The whirlwind events of the past 24 hours should be a wakeup call to everyone who cares about the long-term security of yearn. YAM is not going to be a one-off phenomenon. There will be more and more projects competing to attract stakers for the purpose of executing “fair launches,” but it could end very abruptly with a devastating theft or smart contract error. This could leave a significant chunk of the YFI supply in a blackhole, or even worse, in unscrupulous hands. What then?
At one point, nearly half of all YFI was locked up in the YAM contract. Half! Think about that.
The PoW mining “renaissance” took off in 2013 (I think), as did staking for platform tokens a little later. Now we’re seeing more and more third-party platforms offering rewards for staking DeFi tokens and I think this practice is going to keep growing. But using a governance token for the purpose of staking on external platforms could pose a systemic risk for any DeFi platform, not just Yearn. If we accept the status quo, we are accepting the inevitability of a possibly platform-ending catastrophe. We can either pray it never happens, or try to implement a solution to this risk.
I understand that while there was no formal audit of the YAM staking contract, it was reviewed by many smart people who considered it safe, quite similar to the Synthetix staking contract. That may well be the case, but hacks often happen when other smart people discover a previously unknown technique for manipulating “safe” code. Also, mere mortals who aren’t 100% confident in their fluency in smart contracts, like me, shouldn’t have to rely on other people’s opinions for the purpose of protecting our funds.
Let me preface this by saying I am not a solidity developer, so my suggestion may be entirely unfeasible. But I have as much common sense as [almost] anyone here, and common sense is telling me that it’s not wise to expose valuable assets for the sake of trying to obtain speculative trinkets of dubious value.
We hold YFI tokens which are meant to be staked for governance. But if we take our YFI tokens on safaris around the DeFi universe as we seek free tokens on other platforms, we might not be around to make critical governance votes, and additionally we’ll miss out on fee income as that begins to grow. What if instead of moving our dear YFI around, we let them remain safely staked in the governance contract, while encouraging other platforms to provide us with “farming rights” if they want to attract our audience for their fair launches.
“Farming rights” could simply take the form of a wrapped token – yamYFI, for example – and be delivered to YFI holders through airdrops or some similar mechanism. I imagine this could serve several benefits:
- It detaches the speculative activity and risk of external yield farming from the governance utility of YFI, encouraging maximum participation in governance while protecting YFI – and the Yearn platform as a whole – from hacks and contract errors.
- It empowers YFI holders to choose which new platforms to participate in, without having to choose between fee income from the governance pool and speculative gains from other platforms.
- Makes concurrent participation in different staking opportunities possible.
- It allows YFI holders to “sell their farming rights” – the wrapped tokens from third-parties – for any particular platform if they so choose, generating additional on-going revenue to YFI holders and accruing more value to tokenholders.
- Further positions YFI as a central token in DeFi and crypto, as the expectation of any new platform seeking to create a fair launch would be to deliver a wrapped token to YFI holders.
- Could lay the foundation for a whole new yvault, which would farm individual opportunities as a collective unit.
Aside from the fact that wrapped farming rights tokens are a bit of an abstraction of the functionality of the YFI token, and thus introduce another element of complexity, I hardly see any negatives. But what do you think?