We’re an asset management protocol. We do know how to allocate capital better than individual holders, which is why they give us their money to manage (see AUM growth). Every company makes investments with their treasury, because they think they know which investments are best for their business and consequently their shareholders
It absolutely is. Not sure what would give you any reason to believe otherwise.
Not doing just to hedge gas costs. Please read responses above. Doing because Yearn is driving the Ethereum ecosystem and making Eth significantly more valuable.
I don’t think there’s one perfect algorithm. I think it should be discretionary, made by the same people who currently execute the buybacks.
Which is why the first step should keep it very simple. Adding other equities/companies will happen over the long term (i.e. Susquehanna investment into TikTok, etc), but we’re not nearly big enough to do that yet.
That’s why the buybacks aren’t automatic but discretionary from a timing perspective. In the absence we would probably accumulate and farm stables since those are much more capital efficient to generate yields
Why should YFI holders have their returns dependent on the price of ETH? This is an asset management platform, with stablecoin vaults that can attract AUM and perform well even when the price of ETH is going down.
Yearn already contributes to and benefits from the growth of Ethereum by using it. Besides hedging the price of gas, I struggle to see why accumulating ETH would increase the value of YFI any more than accumulating YFI, unless you think that Yearn is going to perform worse than the average protocol on Ethereum in future.
Since YFI and ETH are also highly correlated on short time scales, accumulating additional ETH also doesn’t act as a hedge against sudden market selloffs. Accumulating YFI + DAI would be a better diversifying strategy, and the DAI could be used to buy YFI when the rest of the market dips.
While I support the idea of owning a piece of the land, of course yearn can’t buy all the land. It’s important to keep an open mind about the idea of a multichain universe. The current landscape might be an indication of what is yet to come. and it sure ain’t pointing to one chain to rule them all…! am pretty sure core bitcoin enthusiast thought the same. Bitcoin being the only layer-one.
Ethereum has clearly shown its strength and focus.The community should capitalize on that. if there’s a promising alternative? Then we explore more.
Meanwhile it’s always good to own your piece of land.
Yup, and the process has been great so far. Eth should be added to the possible choices imo. There’s a non-zero chance Eth displaces the dollar as the global reserve currency. Imagine if we are the biggest builders of that world, but never took advantage of it, despite our front row seat.
This is exactly why we should own Eth. We’re leading its growth.
The hedge isn’t on gas or short-term price movements–although those are possible cop outs. I think the hedge is long term–what if Eth becomes the world reserve currency.
I am very much against this. Like 2weiX said, if I want to hold ETH, I will buy ETH. If I want to LP YFI/ETH, I can do that on my own. YFI should focus on YFI and leave capital management up to people who focus on that for a living (professionals) or the individual investor. I love YFI and think we have great devs and a great DAO, but if this proposal passed and was implemented it would definitely prompt me to reconsider my interest in YFI.
Additionally, I am STRONGLY AGAINST YFI/ETH LPing. This exposes the YFI treasury to the worst of those two assets, and only the worst one. If this proposal were to pass and YFI were to acquire ETH for the treasury, I would rather see the YFI and ETH held separately. Why trade the potential for outsized gains in one of the two assets for a small percent “guaranteed” gain? (I know this is probably more a debate about LPing in general, but still.)
Your LPing argument is very strong. I’m not specifically for one way to generate Eth exposure, just that we have some.
Why can you buy Eth but Yearn can’t? If Yearn deems owning Eth is best for Yearn, its the DAO’s responsibility to own it. Yearn is its own entity, its own account on the Ethereum blockchain. Yearn shouldn’t assume or care that its holders own Eth outside of Yearn.
If Yearn begins holding ETH as a long-term treasury asset, there would be no way for someone to invest in YFI but not ETH.
You are right that Yearn shouldn’t care whether or not it’s holders purchase ETH. That should be the individual’s decision, not one that Yearn makes for them. Minimal governance is probably best in this situation.
LPing effectively results in an averaging out of the gains/losses of the two assets, while earning income from trading fees. IF some ETH is going to be purchased anyway, then - at least to me - creating a YFI/ETH strategy may make sense because then yearn earns more productive income than from holding either of these assets separately (at least for now – this could change with planned changes to ethereum and with the eventual switch back to returning a proportion of yearn’s fee income to YFI holders and stakers) while also deriving indirect liquidity-related benefits to YFI and yearn, and managing risk. I don’t think that the question is whether 50% of buybacks should be to ETH (and I would argue for much less), just whether it should be done at all. And with a portion of that there could be an LP strategy to flatten risk across the two assets plus earn more income to support more buybacks. If this were to become a yearn v2 vault with deployment to multiple DEXs and chains, then it would also be an attractive option for any YFI and ETH holders to deposit into, with yet further 2/20 fee income for the protocol.
