Yes, hence a concession. I think this is okay. The risk of the ecosystem coming to a grinding halt is higher if we don’t pass prop 30.
@hc.link I see that you are ok with a move to increase the cap as long as it is the only one. I agree with that. I do not agree that YIP 30 is required. We could do something less than 50k. Or even with 50k, we could distribute it immediately (to the Multisig/DAO for example) and then turn off the minting key.
Agreed. The sooner the keys are burned after the inflation schedule is set, the better. Burning the keys lends credibility and adds certainty to the protocol. And most importantly, it removes another unnecessary layer of trust that is presently between community governance and the protocol. YFII is a perfect example. The perception of YFII improved dramatically once they burned their keys, and they’re a copypasta fork!
I yearn for the burn.
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Of course I am also for buring the keys, but keep in mind that the keys are in the hands of competent multisignatre stakeholders. Burning the keys is a serious choice to make and should not even be discussed until an inflation schedule is set and the community is happy with it. That is the difference, you cannot just copypasta and burn the keys and expect value to follow. Value follows from well thought out methodical governance backed by heavy capital.
The 50k inflation model extremely conservative in the context of this project. YFI is barely two weeks old, and we are discussing a very modest inflation curve over the course of years that will not even double the supply. In that time, the project could 1000x in TVL. Keep things in perspective. In any case, growth will far outpace the slow inflation. Meanwhile, we can use the modest inflation to bootstrap more liquidity in exchange for some distribution of governance. I am okay with this approach. If I am going to accept some inflation, it should be logical and put to good use.
Keep in mind that the inflation proposed by prop 30 is far less aggressive than bitcoin halving models, and it will preserve 100% circulating supply which gradually decays to a minimum of 80% if a 50/50 LP/multisig split is accepted as proposed in prop 31. Keep in mind for prop 31 that 50/50 is far less dilutive to current YFI holders than 75/25 LP/multisig.
I want 50k to pass to get a decision on chain about distribution. This will attract capital as it demonstrates initiative, compromise, and effective governance. If you want things to last you must move slowly.
As far as price is concerned, the inflation is strategic. It is likely that you will see a larger increase in price with the modest inflation of prop 30 than without it. It will take a long time to price in the slow inflation curve. That all starts to change as soon as you go for more than 50k, but 50k is safe. Further, you avoid a protocol deadlock in the short term, which would be catastrophic for YFI. Also, you allow for 3000 YFI more early governors (10% increase over one year) which is a generous incentive for large LPs to bring capital into yearn.
We are still very much in bootstrap phase, and large LPs who take on risk early should get a seat at the table. Vote yes on prop 30, but 50k must be the limit. After prop 30 (hopefully) passes, we can take up the question of burning or at least time locking new mints for one or two years. Gradual progress is always best.
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First of all, thank you Substreight for leading the charge on the inflation schedule.
I would like to make a case to the community to consider some alternative mental models not borrowed from previous crypto projects.
The one thing I am confident in is that we don’t know what we don’t know. Do we need to set an exact number of tokens for inflation and mint them? If we are leaving this up to be changed in the future, why don’t we have a mint as you go type plan where we only vote in short term inflation for incentives where/when needed?
I think crypto generally tends to think in the mental model of setting these 50 year economic models upfront and knowing what total supply and circulating supply are going to be at certain time points. I understand why that’s attractive - because holders/investors want comfort in knowing that the team won’t change the schedule on them. There’s also this meme of programmatically predictable supply schedules.
But in this case, WE the token holders make the rules. We know that supply is distributed and not mostly held by the team or a bunch of private investors. No one organization or person controls this.
