.
  • Compensation is in stablecoins, or equivalent.
  • Spending on compensation remains at the discretion of yBudget/Treasury as per Governance 2.0.
  • Individual contributor compensation remains at the discretion of yPeople as per Governance 2.0.
  • This excludes occasional part-time grants and funding via Coordinape, which have their own separate procesess.

2. Contributors are rewarded with YFI tokens through yDiscount

  • All contributors being compensated as per the previous point have the option to purchase YFI through a new yDiscount program.
  • Contributors can purchase YFI at discounts to current YFI market price, subject to their current veYFI lock. The longer the ve-YFI lock, the greater the discount.
  • YFI purchased through this program are immediately locked into veYFI according to the duration of their lock.
  • Contributors are only eligible to purchase YFI up to 100% of the compensation amount they received that month, once the discount has been factored in.
  • Once feasible, the intention is to have these operations occuring on chain each month with contributors directly interacting with smart contracts. Until then, manual off-chain calculations are used.
  • Contributors are only allowed to participate with one ethereum wallet address in the program, which can only have one single ve-YFI lock at any time.
  • Changing a participating wallet address is only permitted in exceptional circumstances and requires yPeople approval.
  • The YFI minted with YIP-57 is used to finance this program, and once this has been depleted, yBudget will allocate YFI from treasury buybacks.
  • Funds received from contributors participating in yDiscount is used for more YFI buybacks.
  • yBudget has the power to pause the yDiscount program at their discretion.

ve-lock Discount

# yfi_discount: discount (%) of purchased YFI
# ve_lock: current weeks locked in veYFI
yfi_discount = 0.00245 * ve_lock + 0.0902

So if the coming veYFI implementation is with the following parameters:

min_lock_duration = 1 month, or 4 weeks
max_lock_duration = 4 years, or 208 weeks

Then the discount table would look as follows:

% of max lock duration ve_lock yfi_discount
1.92% 1 month 4 10%
11.5% 6 months 24 14.9%
25% 1 year 52 21.8%
50% 2 years 104 34.5%
100% 4 years 208 60%

YFI for purchase

# yfi_allowed: total YFI allowed to purchase this month
# comp: contributor compensation in stables this month
# yfi_price: current YFI price in stables
yfi_allowed = comp / (1 - yfi_discount) * yfi_price

Example

Alice is a contributor earning 3,000 DAI this month. The current price of YFI is 100,000 DAI. She has just extended her ve-lock to be 48% of max, or 99.84 weeks of 208 max possible (ve_lock=99.84). She therefore is entitled to purchase YFI at 33.4% discount (yfi_discount=0.334).

At the current price, factoring in the discount, Alice is entitled to purchase up to 0.04504504 YFI this way.

Alice decides to spend 1500 DAI to purchase 0.02252252 YFI this month, which immediately becomes locked into veYFI according to her existing lock.

3. Retire & Migrate YFI vesting contracts

  1. Vesting contracts are no longer offered to contributors by default, and are only to be used in exceptional circumstances. Instead, yDiscount is the default method of YFI compensation.
  2. Existing YFI vesting contract are migrated and closed down, with recipients having the choice of one of two options:

    1. Full migration into veYFI. If the contributor sets a veYFI lock that is equal or longer than their existing vesting package, 100% of their remaining vest is locked into veYFI.

      Example: Bob has 1.5 years remaining to vest 9.731 YFI. Bob creates a veYFI lock of 2 years. The full 9.731 YFI is locked on his behalf into his veYFI lock.

    2. Exit vesting package with a haircut. For every 1 week remaining of a vesting package, the recipient takes a 0.25% haircut, and is paid out the remaining in unlocked YFI that they can do whatever they please with.

      Example: Carol has 98.321 weeks left to vest 18.821 YFI. She takes a 24.58% haircut (98.321 x 0.25) and is paid out 14.19 YFI.

4. Retire Strategist performance fee sharing and buy out existing Strategies

  1. Strategy authors are no longer offered the 10% performance fee share for new strategies that get deployed to Production, instead Treasury receives the full 2% management fee and 20% performance fee.

