Assign system rewards as operational capital for expenditures instead of streaming it to governance.
Abstract:
With the current state of the market the system rewards more than cover any operational expenses, they are currently being collected and streamed to governance stakers. Instead of minting additional YFI, I instead propose to use these funds for expenses such as audits, deployment costs, other? Further governance decisions need to occur on “what” is being spent on, but for now, I just want to propose let’s stop the discussion on additional immediate issuance, and instead simply use the funds currently available?
Motivation:
No immediate issuance of YFI required. Cover operational expenses.
Specification:
Rewards keep pooling as current, however operational expenses are first deducted, and any left over can be voted for to go to stakers or roll over to the next epoch.
For: Use rewards for operational expenses instead of minting more YFI
Against: Keep streaming rewards to governance stakers
This is a no brainer. Each contract being deployed now costs in the range of $50 - $100, not to mention any of the other operational costs. It would be nice to have a rough breakdown of what these are btw or at least how much is being currently.
I like this idea but could we specify a block that it will apply until? The ending block can be far out enough to give a generous allowance for operational expenses but will also serve as a forcing function to come up with a long-term solution for expenses and YFI issuance.
I like this idea but disagree it should be a blanket switch to operational cost.
Operational cost must be managed through votes, budgeted and allocated on a monthly basis for that calendar month only.
This should be done at a minimum to avoid someone inventing costs for the sake of spending. And then excess for that same month (if any) is distributed.
YFI holders must retain the right to say NO to proposed expenses. Otherwise we will surrender all income to the few in power.
@yfi_whale I’d appreciate your collective thoughts on this.
I see it as better than inflating, if you need an example of why inflation will lower price look at yfii or yffi.
And, once rewards increase it can always be voted back or exact percentages can be figured out in the future if the rewards grow. Its not like this is voting rewards out of yfi forever.
One can not blindly allocate all income towards development without first a clear set of goals / objectives. At the very least, a mechanism to identify the impact of proposed spends.
I also would imagine we want to avoid finding ourselves in the position where funds have to be spent. Publicly know balances will cause third party contractors to bid up the costs because they can see what is available for the take.
I am not against the idea, I am against the proposal without proper checks and balances first being put in place.
I also think that eliminating distributions altogether is not ideal. There was a proposal earlier that suggested allocating 5% towards development. I agree this may not be realistic now but jumping to 100% is also not ideal.
Thought.
Might we not establish a ‘progress’ fund that income is directed until a stated balance is reached. Thereafter, the priority would be maintaining that target balance, with surplus being distributed.
Eg. A progress fund of 500,000 yCRV to be established. Balances to be maintained through future revenue. Excesses distributed with current mechanism.
Valid point. May be to get things rolling we can support the switch…and side by side work on establishing a system of checks and balances…might be rough in the beginning but we should be able to get it down after a couple of iterations…would be better than waiting around…as I would imagine some of these proposals are time critical to the ecosystem such as audits/security related expenses
I agree with this, however yes need to have expenses voted on so the pooled funds would sit in a treasury as sorts. It will need to be ongoing capital as there is no way to know what would be needed month to month etc.
Perhaps each month a designated amount is kept in treasury and the remaining is rewarded to $YFI stakers to keep incentives. The other thing I worry is that people not voting something that is needed in lieu of the rewards being kept high.
If the pooled amount is a larger % to start and is then tailed off it would allow upfront capital to be stored and a steady income stream coming in over time that doesn’t disrupt the staking and voting incentives.
In any case a proposal that satisfies the capital requirement of ongoing costs that is not at the expense of increase the supply is a plus at this stage.
I agree with this proposal. A few specifics parameters could make it even better.
As @criptodee mentioned, we should time limit this. 1 Year?
We should decide a % (or fixed amount) of funds over this period for which no voting is required to spend. Basically @andre.cronje discretion. Tough to say what % that should be as I have no idea how much will go into this fund.
For the rest, voting required. Or a vote to increase the discretionary amount.
100%. Let’s get this pushed through ASAP. The details of the operational funding can be worked through at a later date with another proposal. I think it’s crucial we give Andre the support he needs to keep innovating!
I agree that governance should eventually decide the parameters of this funding, but now is not the time for that. As a community we need to rally behind the developers before we start picking apart every detail when it comes to the flow of rewards and issuance. The fine tuning can come later.
I strongly agree with the idea of using at least part of the fee stream on operational expenses like security audits, but I also strongly disagree with redirecting the fees before we have a clear model for how the budgeting will be done. For starters, making a YIP and letting everyone vote on it every time funds need to be spent is just inefficient (though it might work well as a temporary solution). I think conviction voting would be a reasonable candidate solution for deciding on the budget. We need to do a lot more research into this before making a decision.
I also strongly disagree with redirecting all of the fees to operational expenses. If YFI holders cannot earn rewards on their holdings and YFI is used only for voting, then the interests of holders will be far less correlated with that of the protocol. This will put the governance system on very shaky foundations.
Finally, I strongly disagree with not issuing more YFI. Currently the governance process is being dominated by shady whales, as we have seen for YIP-30 and YIP-31. We need to issue more YFI to reduce the dominance of these whales and make the governance more democratic.
Of course, I understand that this post is just getting the community’s general opinion on the idea of using rewards for covering operational expenses. But I felt the need to point out the important considerations that need to be ruminated over before we all go “yay pay for audits with fees!”
The rewards per single unit of YFI is pretty minimal at the moment. I’m only staking my YFI because aside from voting, that’s all I can do with it. Depending on how much you have to stake, it’s barely worth the gas fees.
I am 100% in favor of this. There are so many positive things we could fund with even a portion of the fees.
Audits are a great example. Imagine the inflows and increase in TVL once a yVault is audited. We could afford to pay for several audits from different companies using fees. That increase in TVL will increase AUM and fees, and expand the budget for these and other initiatives even further since the fee pool will increase.
This sounds like a good start, then we figure out how people would be paid / funds allocated to expenses. With the current fees how long would this pool take to fill?
The system needs money to function now, use a basic model for paying people until we find a better one. Split off some fees and fill a treasury pool. Debates about issuance of yfi will take forever.
The protocol is generating about $60k in fees per week right now, so depending on what % of fees are allocated to operational capital, this could be ready to pay for the first proposals relatively quickly. I am not sure of the cost of a smart contract audit, but perhaps someone here does.