Currently the weekly supply increase of YFI is 30,000 per week. Vote under proposal #0 is if more YFI tokens should be minted.
I’m voting “FOR” on proposal #0 as I think continuous incentivization of LPs is important for growth of the platform.
However I also think early participants of the platform that are taking more risk should be rewarded with a higher % of YFI supply.
This is a proposal for reducing the weekly issuance rate with a simple halvening model similar to that of BTC but accelerated due to the significant interest in the platform (so a long discovery period is not necessary) and with a inflation floor to always have some level of incentive to attract new users to the platform.
So issuance week 0 is 30,000. Issuance week 1 should be halved to 15,000. (5k per pool). After that every 4 weeks the rewards should half to 7,500 starting from week 5, 3,750 starting week 9, 1,875 starting week 13, 937.5 starting week 17, 468.75 starting week 21 and final halvening in week 25 to a long term issuance rate of 234.375.
This type of proposal is probably why most people are voting no. This is some massive $YFI inflation. If you want to win over No voters,
I think the discussion should be starting at reducing weekly supply increase to 3k YFI. That can still offer attractive yields, won’t be as much of a shock to people expecting a 30k fixed supply.
I like this model but I would alter it somewhat, I think week 20 should be the end of that halving cycle method and from that point it should follow a yearly prime number schedule.
So issuance would go down to 0.32% or 468.75 weekly issuance and this cycle should last for 2 years because 2 is the first prime number, after 2 years you half again, the next cycle would last for 3 years because 3 in the next prime number, weekly issuance would go down to 0.16% or 234.375.
next cycle last for 5 years, next 7 years, next 11 years, next 13 years, next 17 years, next 19 years. maybe after 19 you stop and thats it.
The current yields are 600%+ on the pools and 120% on the fee rewards. These will need to go down significantly. On the other hand these yields also depend on the assets held in the system. If the issuance stops, funds go out of the pools, the party is over. The main driver of the YFI price to go up, the fee rewards, will disappear and the price will collapse to $0.
Ultimately the price of the token will change in a way that these yields will normalize to 5-20% values, so I am not sure if nailing down a perfect issuance will be that important. I think a good enough solution will be to just continue issuing YFI, so that the assets stay within the system and rely on the market to normalize the price of YFI and the yields.
This is assuming yCurve only works because of incentives. This is clearly not true since it has been breaking records in volume for a good while now. As long as there is a value capture mechanism that will flow to YFI token holders the token price will not collapse to $0.
Is there a breakdown where the 52000 yCRV/week comes from? This will give more information, which parts of the system contribute to the rewards and how they will be impact if the yield subsidy stops.
I’m not sure where the 52000 yCRV comes from but we as YFI tokens holders can definitely add a small fee to each tx in yCurve and easily calculate how much value we can extract from the total volume we have been seeing. But even though we still have questions that need to be answered:
How much is the ideal amount to extract
Should this amount be given to YFI token holders or sent to a DAO where token holders vote on how funds get deployed
It is difficult to determine how much we should reduce in supply if we are not sure what other lever we have available to pull.
