I’m not sure if you understand how much APY the staking rewards are getting. I can take my money out of YFI and get more in dividends from the stock market. If you call that greed then I feel that thinking like that will kill this project. Having no ideas and not changing will kill this project.
That is the tradeoff we must require people to make. If you want to exercise your high time preference and gamble your YFI value, please do so. I would prefer those who stake and commit their capital to securing the protocol to be making the decisions.
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Well obviously I’m not doing that because I believe in the project even with the risk. I don’t see how staking is securing the protocol. The YFI are just sitting there. But you seem to be very against the idea of yield farming from a yield farming protocol so I digress. The main point of all of this is that:
- People have already proposed an overhaul with derivatized governance
- Rewards are at ~7% and will continue to drop as more people stake if more revenue is not generated
- This would allow people to stake and vote without creating too much complexity and increase rewards for stakers.
It will create perverse incentives and decrease the cost for an attacker to propose vote and approve adverse code. YFI sitting static is identical in game theory to an ETH validator or a Bitcoin ASIC. It has one purpose only and cannot be repurposed for anything else.
If I was well capitalised, I could lock up a load of YFI, hedge out my risk and then approve protocol killing code without having to worry about the decline in YFI token value since I hedged it out. This yield hunting thinking is a mistake. Low yield is good. It incentives users (low fees) and ensures decision makers are thinking about the next 10yrs, not the next 10days.
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But I think you’re misunderstanding what I’m saying. I totally agree that allowing individual YFI holders to yield farm while voting is a bad idea. That would potentially incentivize bad decision making. But you’re telling me you would not trust the treasury to get a return on YFI? Mentioning Aave in the first post was my bad (I was mainly mentioning it because of the proposal) but all I’m saying is that the treasury should have the ability to do something with staked YFI during the days/weeks/months there are no proposals. As the project grows, I’m imagining proposals will be less and less frequent. So if we think years ahead, where 80% of YFI is staked, imagine a company that has 80% of it’s market cap doing nothing. You can stop the BRK.A comparisons because Buffett puts his money to use.
Indeed. Some proposals here consider nothing other than profit. And it seem like there’s never enough of it. So many proposals I’ve seen would never have been proposed if their authors thought about things such as interests of different parties that make this project possible, or even where the profit comes from.
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I see a few types of ventures for potential treasury staking, but I’ll preface it by saying all of them are against the interest of the stake holders and ultimately the project.
- Provide liquidity as loan providers like Aave
- Dramatically reduces cost of centralization
- Potential for double-counting votes
- If double-counting is solved, governance stakers can’t vote with all the YFI they staked, since a portion would have been loaned out
- Provide liquidity to AMMs like Uniswap:
- Divergence loss means governance stakers will lose ratio of voting power as the price of YFI goes up
- This creates a conflict of interest between the governance stakers and the project. If the project succeeds, they lose power.
- Mint synthetic assets such as Dai or sUSD
- Attaches YFI to external projects the governance has no control over
- Generally, the more utilized an entity’s assets are, the less resilient it becomes. Since it can’t use those assets to respond to unexpected events fast enough. Such as an emergency vote. (Can’t vote since it takes time to approve burning synthetics to get YFI back for governance)
Lastly, just because the project is risky doesn’t mean extra risks are moot. That’s like saying skydiving’s already risky, so I’ll take my chances with this poorly made parachute.
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Keep in mind there are multiple ways to make YFI valuable.
One way, as you have suggested, is to increase returns on YFI. Whether this means actually investing it or increasing fee cuts, or something else.
The other metric, which I think is better to focus on, is increasing TVL. As more people join the platform, YFI holders will earn more fees, which boosts the price in a way that is better aligned with improving the product.
Overall, I think the risk/reward profile is already there, and the trade-off isn’t worth it for gov. If you want to make returns on your YFI, the YFI vault already exists. People staking in gov understand the benefits.
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Would make complete sense to have even a portion of the YFI staked in gov contract then allocated to the YFI vault or another unique strategy
No it should not. It is identical to allowing individuals. It is actually worse because you are basically creating apathy. People would rather stake for yield than stake for governance.
I have no doubt the protocol could generate huge APY on that YFI. Nevertheless, I believe we should NEVER allow any form of yield + voting aside from fees. If the Fees are not generating enough revenue for you, unstake, loan out your YFI elsewhere OR make better decisions to increase the fee revenue.
We must not sacrifice the protocol security for arbitrary yield. Fees are the yield and that is what YFI stakers must optimise for. This is not a get rich quick scheme, this is being built out for years to come. Start thinking with your long term hat on.
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No. Staked YFI = governance and fees only. This hunt for yield comes at the detriment of security seriously needs to stop.
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Thank you for being a sensible voice. I hope to see more of them and less yield hunters at all costs. Adversarial thinking is more important.
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I agree with this. Stacked YFI are for governance and “dividends” only. If i want to get more return with my YFI, i will take more risks and go degen farming with it.
Of course, i would love a 12,000 % return on my tokens but not at the cost of the security of the protocol. Stacking/voting must still be incentivize correctly but that’s for another thread
One good point made however by someone else. At some point, it will probably be necessary to be able to claim rewards without vote if vote are not frequent enough.
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Good points. I agree that those are riskier uses of treasury liquidity however that does not mean a less risky method is non-existent. If there were a scheduled voting protocol, that would reduce impacts to the treasury using liquidity. When exactly would you need an emergency vote? There has not been one to my knowledge.
