[POLL] $YFI Inflation & Reward Distribution Policy

Proposals Vaults
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@rgalloway very well laid out.

I’m against Option 1. YFI is nothing like Bitcoin. YFI isn’t a Store of Value, it’s much more a capital asset insofar as it generates fees.

I lean more toward Option 3, where “temporary” means 2 years. And while I think that it is important to keep our options open, my desire and expectation is that as we approach the end of the 2 year period we will be in a position to further reduce issuance rates (relative to the first 2 years) because we will have an established product

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24

YFI distribution method was fair because it allowed many people to participate and earn YFI.

Why are we stopping the high inflation rate now? I read many arguments but it’s clear to me it’s because YFI whales want to continue to be whales in the future. They don’t want to be diluted by more participants.

If YFI is to become a long term project, it should encourage more people to join and participate. @yfi_whale seems to be a fair and reasonable group of people but the fact that a group can sway the project with their vote is not good for the long term development of the YFI.

We should strive for participants to continue to contribute liquidity and embrace participants who come “late in the game”. Be long term greedy. Not short term.

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25

How does proposal C work? @Substreight Can you provide more details around how YFI rewards would be distributed proportional to TVL? How would you measure TVL? I think this proposal is the most ambiguous

I think this is the trickiest part of the proposal package. I think whatever we decide, we should leave it flexible to allow for future changes (Andre launching new products soon, adjust yields to respond to competitors, etc).

Also, everyone should keep in mind that one of the huge values of YFI is that you can stack yields seamlessly.

Already we can farm YFI, CRV, and BAL. So there’s no need for YFI yield to be 40-50%, not even close. Look at the sUSD pool on curve. It’s at 13% SNX incentives right now because people are farming it for CRV as well as base yield with $45MM. Right now BAL yield is small because the balancer pools are unbalanced but once we switch to something closer to 50/50, the yield from BAL alone will be 25-35%.

Additionally, once v2 launches, users will most likely be able to farm COMP as well. So YFI yield only needs to be a small portion of that. We should include this in any economic analysis on LP incentive rewards to avoid overpaying. It’s been an interesting experiment that Andre started in giving away all the initial YFI in 1 week but we should not be anchored to that.

Here’s a guesstimate of yields for somebody in Ypool (YCRV) assuming 50-100MM+ AUM, which is obviously down from current peak but more reasonable.

base line apr - 3-5%
trading fees - 3-5% (assuming 20mm in trading volume at 4 bp / trade)
BAL (assuming 80/20 pool, doesn’t matter which way it’s split between YCRV & YFI) - 25%
70/30 pool would be around 30% and 50/50 pool would be 45% yield.
CRV - ?? but I would assume at least 10-20%
COMP - blended around 4-6% right now (mostly because TUSD is not eligible)
AAVE - hasn’t been announced but probably launching.

So even before YFI rewards, LPs are looking at 45 - 90% yield if they join the YCRV pool and stake to balancer.

YFI rewards can be very close to 0% in this scenario as that yield seems very competitive. Also keep in mind that when farming yields are too high, there’s a lot of selling pressure on the token, which you see with COMP and BAL (both tokens are down 35-50% from their high range). Would be interested in hearing @yfi_whale 's thoughts on this as well.

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26

Excellent work @Substreight and @yfi_whale and thank you @rewkang

How are we balancing the flexibility afforded by near term conservative supply inflation approaches versus the challenges presented by uncertainty of monetary supply in the mid-long term?

Largely supportive of the Proposals A&B here, but would opt for conservative inflation, % thresholds, and reduced uncertainty in future monetary policy via burn/timelock.

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Have been playing with the split from 75/25 to 50/50 to keep more flexibility in the future.

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I am okay with both proposals. 5k-ish for year 1 with a 50k hard cap at year 10 will have no negative impact price wise. The @yfi_whale initial inflation is actually more aggressive than the continuous inflation 50k model. I reflexively voted for @yfi_whale but after reading comments, I think I like the 50k model better becaue the initial inflation is much more gradual. I like the idea of building long term incentive structures around the low emission 50k model.

For the distribution of the inflation, I think the 75(LPs)/25(multisig) is better because it promotes liquidity and decentralisation, both of which drive price. I also agree that the minting keys should be burned after settling on an emission model. However, this issue requires a separate proposal and is outside the context of our initial decision regarding an emission model.

If in 1 year we have 10x more capital locked in DeFi (and thus probably in YFI), a 20% inflation will barely have an impact on price. Also, we want to pick a model that supports price, becaue ultimately YFI can be used as a collateral insturment for DeFi in addition to governance. Consider the case of DeFi project x holding YFI as part of a collateral basket for their project, while simultaneously driving governance initiatives that work in their interest.

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29

exactly, YFI whales shooting their own foot… in 6 months times EVERYONE will avoid YFI & talk about the “1 week premine” if emission is something stupidly low.

dont insult the great start @andre.cronje gave us

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30

had a very fair launch

yet everyone seems adamant about RUINING this. which is why my comparsion to a hypotetical parallel-2010 btc was made.

opinion of a fair launch is vital for future adoption, and emitting 30k in a week & then 12-20k over 10 freaking years is not fair for anyone joining from this day forward… think wisely about that YFI holders

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31

Full support for Substreight 50k model.

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33

What would you like it to be instead? This is a discussion forum, if you have a better plan i’m sure all of us would be open to listen.

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Thank you for the post. This has been a concern in the back of my head. @Garry @yfisensei what do you see as a more equitable rate that also rewards early adopters?

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@piet @Substreight i’m no expert and obviously there needs to be a compromise

but you guys seem to be thinking the compromise is somewhere between zero & 20k over 10 years, when infact the compromise should be somewhere between zero & 30k per week

no self-respecting future new user will join YFI gov if he sees a 99% frontload (premine) from before he discovered the platform, it’s that simple.

so please pick something more longterm thinking, or you’ll be the next XRP comparision.