  2. Strategists are compensated the same way as any other contributor: stablecoins + yOption system.

  3. Strategies already in Production and earning 10% performance fee are “bought out” using the following scheme:

    • Earn x times previously averaged monthly earnings from the strategy, paid out as veYFI, where x depends on the veYFI lock:

      # buy_out: total amount of YFI to be locked in the strategist's veYFI
# net_earnings: strategist's average monthly earnings the past 6 months
# x: multiple, depending on strategist's excisting veYFI lock
# YFI_price: current YFI price in stables
buy_out = (net_earnings * x) / yfi_price
      % of max lock duration ve_lock x
      < 12.5% no lock or < 6 months < 26 3
      12.5% 6 months 26 6
      25% 1 year 52 9
      50% 2 years 104 12
      100% 4 years 208 18

      In other words, if a Strategist creates a veYFI lock for four years, they receive 18 months of their averaged earnings paid out as veYFI locked for four years.

    • Average monthly earnings is calculated as an average of the past six months, and is done with the help of each individual strategist, where net earnings is calculated. Net earnings would include earnings from other strategies, committees, or strategists, and exclude payments made to committees, or strategists.

    Example: David is a strategist with 2 strategies in Production and is also member of a committee. He donates 5% of his earnings to the Strategist Multisig. Looking back over the last 6 months, David’s net earnings was on average $45,500/month. David creates a veYFI lock of 2 years. YFI/USD is $35,000. David receives 15.6 veYFI that are locked for 2 years.

5. Establish a dedicated team budget for Strategists

  1. As a replacement for the donations to the Strategist Multisig, yBudget are instructed to set funds aside for a dedicated team budget for Strategists.
  2. This can go to the existing Strategist Multisig wallet, no changes to signers are required.
  3. Funds are to be used at the discretion of the Strategists, including to help onboard and retain new team members, but also any other activity that is not in conflict with Yearn spending policies.

Signalling vote

  • Yes, I support this proposal
  • No, I’m against this proposal
0 voters

Changelog

  • Feb 01 2022: Rename yOptions to yDiscount, add another identified risk
  • Feb 02: Make edits and clarifications as per feedback below

References

  1. YIP-65: Evolving YFI Tokenomics
  2. https://coordinape.com/
  3. YIP-52: Make Strategist Skin in Game Partner for Make Benefit of Glorious Brain of Yearn
  4. YIP-54: Formalize Operations Funding
  5. YIP-57: Funding Yearn's Future
  6. Yearn Retention Packages
  7. YIP-61: Governance 2.0
8 Likes
2

I don’t see what any of this has to do with options. This seems like an overly-complicated way of just offering to sell veYFI at a discount due to the lockup time. I would change the term to something else so it is clear this is not a traditional options contract (because it isn’t), and that the key benefit is in the discount for staking longer.

As a note, in many tax jurisdictions, receiving a discount on the purchase of stocks from an issuing company is considered to be a source of income, and the capital gains definition cannot apply. Of course, I am not an accountant, and tax considerations vary widely by country and the whims of different governing bodies, but in general it seems to make a ton of sense that a discount is just another way of earning income that isn’t being paid directly.

Early stage startups are often able to leverage stock options as a tax-efficient way to incentivize early employees to stay for a liquidity event where stock will be exchanged, either on the open market (IPO) or in some sort of acquisition event. The key trick here is that the options are evaluated at a price determined “pre-liquidity”, meaning it does not have an established market price, and is likely to be under-priced prior to liquidity events. Also, the options were created and promised via contract typically years before these types of events, which makes it easy to exercise them for substantial gains where the option is worth it. YFI qualifies as none of these as it is a freely-trading market asset, and additionally is not a company and thus can’t qualify to create those types of stock options.

It sounds like this is functioning quite well, and teams are naturally forming as is. There is nothing stopping strategists from also contributing to Yearn in other capacities, why does that have to change? Proposal is light on details about this. Note that they can also contribute in this proposal to earn more reliable income without having strategist earnings come under the perview of Yearn. Also note that they can choose to do whatever they like with their income from strategies, including purchasing more YFI and participating in veYFI.

Overall, I do find this program compelling for the majority of yearn, as it greatly simplifies how contributors are rewarded. I would however make a change to the “yOptions” system (and naming) that simplifies the delivery of discounted veYFI, and in general obtain more advice on the program from knowledgeable accountants who can advise contributors on tax treatment so that they don’t run into issues of under-saving for their quarterly/yearly tax payments, and then being unable to access enough liquidity to pay due to the lockup constraints of veYFI.