Lastly, just because something adds more risk does not make it x-fold more risky. There is a difference between 1% more risky vs 99% more. I am suggesting the treasury use liquidity in the interim which arguably should be magnitudes lower in risk than some of the proposals. The analogy of skydiving with a bad parachute but a back up vs skydiving with a good parachute but no back up can yield very different results.
What are you talking about? How does allowing the treasury to use liquidity imply much more risk than anything else exactly? If it’s not safe in one SC, how is it more safe in another? I would say you are not thinking with your long term hat. Right now 6k (20-25%) of YFI are staked getting 6 - 7% APY from rewards. Now if we have near full participation in governance (ie 30k YFI) APY goes down drastically assuming fees stay the same. The price will increase but THAT is the perverse incentive. As Andre said, YFI has no value, yet exchanges disagree. I think too many people want the price of the coin to shoot up so they can get rich quick, not to actually govern. By improving staking rewards you will get more voters. Stop trying to paint increased staking rewards as a bad thing.
When exactly would you need an emergency vote? There has not been one to my knowledge.
Just because there haven’t been one in the less than 2 months YFI existed doesn’t mean there won’t ever be one. And if we can’t vote when there’s an emergency we risk breaking the whole project.
For example, what if someone suddenly discovers a Curve bug that can drain Curve pools? Everyone’s votes will be stuck in a scheme somewhere and no one will be able to vote on withdrawing yVault funds away from Curve.
I agree that those are riskier uses of treasury liquidity however that does not mean a less risky method is non-existent.
I’m not only focused on risk, I’m also focused on the sustainability of the project. And conflict of interest between parties that make this project work compromises the project. You can have a zero risk strategy that is still bad for the project because one party cannibalizes the other. (e.g. YFI holders requiring all LP to pay 90% of profits. There’s no risk of losing capital, but the project won’t succeed because one party’s been mistreated by the other)
I brought up these 3 examples because that’s the method most people propose when this subject is brought up.
My stance will remain unchanged until a strategy can ensure that it doesn’t compromise the sustainability of the project. And I think it’s unlikely that such a strategy will be found.
The analogy of skydiving with a bad parachute but a back up vs skydiving with a good parachute but no back up can yield very different results.
Your proposal only adds risk without mitigation. I fail to see how adding more risk is akin to any of these two options. From what I see, you’re only switching from the good parachute to the bad, without adding the backup.
To quote:
The argument of risk is moot because this entire project is a risk.
sounds a lot like what I suggested. Or in other words. “Hey, this project is already pretty risky, what’s the difference if we tack on a few percent more?”
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@ynotyfi said:
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.
The way I see it, this is completely backwards. If you want to generate yield on your holdings, you should be doing it.
YFI staked in governance is fulfilling it’s main purpose as a governance token which is to ensure the community has a say in the protocol’s configuration and can respond to rapidly changing market conditions in a speedy way, which reinforces yearn’s security. Essentially, all YFI is meant to be is a vote (and a proportional claim on revenue) and the only way it can fulfill that purpose right now is if staked in governance. Although I’m sure we all would like it to be so, in my opinion YFI should not be considered as a valuable asset/collateral yet at this point in time and I think any use of it as such is speculative.
This is to say, I see nothing wrong with being a purely profit-seeking YFI holder but to suggest the governance stake as a whole should act in order to maximise profits doesn’t make any sense to me and seems completely counter-intuitive, as I’d guess there’s currently a decent proportion of holders (myself included) that would not be interested in being staked in governance if that YFI were to be used in external platforms (some very much untested, like Cream and Harvest, for example) in order to generate yield. That’s why the YFI vault exists.
If you wish to speculatively farm yield with your YFI, by all means do it, all you have to do is unstake from the governance contract and then pursue any yield opportunity you wish yourself or simply deposit to the YFI vault. But that’s a decision each individual holder should make for themselves, it isn’t something that should be done by default and most definitely not with the YFI that is meant to be governing the whole ecosystem.
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People need to realize the project is new but the space is changing rapidly. While it’s easy to keep something that has worked for “2 months”, that’s probably not the best. Especially when the community is growing.
I laid out my explanation for why this wouldn’t work in future. You’re the one who’s ignoring future risks if we make the changes by saying there’s no need to be concerned with emergency voting because we haven’t had the need for one.
Edit: I thought the whole block of text was you quoting me so I didn’t read it at first. I will now read and respond shortly
I don’t think there was a YIP for the yETH vault locking, etc.
This is because of the temporary power granted to the multi-sig wallet holders. And to my knowledge, this isn’t a permanent solution
I disagree. My stance is that stakers need incentive to improve voting numbers. Without that, the project goes down. If it’s the same group of people voting then this is no longer a decentralized project that it is touted as. You honestly think people will continue to stake if rewards drop to 1% or less?
Rewards are currently 7%, and will grow as more people use YFI products, this doesn’t account for the growth of YFI price as the project succeeds. In my opinion, if a project can’t make a satisfactory return of investment without sabotaging future prospects, it won’t work in the first place.
How is the current system a “good parachute” if people in the community agree that it can be improved? I’m not saying allowing the treasury to use liquidity is a “good parachute” but it’s better than keeping a parachute that the community is saying is bad.
The current vault ensures no loss of principal in YFI, retains voting power of existing holders, and introduces no conflict of interest between investors and the project. A proposal like this would introduce at least one of these undesired outcomes as I have already listed out in my previous posts.
Also, I’m not sure if you have noticed, the majority of community in this thread are against this proposal.
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I’m not sure if you noticed but this thread does not have many participants. Most of the replies are from yourself and captainobvious. Hardly a majority.