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36

Thank you for the very constructive response.

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37

First of all, thanks for the incredible work @Substreight and @yfi_whale.

I’d agree with @rewkang that any decision made now has a risk of being suboptimal and implications of that might be huge in the long term. I also understand people who state that keeping things open has uncertainty, including the very basal things like hard cap size. As an alternative possible approach, we can vote in parts/sets to reduce the scope of the discussion. Start from things that the community mostly agrees on and gradually move to the less certain things.

Here’s my 2c:

  • Total cap. I guess it would be easier to vote and move forward from here. Not sure either it’s possible to make it truly irrevocable without destroying minting keys. If not, I still think destroying is premature even though it introduces extra risks for stakers. As for the number, I think 50k is solid both in terms of form and substance.
  • Initial inflation. Understandably the most debatable question. I feel ~20% is reasonable since I see the benefits of a long-term approach with pretty decent yields anyway.
  • Steepness of the curve/years. I like the curve of the initial 50K V1 model, or even make it even a bit steeper (but not as steep as yfi_whale’s model), since risks at the beginning are disproportionally higher than in the middle, hence it should be reflected accordingly. Both 8 & 10 years look very promising especially taking into account the great potential for price appreciation.
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I believe @andre.cronje senpai started to build YFI to create the best yield farming product. He started by switching funds between protocols to give the highest APY. He is now developing v2 which can help anyone and everyone to participate in yield farming. This includes lower gas fees to yield farm and delegating funds to controllers, etc.

There are three stakeholders of the YFI ecosystem:

  1. Contributors: @andre.cronje senpai and a team (in a future) to do gods work and help build YFI into the best yield farming product

  2. YFI hodlers: YFI hodlers are equity holders of YFI. As equity holders, they are incentivized to maximize their gain, that is keep the supply of YFI low, which will ensure that they keep their dilution % as low as possible, while will cause the price of YFI to be high. In the future, they may introduce higher value capture to YFI holders.

  3. YFI farmers: YFI farmers are our customers, they use our protocol to generate yield. There are long term and short term farmers. Short term farmers will sell YFI in the market when mined. Long term farmers are YFI Hodlers. While long term farmers are better than short term farmers, since we want people to participate and contribute to the long term success of the project. Andre created Pool 4 to give an extra bonus (10-15%) for those who contribute and vote. Short term farmers are good for the project too, we want more liquidity for YFI.

What protocol (company) are we looking to build?
Are we looking to become Microsoft (1990s) or Oracle which aims to eat their customer alive with their margins? Or are we looking to build Amazon, who believes in serving the customer well is the best competitive edge for the company?

I would say Amazon. We should be attracting as much LPs as possible. That’s the behavior that we should be incentivizing.

The current proposals with low inflation and low supply strongly favors whales that have bought YFI. Now that they bought their bags, they are using their twitter influencer status to shill YFI and their proposals. Wake up YFI farmers!! This is not in your best interest.This is detrimental to the long term interest of all stakeholders

Inflation Policy
Everyone is in agreement that giving YFI is key to the growth of YFI. The key question is how much?

Proposal 1:
For: We should do a token/stock split. Each YFI should be multiplied by 100-10,000x
Against: Keep things the same.

The idea is simple. No one gets excited for 0.0000001 YFI. An average user can’t count in Satoshi. The psychological effect is the reason why Walmart prices their products for US$29.99. If this project is to last for 10 years, we will people will eventually mine 0.0000001 YFI.

Suggestions:

  1. Hard cap should at least be 5x of the initial supply. Users are suggesting a hard cap of 50,000. 60% of the supply is created in the first week. Jesus. What a large pre-mine. Are we looking to XRP for inspiration?

  2. Emission Schedule of 10 years. Look how long Bitcoin took to build its following. 3 year emission schedule clearly favors current farmers but not future farmers. Why don’t we just suggest 3 weeks? this way, current farmer whales can just withdraw their money and farm the next token project. Btw, I’m launching a new farm with Justin Sun by forking YFI but it will provide 100,000% APY in the first week.

I don’t have any good ideas for inflation % and decays. Open to suggestions.

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39

@yfisensei Why is the value of YFI in attracting more people to farm YFI? Why are our customers YFI farmers? I disagree that they are our customers.

Our customers are people that will deposit assets on yswap to earn a stable APY while maintaining exposure to the asset. For this reason I do not support any of your proposals, as I am interested in governing a product for users to make money off of yAssets, not a product which is some sort of half-assed ponzi to attract people to farm YFI.

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YFI
YFI500×1406 197 KB

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@yfisensei Again, my disagreement with you (and the meme) is that I don’t care if people farm YFI, actually I don’t want them to farm YFI. There’s no need.

I want them to deposit their stablecoins in the yCurve, and deposit their assets on yswap so they earn yAssets. That is the point of yearn.finance for me, not yield farming. lmk if there is some flaw in my thinking

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42

Jason, one of the most compelling ideas in crypto is a “user owned internet” where the distinction between owners and users blur and both share in the benefits of a healthy ecosystem. The way I read @yfisensei 's post is that this is an opportunity to make sure that new users that come in also get to become owners, and owners continue to be users.

giving users a “piece of the company” when they use it is a powerful concept and ideally it can be done in a way that turns heavy users into owners and governors.

With this said, the amount that is distributed to users probably shouldnt be 500-1000%

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@rgalloway Owners become users (and vice versa), sure, I’m definitely going to use yearn products like yswap. That’s not where my disagreement comes from.

The inflation argument is that the primary use of YFI for users is… farming more YFI. I think that’s underselling the scope of yearn by a long shot.

1 Like