I would also say that the independence of Strategists is a key property of how Yearn functions today, and I would prefer that stay in place as much as possible. Becoming a Strategist is open for all, and that is a key part of our success as a protocol, so I think this system should be opt-in for any Strategists who plan on participating, according to the amount they are receiving from a Strategy’s performance fee. For example, if there are three Strategists on Strategy, but only one wants to participate in this program, the other two should also be free to continue earning their income directly from Strategy fees. I think mandating that all Strategists be bought out of their performance fees to participate in this is a mistake.

Of course, there is definitely a benefit to joining in on this program because it will have more stability and access to cheaper veYFI that is more incentive-aligned with the protocol, but allowing independence is a value we should also share. I hope you see the reasoning behind this.

7 Likes
3

This proposal does a lot. The streamlining of compensation and the redistribution of compensation seem to be quite different, and might warrant their own proposals. As written, it presents everything as a win-win. I’m inherently distrustful of anything that doesn’t seriously address downsides. The redistribution of compensation away from strategists seems to be fundamental to the core of Yearn’s value proposition. People trust Yearn to some extent due to the high compensation structure for strategists. It seems eliminating it runs the risk of considerable downside to Yearn. I’m sure the proposers have considered this, but I don’t see the logic written out for a seeming 20x reduction in strategist pay. The historical context is helpful, and the description of how strategists increasingly work as a team seem to point to the “eat what you kill” approach not holding up. But you can move from an individual-focused reward structure to a team-based one without slashing pay by 20x. Why is such drastic compensation reduction warranted? Here I’m somewhat reading between the lines, as the proposal discusses a saving to the protocol and that such compensation isn’t required any more, without explicitly addressing the pay cut, another red flag for me.

If strategists don’t need that 10%, why not lower fees by 10% to prioritize the goal of increasing TVL, which I thought was Yearn’s primary goal as per this Banteg tweet. Redirecting those fees to the Treasury seems to put a much bigger emphasis on Treasury growth, which I thought wasn’t a top priority for Yearn. I was actually pushing for more focus on growing the treasury in the #status-quo thread of the tokenomics revamp discussion, but didn’t get much traction. Or is this seen as a way to increase revenue accrual to YFI, and therefore help pump the price of the token?

I would love for someone from the strategist side to chime in on this. Since the post doesn’t mention their take on this, I assume they weren’t consulted. Is there a risk some strategists will leave Yearn and go to a competitor instead, or create their own protocol/vault?

I don’t really understand this. What does the “no expectation of compensation” have to do with anything? Is it saying higher compensation makes sense when people don’t expect it? And now people expect it… it should be lower? If it’s saying that %-based compensation makes more sense when TVL is low, it should say that.

this seems to contradict itself. if everyone chooses their own lock-in, then contributors will have very different amounts of alignment to YFI from none to 100%.

3 Likes
4

As you wish, ser!

I can only really speak as a part-time Strategist. I was a member of the Strategist Multisig (SMS), but I stepped down from it when I started to run for Congress. I’ve been working on writing a few strategies since December with the understanding of the current 10:10 split between strategists and Treasury, but that is now in jeopardy.

My issue is this: that nowhere in this proposal does it mention how part-timers are handled. It only mentions the full-time Strategists. This means that my pay goes from 10% of performance to 0%. After speaking with Jiji, it was made clear that my payments would be at the discretion of the SMS. This in in alignment with the following:

This means that I’d go from a somewhat known, easily calculated income to a nebulous promise of “something.”

The strategies that I’ve been writing are currently in review, and are expected to bring in a lot of revenue to Yearn - but based on this proposal, I will see exactly none of it. That is, unless the Treasury decides to provide the Strategists with a grant, and then the Strategist Multisig decides to provide me with a grant.

This proposal, as written, is devastating to anyone who isn’t already considered a full-time strategist. It should also be noted that there are ~30 members of the Strategist Telegram, but this proposal only considers how 8 people will be impacted.

And infrequent, part-time contributors aren’t paid at all.

Given that a significant portion of Yearn Strategist contributors are not the 8 referenced here, this feels tone deaf. I started writing my current strategies based on the existing pay structure. With the current one I would not have done so, as I would be working for nothing but an assurance of some payment at some time, maybe.

It should also be noted that the same logic could also be applied to all other Yearn contributors who are not strategists.

This proposal, as written, will cause a brain drain, and will impede the growth of the Strategist team via the addition of new members.

2 Likes
5

Thanks for your thoughts!

Agreed - will replace yOptions with yDiscount, if anyone has a better naming suggestion, please raise it!

Yes, since this is not an option per se, it makes sense to make a distinction as per your suggestion.

