[POLL] $YFI Inflation & Reward Distribution Policy

[rgalloway]

@Mr_Sadim

I’m completely against this idea. The reason we have crypto is so we don’t have to trust what people will do in the future. We can look at the code and know what will happen. Certainty in economic policy is paramount.

I 100% understand where you are coming from, but I think it is worth zooming out a bit and considering all our assumptions and then reviewing how they apply in this situation.

There are a few options that need to be chosen between and tradeoffs for all of them.

Option 1: pick a monetary policy in the next day and never change it
This is the most pure crypto option in the spirit of Bitcoin. It has a successful track record in working for Bitcoin. Much of the impetus around this model is the notion that when people are able to change a monetary policy, they do so for bad or poor reasons and in the end make the system worst for having changed it. If this is the option we go with then we either get it right the first time or try again after the whole system has fallen apart. This trades one form of risk for another, and this is really true for all options.

Option 2: Pick a potentially final monetary policy now with the explicit expectation that it may be tweaked going forward
I think this describes the rationale for this option well:

@rewkang

The only thing I know for certain, is that we WONT have the perfect long term monetary policy figured out in the first proposal so I would opt for the lowest inflation model. We WONT know what other rewards and incentive programs we will want to start up in the future just like Synthetix started 5 new incentive programs they had not planned for when they initially set out to do this. Really, not much incentives are needed at all since ypool had a lot of traction before YFI.

If we go this path then there should be some level of understanding as to what the scope of potential future changes is. Are we just adjusting curve shapes and percentages to different pools or uses while maintaining the same max supply? Is it possible to increase the max supply? create a tail emission in perpetuity?

Option 3: Pick a clearly temporary monetary policy that everyone knows will be changed in the future
So I lied above when I quoted @rewkang as an example of option 2, as it could also be considered as an example of option 3

@rewkang

I would opt for what has the lowest inflation and we can work our inflation up if needed. I would vote for the model that has the least aggressive start - that would be Model A if looking at 1Y YFI supply

In terms of pools, we should direct it to only one 80 YFI / 20 yCRV pool as that would be most capital efficient. It accomplishes all the goals of incentivizing yCRV usage, YFI liquidity and potentially

We are now moving pretty far away from option 1 and I can hear the Bitcoiners grinding their teeth. The reason to adopt this strategy is it could make it easier to actually make the requires changes to the protocol when unexpected events occur or when we have a more “final” monetary policy.

option 4: no more issuance until a policy is decided upon in the near future
This is what I proposed above. It trades off a risk that liquidity will flee without a hard promise of a future monetary policy with the risk that we pick something, get it wrong, and then can’t change it.

There are probably other options that I haven’t covered

Commentary

@Mr_Sadim 's point above is only held if we adopt option 1. Otherwise we have varying levels of trust in the governance structure that has been created.

Questions for any model proposed
Is this model applicable and best for yEarn? If we pick a policy based off another project (i.e. Bitcoin), will it work as well here? Is the ability, or inability to change or adjust parameters a net positive for yEarn? Is absolute scarcity as a feature or meme a key value driver for yEarn?

I would argue that the value of YFI comes through the usage of the yEarn system first and foremost and not just as some token that people should hoard. As I mentioned in my post above about fairness and inflation, if the real value of YFI comes from future cash flows and revenue from yEarn, and and open and inclusive fair governance model, then the Bitcoin model may not be applicable. Is this project about trusting in only code and Austrian economics, or is it about DeFi, Yield Farming, and hyper inclusive and fair governance? How far do we want to push the idea that the community can govern well and that we can remain flexible in the face of a rapidly changing crypto landscape?

curious to hear everyone’s thoughts.