A more elegant solution to burning

Hey guys,

I have seen discussion about some sort of burn mechanism, and yeah that’s soso but there are better solutions out there.

I got the idea from another project, but it is quite simple.

For rewards aggregated/token value accrual some would propose buying YFI and burning.

My thoughts are following:

For the protocol when it gets revenue, it buys YFI on the open market. Instead of burning it, it stakes it for more yield. That yield in the DAO is owned by YFI token holders of course. This is superior because instead of 1-time capital burn, overtime the protocol accumulates more YFI (less open buyer demand). We have a yield aggregating protocol and open governance, why would we NOT do this? If we get the mechanics right, overtime the protocol, as it grows, will potentially be buying more YFI (through accumulated fees/revenue) than it mints (via inflation) and that will also take supply off the market similar to a burn would – but we are also getting more yield as this happens.

I cannot think of any reason why burning would be better than what I am suggesting. A Polkadot project is doing this – they framed it as a decentralized sovereign wealth fund. It is subject to governance, but I think using accumulated revenue () to make more revenue () is a novel idea and is way better than something like a MakerDAO thing. Can easily run w/ this idea in multiple ways I just wanted to get this out there for some discussion.


This sounds very good, later if YFI holder decides that the DAO YFI is earning to much they can just burn some of it to increase the payouts to the YFI token holders. I think it is good to build up a monthly reserve of capital earned through the fees for the DAO to use and I see no negative in doing this.

Another option is to just always dedicate a certain % of the fees to the DAO and then the DAO holding extra YFI tokens to earn more fees might be to much, if we have allocated a certain % of the fees to the DAO already normal burning might be best.