From the proposal:

Performance is a team job. While Strategists write profitable strategies, they are not alone responsible for vault performance. Protocol developers write vault upgrades, Security reviewers audit both vaults and strategies, the Web teams maintain the front-end, yMechanics protect against MEV and improves harvesting margins, the Growth team promotes the product, and the Partnership team helps integrators bring TVL, while banteg keeps the morale up across the board with exquisitely curated hentai. To name a few. It’s a team effort that makes Yearn into what it is.

Complexity and effort does not scale with TVL. The 10% performance fee to Strategists was a wild success. So much that our TVL and Yearn community grew and evolved. Yearn is completely different at $5bn TVL than it was at $500m TVL.

Some of the response from this proposal seems to pick up on this motivation.

In addition, consider the fact that Strategists moved away from working solo to forming committees to share the burden (and rewards) from maintaining strategies. This is just the type of clever workaround around a pain point (Only the strategist creator is rewarded from the protocol but maintaining the strategy is a team effort) that identifies there’s an unmet need which can be served by a better solution.

Strategists (those who actually have strategies in production) remain as independent as they are today, this remains unchanged.

Given that there are only 8 strategists affected and that the response has been positive so far from them, I wouldn’t create opt-outs unless absolutely required. In the future these would inevitably need be grandfathered in one way or another. But if there’s strong sentiment from the affected strategists that this is necessary, I agree that we should consider it and allow for it. This is not meant to discourage contributors - quite the contrary. Which is also why the migration deal is skewed in their favor.

1 Like
6

Thanks for your thoughts!

As you should be! I propose we add to the existing risks another one:

  • Onboarding of new strategists may be negatively affected. Currently the 10% performance fee acts as a form of marketing tool to draw attention and attract new talent to write strategies for Yearn vaults. Whilst the strategists would still be compensated, this marketing tool may be lost and this may adversely affect onboarding. On the other hand, the way it is advertised today might also be considered “false advertising”, as it’s hardly a “set it and forget it” type of job that gives passive income. Instead it’s a complex, strenous effort to maintain a Yearn strategy in production, requiring more people than its single author, and as committees have shown, rewards end up being shared among several people either way. There is currently no strategy live at yearn that is the result of a solo effort.

What do you think about this? Should it be added to risks?

This proposal is not about redistribution, it is about streamlining compensation for all contributors. See next point.

How did you come up with these numbers? It reads like a strawman if you don’t show the basis of the assertion. Actual pay of strategists or any contributor is explicitly out of scope from the proposal:

Since you don’t quote, I don’t know for sure what you are referring to, so I’m making a guess.

From the proposal, emphasis mine:

It doesn’t “address the pay cut”, because there is no pay cut expected in the proposal.

It’s hard to forecast the impact accurately, but in the immediate future I wouldn’t expect this to generate a lot of savings to Yearn’s treasury, as it’s expected that Strategist total compensation (including migration) will be more or less on the same level.

If yearn were to go from $5bn TVL to $50bn TVL, there would be considerable savings at that point for the treasury. Excess of Treasury earnings is spent on YFI buybacks as per BABY.

According to their own preference. Equal opportunity to align themselves with YFI, but it doesn’t mean equal outcome.

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To comment on this briefly, the proposal covers how to migrate the existing strategies that are live in production. The only strategies that are live in production at the moment (to the best of my knowledge), are written by Strategists that work full time.

Hence why part time strategists are not mentioned - they do not have strategies that need to be migrated and are thus not earning any fees.

If your aforementioned strategies make themselves to production before veYFI is implemented, they will be earning fees - and you will be entitled to a migration, based on the same model as outlined above.

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Thanks for your response. My concern is still that there are a large number of folks who are part-timers in the Strategist group, and this proposal doesn’t address us at all. I would like to see it addressed specifically in this proposal, since it does affect us. By taking away our revenue share and not replacing it with anything at all, it suggests that we aren’t valued team members.

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yOptions is brilliant. will be a helpful add for a lot of protocols. kudos, team.

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That’s good to include. Don’t want people assuming the worst (like I did). I came up with the 20x reduction by only finding wording that guaranteed a continuation of the strategists’ existing 5% multisig contribution.

