Request for Comment : Proposal for YFI Inflation and Supply Mechanics

Proposals Vaults
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TLDR:
Request for Comment stage not on chain vote yet

Proposal A : Implement the Synthetix Inflationary Model and use that as incentives for LPs of a 80/20 YFI/yCRV Pool. This pool’s BPT could then be used as a voting token

Proposal B : Implement a time-lock for rewards, open to discussion with the community on how long it would be

Considerations for $YFI Rewards

  1. We want to benefit the users of the protocol and arguably users should be the only ones voting on the protocol, what Andre did with Pool 3 was stakers are “using iearn”, are “providing liquidity” and earning YFI
  2. If we shift the weights on the Balancer Pools we are arguably exposing the LPs to more IL and Capital Requirements, which should be justly rewarded
  3. At current rates, 10k is much too high. What inflation model Works?
  4. Governance Participation should be rewarded more than just providing liquidity, yearn has already accumulated $100m in AUM, it’s time to work on governance alignment rather than liquidity bootstrapping.
  5. Should the rewards be time-vested ?

Proposals
Proposal A : Fixed Supply Change to inflationary Supply w Balancer Pool Staking

  • This creates a pool of incentivized users and aligning Governance with skin in the game
  • An 80/20 YFI:yCRV voting pool creates incentives for all of the goals of yCRV adoption, YFI liquidity and governance participation
  • Stakers earns Trading Fees, $CRV, $BAL and $YFI and benefit from YFI price appreciation (if applicable)

For : Yes for a 80/20 YFI/yCRV w/ inflationary supply curve
Against : No more tokens will be distributed

Additional Consideration :

  1. 80/20 YFI/yCRV captures capital appreciation on positive YFI Price movement
  2. The BPT Token does not need to be the only Voting token, I also believe a 100% Pure $YFI Voting system would be beneficial to the Ecosystem
  3. The rewards doesnt have to be hard set to this pool as @vsh_p2p pointed out, there are plenty of products to be launched and we can launch a proposal to stream inflation there as well

Proposal B : Time-lock Rewards for $YFI

  • All Rewards/week are distributed but vested for a period of time 3m/6m/9m/12m (TBD)
  • Considerations: YFI is a new token and time-locking the rewards now would lead to there only being 30k Supply for some time.

For : All rewards will be vested for a 3m/6m/9m/12m (TBD) rolling
Against : Rewards can be claimed at any time as per status Quo

Proposed Inflation Schedule
We would use a copy of Synthetix’s inflation model for this, they’ve spearheaded the way of Inflationary incentives and have proven that it can work.

DeltaTiger from Synthetix Discord has been extremely helpful with this
See Delta Tigers version of the emission schedule in the tab

How would rewards look like once Proposal A is passed?

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Credits
Came up with this Proposal with the help of Andrew Kang, Will Price, Cooper and Calvin Chu, LongShortFundin and many more and can’t thank them enough for their comments that helped shape this proposal and walked through the thinking of it with me. Also would like to thank and credit DeltaTiger again for not only setting up the original Synthetix Inflation Proposal but also being super helpful in setting this one up as well

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First consideration is that yearn ecosystem has a lot of products and will have more going forward. At some point we’ll want to drop the current pool in favor of a new one. Do we want to hard lock in rewards for YFI/yCRV Pool now? I think we should emphasize that it’s not a hard lock in the proposal.

Second, I think that BPT of the pool should be a voting token, but not the only voting token, and it’s not clear from that proposal if that would be the case or not.

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Incredibly well thought out proposal.

I am FOR both Proposal A & Proposal B.

Synthetix has demonstrated the value of year-long vesting when backed by a strong roadmap and the more we can shift focus to the long-term instead of the short-term gold rush, the better.

Over the long term, we should look to shift YFI pools to 50/50 for the most useful liquidity. In the short term, gradually shifting from 98/2 to 80/20 seems like a win to me.

PS: Has Balancer whitelisted YFI? [Edit: Yes] :stuck_out_tongue:

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@Coopahtroopa YFI has been whitelisted by balancer.

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I believe there is a typo here. 80/20 yCRV/YFI and not the other way.

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First consideration is that yearn ecosystem has a lot of products and will have more going forward. At some point we’ll want to drop the current pool in favor of a new one. Do we want to hard lock in rewards for YFI/yCRV Pool now? I think we should emphasize that it’s not a hard lock in the proposal. Second, I think that BPT of the pool should be a voting token, but not the only voting token, and it’s not clear from that proposal if that would be the case or not. @vsh_p2p

We can always open a new proposal once the new products come online to divert some of the inflation to it like Synthetix does. This does not need to be a hard set rewards, I will update that in the proposal, valuable input!