This is just a FOMO argument. If Yearn accumulates a ton of YFI in its treasury and it becomes extremely valuable, why would it be better to own ETH just because ETH has the title of “world reserve currency” or “ultrasound money” or anything else?
Yearn will always buy as much ETH as it needs for operations, and as @banteg pointed out, it accumulates ETH via many of the vaults anyway. Elon Musk owns plenty of TSLA and has a massive stake in its success, but that doesn’t mean he should be a net buyer of TSLA.
I’d propose one of two alternatives:
Yearn buybacks consist of YFI only (in line with traditional stock buybacks)
Some portion of funds that would be used for buybacks are instead directed into other assets and derivatives (and potentially platform insurance) to hedge systemic price risk and smart contract risk to better ensure long-term financial viability/solvency of the platform
Option 1) is basically the status quo. If something like 2) is on the table, I’d suggest that rather than trying to decide capital allocation for the treasury in a governance forum that there should be a designated treasurer (which could be multiple persons, ideally with some experience in risk management) whose job it is to make decisions regarding portfolio management (including potentially buying put options on ETH as insurance against black swan events and systemic factors that may dramatically affect the value of YFI - e.g. Ethereum network being compromised or being unusable at some point in the future for whatever reason).
The one argument that does make sense to me for increased ownership of ETH is that it may be beneficial for Yearn to stake ETH and have some influence over the network, as well as potentially conferring benefits to Yearn from an MEV perspective
I’m not against accumulation of ETH, I just don’t think it can or should be used in lieu of YFI buybacks as a way of distributing revenue back to YFI holders
That’s correct, but if Yearn deems holding Eth is helpful to YFI’s price over a long-term time horizon, its Yearn’s responsibility to do it. Creating value for YFI’s holders is the Yearn DAO’s goal.
Not meant to be FOMO. If you’re the construction company that built the Earth, but owned no Earth, that might come seriously back to haunt you. If anything, ETH on its balance sheet is a bet on Yearn creating immensely value for Eth.
Option 1 is not the status quo. Businesses of all kinds buy far more than just their own equity. They buy real estate, capital goods, other businesses, etc.
We’re building out Ethereum. Why would we bet against ourselves? You basically just said: don’t bet on Ethereum, bet against it, in case this whole thing doesn’t work out. So for you the treasury’s role is to either bet solely on ourselves (option 1: buyback YFI only) or bet solely against ourselves (option 2: hedge our or the system’s failure).
MEV is just one massive unbounded benefit of owning Eth the asset. We all know how big Eth is going to be, because we’re building it. MEV, transaction fees, whatever it ends up being, will be massive, and it’ll be because of us.
Buying back YFI with a firm commitment not to sell it effectively takes it off the market, which is very similar to stock buybacks as a mechanism for increasing the earnings per YFI, and producing compounded gains in price (with tax efficiency as a nice bonus).
Buying ETH and holding it in the treasury may increase the value of the treasury and provide more funds for operations, but doesn’t affect the earnings per YFI.
Under normal circumstances stock valuations aren’t typically based on amount of cash equivalents or investments held in the treasury, but in terms of revenue/earnings metrics and their predicted growth rates.
If YFI started holding a ton of ETH and the ETH became worth more than the YFI, basically YFI would become a proxy for ETH just like MSTR is now a proxy for BTC, with share price almost entirely decoupled from Microstrategy’s business activities. Personally I don’t think that would be a desirable outcome.
I think it’s very different, because it shifts funds away from YFI buybacks, which are a way of distributing earnings to YFI holders, and instead uses those funds as part of a long term treasury fund for Yearn operations. Those are not equivalent.
“both very cheap” needs to be measured using some kind of quantity related to fundamentals - buybacks are supposed to decrease circulating supply and thereby increase the earnings per token even without earnings growth, as well as introducing some buy pressure into the market. The point isn’t necessarily just to buy when cheap, but to convert earnings into price gains, to benefit tokenholders.