I’d reword that then since it doesn’t “align all contributors equally to YFI”. Like if I offered a group of people to choose between red socks and blue socks, I wouldn’t say this “aligns them equally to blue socks, according to their own preferences”. Maybe “allows all contributors to align themselves to YFI according to their own preferences”. Though I could equally say that about USDC :rofl:

I like the description of the possible downside, which is well addressed. That’s the main concern I see, that taking away the 10% performance fee can be seen as taking away some of Yearn’s magic. This is addressed by:

  • aiming to keep total compensation more or less equal going forward (in $ terms)
  • allowing part-time strategists to keep contributing, and get similar compensation
  • maintain support for onboarding, while highlighting more reliable compensation packages

I talked to FP briefly who highlighted the path to the 10% performance share is long and uncertain, with many factors going into a high-TVL strategy, including luck. They have different programs in place to compensate newcomers in a more dependable way. Maybe describing those programs a bit would help give confidence to new strategists looking to start down that path. So removing the 10% performance piece won’t do anything to directly affect onboarding compensation. Though its loss as a powerful marketing tool to bring in new contributors in the first place remains a downside, that’s mitigated the more you describe how it will be replaced in practice.

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Existing YFI vesting contract are migrated and closed down, with recipients having the choice of one of two options:

  1. Full migration into veYFI.
  2. Exit vesting package with a haircut.

Would it make sense to also offer an arbitrary split between the two options?

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It’s difficult to debate the merits of the proposal in earnest based on emotional arguments. You have the right to your feelings, but this does not necessarily make your claims true.

Sir, with respect, neither you personally or the other group of people you are trying to associate yourself with, are earning any revenue share. How is it being “taken away”?

Since it’s not being taken, it’s also not being replaced. Strategists today have a grant system, this stays intact, but funding comes from Treasury rather than from the strategists’ own pocket. The outcome is unchanged.

I don’t know how you arrive to that conclusion. But if you could outline a constructive and balanced proposal for how we should be migrating strategies that are not in production and are not earning any fees, I believe we would consider that.

I will state this again: If your strategies make it to production and is earning fees before this proposal is implemented, you will be entitled to the migration outlined in the proposal, using the same model as anybody else that has strategies in production.

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Thanks again for your constructive suggestions.

I’ve updated the text to include it.

Sure, I’ve replaced the text with your suggestion.

I’ve added to the new risk that was added to consider part-time strategists and their compensation.

Indeed, this is my reflects my understanding as well.

How Strategists organize, and how they run their funds and give out grants etc, is something I would suggest we consider outside of the scope of this YIP. I wouldn’t want Strategist processes to be outlined in the YIP as it may be interpreted as instructions and impose on their own governance. If it ain’t broken don’t fix it, etc.

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out of curiosity, would the lengthy lockup plus inability to trade these options impact their market value? would there necessarily be a discount?

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This is just fundamentally inaccurate. The current model is that strategists earn 10% of profits, should the strategy go live. You’re suggesting the following:

  • Strategists get 0% share, Treasury gets 20% share.
  • Strategies in Prod get bought out, with an 18 month vesting period.
  • The 8 strategists considered by this proposal instead receive an unknown salary (per this proposal, at least. They may already know)
  • The remaining Strategist contributors are not considered at all by this proposal

To this point, I’ve been a Strategist since 2020. I’ve always worked part-time. It worked well for me and my life, and I was on the SMS until this summer. Yearn welcomed my contributions, and I was paid for my Pool Together strategies that went into production - the “eat what you kill” model worked well for part-time.

Once again, fundamentally inaccurate. 10% is going to 0% on any new strategies being written. Unless you are the 8 considered, you are left to a grant-based model. How much will that grant be? How long will it be received - will it run the entire length of the strategy going live, or will it be a one-time grant?

This isn’t my point; it’s not about migration. My point is that Yearn should still have a model in place for mercenaries. I don’t believe that grants are sufficient - they are often reliant on visibility and popularity, and can change or end at any time.

My “constructive and balanced proposal” is to keep some version of the current model in place for mercs. That model is based in code, on-chain, in contracts - and in keeping with Yearn philosophy. There needs to be some clear, written outline of how part-timers would be compensated, with metrics.

Edit: It could even be as straightforward as “If you have a strategy in Production, you will be paid according to the above.” That way simply having a strategy in Production means you’re added to the list of Contributors. There will still need to be some way to let upcoming folks know what kind of compensation package they’ll receive. There are tons of options - I just want to make sure folks like me are considered.

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This proposal is currently in the voting phase. Cast your vote on Snapshot.

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Sad to see the proposal go to the voting phase before this issue is properly resolved or adressed. Seems like it’ll materially reduce the amount of interest for outsiders to write strategies for Yearn.

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