Yes, governance will be exposed to more systematic risk by using yUSD as rewards vs yCRV.
But on the other hand, this is aligned with the ecosystem. What’s it saying if YFI governance stakers aren’t willing to take the risk of yUSD over yCRV?
I agree but it also adds the vault exit fees to governance participant rewards as a side effect and therefore more friction to claim rewards, especially if there are no markets with deep enough liquidity to facilitate a yUSD/yCRV swap with limited slippage and fees. It’s trading one problem for another that is only marginally helpful if you choose to leave your rewards parked for a long enough period (but it does help compound gains). But taking it further with a closed loop trading pool could be an interesting solve for the exit fees, while still providing a vault exposed compounding asset AND giving users the ability to opt-out of the vaults entirely by trading out of it cheaper than exiting the vault.
And on top of that it gives YFI holders a transferable asset within the community that represents a share of all pooled rewards (LP token). This kind of unique asset could be used for lending to other participants, used as collateral for off-chain VC vault investments, sponsoring protocol initiatives, adding/slashing rewards based on voting mechanics, etc.
yUSD could be used directly for all of that but anybody can acquire it and influence initiatives outside of the interests of governance, a smart pool keeps it a closed loop.
I know this is outside the scope of your proposal, so I don’t want to bog down the discussion with this idea, but I think it has some merits that should be fleshed out further.
@banteg Do you have any implementation comments for the process of changing the governance staking rewards? I’m not fully clear on the details.
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