[Proposal] yMarkt: The best buybacks can get


This aims to propose a buyback mechanism that aligns with and builds upon the current change direction of YFI tokenomics. The proposal makes an initial case for the creation of a primary market making tool to support buyback efforts. This can be designed exclusively for YFI acquisition or developed as a potential Yearn product (yMarkt). The proposed mechanism is likely to facilitate YFI buybacks at preferential prices.

Key words: buybacks, primary market, buyout, conviction farming


A review of the most engaging improvement proposals submitted over the past year posits buybacks as a central health routine in the future of yearn. More generally, buybacks are likely to emerge as standard practice in the years to follow. In this context, it might be worthwhile to experiment with mechanisms that leverage existing yearn products for the purpose of governing and optimising buybacks.

YIP-65: Evolving YFI Tokenomics expertly summaries the spirit of the times and can therefore provide adequate basis for evaluating the timeliness of letting buybacks shed their now skeuomorphic TradFi skin.


Buybacks are an emerging DeFi primitive.

No top-down buyback and market standardisation. (DeFi)

Yearn is well positioned to offer a buyback market-making service.


First of all, there is no clear sequence of actions for transparently determining the best timing and quantities for the execution of a buyback. Secondarily, DAOs are competing with traders for their own token. This current state of affairs is arguably inefficient as it presumably fails to account for the intrinsic value of buybacks. Furthermore, given that in the face of frontrunning risks institutional action on the secondary market tends to default to secrecy, buybacks are likely to generate additional cohesion stress.

Desired Behaviour

A buyback mechanism should be designed such that:

  • It is attractive for temporary holders and traders
  • Generates buyback opportunities at a discount
  • It operates autonomously within set parameters
  • Proposes a unique, competitive risk profile

A YFI example

YFI holders stake their tokens with an associated price label on yMarkt for 90 days. Yearn buys back a predefined quantity only at price points that satisfy buyback conditions. (ex: at least 5% under the average price of the week.) All staked tokens are made available for work in xYFI vault and the generated yield is distributed to the positions that have not been liquidated in the pool and their staked price point satisfies to at least some extent the distribution condition. Additional considerations such as the total duration of the sell offer as well as how long ago it was submitted should act as inputs in the cyclical buyback routine and corresponding distribution of rewards. This is a Harberger Tax on the hedonistic trading classes. Maybe.

The above is an attempt to provide an abstraction of the risk-reward space for such a mechanism. Only the positions in the green area are rewarded for staking. The separation is made by the purple line that represents (in the absence of a model) the median price per staked $YFI. The green dots represent liquidated positions. The red points, rewarded, but not liquidated. In black, staked, but not rewarded.

This aims to offer proportional compensation for the risk of selling the asset under the market price.

It’s kind of like a token’s woodpecker. (yPecker… maybe not.) Or, “you have a cow”.
You take it to the market but you also overclock it. Sure, it will give more milk than ever in cow market paradise, but that lowers its perceived value because of the obvious overclocking. What is just another cash cow for you, for those at the market is sacred. As a result, you will get a lower price in exchange for the cow because of your public display of carelessness towards what is ultimately a perfectly good cow. The peoples of the cow think they swindled you, but you don’t, because you’re evidently not a cow person.

Known Unknowns

How does such a mechanism relates to and interacts with the secondary market? (volumes, volatility)

Should such a mechanism execute on the likely emerging arbitrage opportunities?

Can this be used as a conviction voting mechanism in governance?

Is it useful, or is the risk profile sufficiently unique?

Does it fit Yearn’s mojo?


To be determined.


Might end up as a new product

Token buybacks can be optimised

Cool data and new derivative surface

Market among Markets, Buyouts among Buybacks


Complex Logical Instructions Set

Likely DAO 2 DAO service

No supporting data

No need to reinvent the buyback


A Buyback Market Mechanism (yMarkt) as a Yearn lego is:

  • worth exploring
  • NO!

0 voters


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