This proposal would change the rewards for governance staking YFI from yCRV to increasing YFI shares by purchasing from the market and adding to the staking pool
Abstract:
Currently the governance staking model rewards stakers with yCRV as a cashflow incentive. I believe that the tokenomics of distributing YFI instead would provide better yield for the governance holders and would better fit the emerging ethos of the yvault products.
Motivation:
Currently, the yCRV rewards are quite small in comparison to the overall appreciation of the YFI token. Most folks who are purchasing the YFI token are doing so on a speculative basis, not for any real desire for governance. These yCRV distributions are currently not a significant incentive for participating in YFI governance.
Specification:
I believe that if we change the governance reward to increasing holder’s position of YFI instead of yCRV this will have multiple benefits: increasing purchase pressure on YFI, further incentive for YFI holders to stake their shares and participate in governance, and less volatility of YFI price. Purchasing YFI from the market to add to the staking pool would work akin to stock buybacks, driving share value higher. Requiring YFI holders to stake their YFI to participate in governance and receive these rewards will further increase governance participation, and the act of staking YFI will reduce overall market availability. This will create a virtuous cycle of increased value for both YFI holders and for the ecosystem at large.
For: Would replace yCRV distributions for YFI staking and replace with an accumulation of YFI instead
This is an interesting idea. Even though people could still be purchasing YFI with their yCRV rewards currently, “forcing” the rewards to be YFI would send a strong positive signal in favor of those who really want to participate in governance.I like it how it actually follows the same pattern as the Link rewards, where you stake a token to accumulate more of that same token.
I’m currently In Favor of this idea but would love to hear some of the opposing views.
That’s a great concern. I think it could be resolved by batching the buys and distributions, similar to how the LINK vault handles things. That’d reduce the overall cost.
I can think of two main issues, one of which gave me pause while writing this up. The first is Dark’s comment of fees, which I addressed above. The second is that this would in effect further the overall voting concentration of the YFI holders, unless a new generation mechanism was determined.
Currently the yCRV shares just give everyone money, like a stock dividend. The YFI purchase is more like a stock buyback, but with one key difference: the repurchased shares are not destroyed. Destroying repurchsed shares changes the supply cap but keeps the relative voting power consistent. By giving the purchased shares to the existing shareholders, power will concentrate.
I feel that the increased governance is worth that risk, and that a new emissions model will eliminate it - but that is the main drawback I think, and it’s one that I want to bring to attention.
While I like the idea of stock buybacks driving price appreciation, I think YFI is all about earning yield, and a cash dividend is the purest form of yield. This cash dividend will drive demand for YFI, solely based on its ability to accomplish its original goal: to maximize yield.
I view the recent rise in YFI price to be driven by the realization of how cash flow positive YFI already is (and its future potential as AUM grows). Changing the rewards to buy YFI would help increase the price, but remove the yield, which is necessary to bring in more YFI investors. How about a 50/50 mix of yCRV + YFI buybacks?
Strongly oppose. It’s appropriate for a YFI vault, not for governance staking.
In addition to centralization and increased market risks (putting all eggs in one basket), people will receive less rewards because of slippage. This also puts an unnecessary buy pressure on YFI which impedes natural price discovery.
Something similar would’ve made sense if the community has chosen the burn model, but people have voted against it.
Counter-proposal: YFI long vault that stakes and recycles the rewards for YFI, but honestly I don’t believe it should be done since moving YFI away from governance is not its intended purpose and poses risks of vote highjacking.
+1 banteg: Strong Oppose
This proposal removes a simple and direct economic return from yFi holders (ie you get yCRV you can redeem for USD on Curve).
Instead it creates a closed loop where the economic benefit of owning yFi is that someone (the vault) will buy it off you (this creates buy pressure on the yFi price but is high noise and low signal for Price Discovery).
Opposed,
As much as I’d appreciate the increased buy pressure for my own economic well being, I do not like the power concentration that this would cause as a result.
I’ve been thinking about the idea of creating a YFI vault that does exactly this, uses the YFI system rewards to buy more YFI for the vault holders. And then the next step would be to use the YFI-Vault tokens as the voting tokens, rather than YFI itself.
Would that answer your concerns at all?
In general terms, it kind of bothers me that on a platform that’s all about Yield our native token is not able to generate yield and compound it in a direct way. I see a YFI-Vault using system rewards as one potential answer. Another would be to petition Aave to add YFI as a supported asset, so that a YFI-Vault could earn interest on YFI (and also potentially borrow against it like the LINK vault does). Similarly tokens of this sort of Vault that supplies YFI to Aave could be used as the governance voting token, with the benefit that YFI itself would be bringing yield into the system. Additionally were YFI to be listed on Aave it would allow market participants to borrow and sell YFI, thus aiding in natural price discovery, a concern of yours that I share. Any thoughts on this?
Not sure if you read it correctly. This isn’t about minting. This is about buying more $YFI on the market and distributing it back to people staked in governance.
Apologise. You are correct.
It’s a early here and I’ve not had much sleep.
I will review and amend my response.
Thank you.
Edit:
Originally I was all for the idea. It rewards those that actually want to participate in governance. But it also excludes future participation as it’s unlikely those here, strongest in spirit will not sell.
Moreover this conversation relates to another problem, combatting against skittish YFI That runs to perceived yield in YAM and CREAM etc, without considering the risks to themselves or the YFI community.
Both I believe can be overcome by becoming clear and transparent around messaging. Surfacing stats like AUM, Yield to date, numbers of unique addresses, rewards issued to date and using this to construct clear advantages that over time become so attractive that all YFI essentially comes home to stake and participate.
On that note and why I’m lacking sleep.
I’m working over time trying to flesh out a yEarn brand blueprint, tone of voice, etc to support a design strategy which is not being given the time it needs and my biggest fear here is that we run with the first UI that is dropped in the communities lap.
A good UI requires just as much time as is needed to establish good governance or develop a good product. Too much rush.
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