Yes the BPT can be a Voting Token but also would like to see the a 100% Pure $YFI Time Lock used as voting token

I believe there is a typo here. 80/20 yCRV/YFI and not the other way. @YieldBouncer

A 80/20 YFI pool would allow LPs to capture the Capital Upside of a $YFI Price Appreciation

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1 Like
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line 2 of proposal A still states the other way round,

An 80/20 yCRV:YFI voting pool creates incentives…

should be corrected to 80/20 YFI:yCRV

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Updated my bad! Missed that in initial draft

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I think that if we do decide to go for a continuous issuance model, this model should be codefied and not able to be changed by future governance.
We do need some economic guarantees in order for token holders to better evaluate what they are getting into.
We all know the criticism that Ethereum gets because of its uncertain issuance model.
Of course the community can always decide to “fork” the contract and move to a new token with a new token model, but at least we create some friction and the ability for others to stay in the original contract.
Incredible work on this proposal guys. Thank you to all those involved.

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Support the inflationary scheme in a 80 yFI / 20 yCRV pool. Agree on the escrowed rewards as well, although 1 full year might be a stretch.

Would vote FOR both of the proposals.

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So one thing is that this inflation schedule may be too aggressive for some people. You may want to start with 75% annual inflation or lower. (Instead of 150%)

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May I know if you considering proposing vesting of rewards for both yGov pools?

There are two pool incentives:
locking of yCRV/YFI BPT (YFI rewards) and,
locking of YFI in the fee rewards pool (fee rewards)

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Great proposals!

  • For an SNX-style emission. I have been toying with the model here and have some various scenarios laid out from more conservative to more aggressive emission.

  • As has been discussed, YFI rewards should be proportionally split between various relevant products rather than one pool. Reward split could be determined by liquidity provided or fees yielded to protocol.

  • Agree that YFI should be issued to those using the protocol, providing liquidity, and participating in governance.

  • Interested to hear pros of time-vested YFI rewards. Not sure on this.

  • For YFI being solely used for governance.

  • Interested in learning more about time-locks and vesting ideas.

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I am strongly FOR proposal A as it is battle tested by the SNX community and provides solid incentive alignment for participation in governance and liquidity provision.

On top of that, It skews YFI distribution in favor of early LPs who admittedly take on the highest risk. Speculators and investors that will first wait for the critical period to pass and invest after will be receiving a smaller portion of the supply. I am all in for this.

I do not have any opinion on proposal B.

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I support both proposals. If going with an inflationary model, SNX provides an excellent model to base YFI’s on.

One thing however: SNX has taught the space value of being pragmatic in protocol reward emission schedules and approaches, but there’s no need to let the reliability of their approach become a default over stepping out into the unknown.

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In favour of 80/20 YFI/yCRV pool. Certainly better than a stablecoin oriented 2/98 YFI/yCRV pool. Some real risk of impermanent loss is better to filter out speculative capital.

Also in favour of time-locking rewards. This factors into switching considerations and increases the friction on speculative capital.

P.S. But still voting “against” on proposal 0 on the basis that I would like to positively vote “for” on this proposal after seeing what happens for 1-4 weeks after ceasing of YFI issuance :sweat_smile: My reasons set out here: Proposal 0: YFI Supply

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Proposal B just became much more relevant with the failure to pass YIP-1 (staking/burning). It failed for lack of quorum rather than sentiment.

Now would be a great time to dial in how to deal with yCRV rewards and get it passed. What do other successful time-lock models look like?

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I am leaning towards opposing Proposal A, not on the basis of objecting further YFI distributions, but that YFI shall not be distributed to LPs of YFI trading pools.

YFI should be used for governance, not trading. Distributing YFI to YFI/yCRV LPs means distributing governing power to people supplying for YFI trading behaviours, acts that do not align with the token’s purpose.

YFI should be distributed to voters and first level LPs (e.g. LPs of yearn, yswap, ytrade, etc.) instead, as those, in my opinion, are the ecosystem-benefiting works that should be acknowledged.

As for Proposal B, I am all for it.

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I’m generally in favor of both Proposal A and Proposal B.

However I’m wondering why we would use a Balancer pool when it seems that yearn has it’s own AMM version, as detailed in Yield Aware AMMs and 2 other related posts.

I am unsure of whether this proposed AMM idea is actually ready for use (is it yswap.exchange?) so that might be one argument against it. The other argument against it would be no BAL rewards. However the obvious benefit would be more direct awareness of the Yearn offerings, and liquidity bootstrapping directly on the protocol.

Edit: I’m not sure what the mechanism is that would let us Stake from a YSwap pool… corresponding to the pool unique BPT from a Bal pool