These YFI haven’t been doing anything for over X hours since there aren’t proposals. Over X mil in liquidity not earning, correct?
Edited for brevity:
The rationale here is that the governance SC currently has ~25% of Yearn’s market cap which sits there unless there are YIPs. Furthermore, there are proposals to create derivatives for people outside of the Governance SC in order to allow them to vote. Why not allow the Governance SC to use a FRACTION of the liquidity to farm to increase rewards? The treasury would use the most conservative method, therefore people who want more ROI can take their YFI elsewhere. Hypothetically, by improving staking rewards you would be increasing staking and ultimately voting. Additionally if there is a set schedule of YIPs that would allow the Treasury to better allocate resources since once a vote is done, the liquidity is locked for 3 days.
Those against the idea have stated there is more risk. While there is more risk, any new idea will have risk. The project is a risk.
As the price of YFI increase and more YFI is staked, rewards will decrease which reduces buy-in and growth. This issue will need to be mitigated.
YFI staked in governance is earning a portion of the fees paid by users. A vote on a proposal is only required to claim the rewards to your wallet. The rewards accumulate regardless.
^ Yep. You are still accruing rewards, just can’t claim them unless voted. You should have the opportunity to claim pretty soon.
That’s not really what I’m getting at. I know I am earning rewards but the treasury could potentially earn more money on the YFI locked for governance while there are no proposals. To my knowledge it is just sitting there not doing anything for the community once you stake it, it does something when there is a vote. While I am earning rewards on my stake, I think the organization should use that liquidity for profit if there are no proposals. Does that make sense?
I see that we are talking about 2 different things in here. For the YFI staked, looks like it’s difficult to have it generating any profits, as it has to be locked at the SC, right?
I think the concern is tying them up in outside smart contracts. But I agree it would be nice to utilize the asset. It would incentivize governance staking. I’d love it if they combined the YFI vault and the governance vault.
I don’t think it would have to be locked necessarily. There are proposals to derivatize vault holdings for cheaper gas fees so I don’t see why staked YFI in the governance SC can’t be derivatized as well. Or potentially using some orthogonal means to do so. The goal of this idea would be to get more return for the treasury which would ultimately be passed on to stakers.
Yeah that would be my concern. I wouldn’t suggest tying up all of it anyways. But yeah I think overall it’s being underutilized.
My take is that this is intentional. Lending protocols like Aave will allow other people to borrow the asset. The whole point of governance staking is to keep the tokens in a contract meant for governance. If we lend it out, that’s essentially what the yYFI vault does.
Hmm maybe Aave was a bad example. I get the desire to keep it in a contract for governance but if you have 122 million sitting in the contact for multiple days/weeks it’s not really doing the community good. I think if there was a set schedule for votes (every month/week) and in the meantime the staked YFI would earn rewards for stakers while being utilized for increasing the treasury through yield that would be a win win without changing too much.
What would you do with the funds, outside of providing liquidity, though?
Arguably, being locked up is doing something with its price. If less of it was locked up, the value of YFI might go down because circulating supply increases.
Staking is an important part of providing security for a protocol that uses tokens to vote.
This is not a good idea. If I understand this, you want to essentially yield farm with staked YFI.
Not only does this put people at risk who literally just want to secure the YFI protocol, it also requires further layers of governance and dependency on speculative farming protocols. If I stake my YFI, I expect it to sit dormant with the sole prupose of earning fees and voting, nothing else.
There is a growing culture of yield at all costs and I do not believe it is not the right way to view the world not the longevity of this protocol.
I recommend reading this thread. A lot of people have expressed why allowing YFI on other platforms comprise security of the protocol.
Mainly, we can’t be sure if YFI holders will vote what’s best for YFI if they can hedge their bets elsewhere.
Agreed, YFI must not be able to be hedged nor interest bearing on any form and vote. One or the other, not both.
Yeah I looked at that proposal but I’m not a fan of it because it gives voting to people outside the Governance SC and gets too convoluted in my opinion. My idea is to potentially derivatize just the SC into some form that allows the treasury to gain yield not individual YFI holders. Those in the SC will get rewards from the treasury.
I do not want to yield farm. I want the treasury to yield farm with my liquidity tied up in the SC. The argument of risk is moot because this entire project is a risk. It says it when you go to stake. I’d much rather trust the treasury to yield farm than myself.
I also disagree with this. Staked YFI should not be used in any form of derivative. Period. There is no yield without risk and as a staker, I am already taking risk holding a volatile asset, compounding it in other protocols is dangerous. It also creates perverse security incentives both for non committed stakers + attackers who can capitalise on these derivative structures. We should not include any form of yield derivation from any staked YFI. It has one job, earn fees + govern. Anything else is attack surface and unacceptable risk.
I think this is the best counter argument to my idea. But my rebuttal would be that I’m not saying use all of it, and I would argue that increased staking rewards would lead to an increase in price action. Right now the yield for staking is ~ 7 % APY. As we increase treasury rewards for staking, it will lead to more people wanting YFI to stake in the governance SC which would lead to more voting, etc.
Greed will kill this project, and many others. This culture of hunting for yield at the expense of security is concerning.
The argument of risk is never mute. This is the exact wrong approach sir, I suggest you consider risks as exponential where they create increasingly larger and further reaching impacts the more of them you add on-top of each other. Yes YFI and this DAO is risky, but creating security holes inside the governance layer is the exact right way to ensure it does implode. You should be aiming to protect the governance contract above all others, not lend it out to the highest bidder.