Suggestion to consider: Mint tokens and design incentive programs on a product by product basis
Thinking in the context of corporations, they don’t create 10 year budgets because they don’t know how much they will need that far in the future. They create quarterly and annual budgets because they have a much better sense of their needs in a closer time period
When we think about inflation in crypto, layer 1s have inflation schedules because it serves as their long term security budget. This is not the case for yearn. Yearn needs inflation to bootstrap and incentivize usage of their products. But with yearn pools already offering attractive yields and having had strong exposure, do we need to waste inflation on these pools? If we are going to be diluting ourselves, it makes more sense to save inflation to be directed towards programs/incentives we know will have a +EV on our YFI holdings
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Could you explain “dilution” a bit more? Current YFI holders (should YIP 30 pass) will have an equal shot at earning future YFI and maintaining their governance stake by providing liquidity, do they not? No inflation (outside of DAO) just seems like a way to bottleneck any/all distribution through means other than at the mercy of existing holders. (In other words, no inflation would mean that future users can only “buy” YFI and not “earn” it, which just propagates a bias for hoarding imo.) If it is perception of scarcity which is at stake then there is little difference between a 30k cap and a 50k cap +tail emission, with the latter having the added benefit of LP incentivization, something there is demand for. I mean, sure, existing holders should not be unreasonably diluted, which the low inflation quasi-guarantees, but I don’t see what’s wrong in having a preset mechanism for prospective audience to earn into YFI governance as well.
@hc.link I hope youre paying attention to the slippery slop. Jumping right into governance with a 40% overall print and not burning the keys is asking for future printing maybe within a month and maybe aggressively. Now is the time to vote against inflation. Lets all live within our means and only spend the aDAI not expect future and current investors front the cost, rather than pay the amount as they have it, by inflating YFI.
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I was responding to the point raised by @hc.link that 40% inflation will not have a dilutionary yearn’s governance. 40% additional YFI would seem to dilute any current onwer’s voting power unless they increase their ownership in YFI by 40%. If the goal is for all current owners to have the same voting power in 10 years and not add additional YFI holders, then what is the point of the inflation? I am not against some dilution as I wrote in the YIP 31 thread; I would prefer that the project capture the most benefit from the YFI issued that causes that dilution:
This assumes additional distribution of YFI should be through farming rather than purchasing. As mentioned in the quote of myself above, that adds profits to farmers/LPs when that value could be captured by the project instead. In addition, farmers can be provided yield through incentives other than YFI (e.g., aDAI, yCurve, yUSDC). If farmers are interested in more than just the yield and want to hold YFI, then rhey can use those incentives to purchase YFI.
Edited for grammar and for clarity.
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Thanks to @LapisLime for bringing to my attention that the other thread has been closed.
I will reiterate here just in case.
Why do we not try to have the best of both worlds?
On one hand, some YFI issue (inflation), on the other hand some burning mechanism causing deflationary pressure.
Someone earlier proposed not to distribute ecosystem rewards via staking but to use them to buy YFI off the market and burn them. Basically an extreme version of buy-back (i.e. buy-back with burning) vs dividend distribution.
Psychologically, knowing that tokens are constantly burned – and more are burned as the project grows successful – will be a strong motivator to hoard/buy/farm and never dump.
Incidentally, since YIP01 was rejected due to failing quorum, at the moment we are still supposed to be in the “burning” mode rather than the “staking” mode.
Important note: Burning model is superior to earning distribution also tax-wise.
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To my view, this is the correct thing to be talking about and what we should focus governing on initially. If our first vote is a print with no measures to mitigate inflation of YFI token to investors and governors then we are setting a precedent. No key burned. No burn implemented. Where is the compromise? Please tell me 40% isnt the compromise just because its a long time frame. Next could be the 50% print over 100 years or 90% over 1000 years. My point is 8 years or 200 years its still 40% inflation
This is paramount. I would have preferred that YIP 30 included a no more mint component. If YIP 30 passes, we should turn our discussion to that. It is only limited inflation if it is in fact limited.
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+1 on this. With the recent release of yVaults, we can see a huge amount of capital being poured into yEarn ecosystem without any YFI incentives. Imagine the contract was fully audited, we can probably increase that TVL by 5-10x. As a yield aggregator, yEarn will always have a better APR than other protocols.
We can compromise on this by setting hardcap to 50,000 but the extra 20,000 won’t be distributed until we really need to be competitive.
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People will always create a reason to print more. People are creative like that. If this fails to pass, I’m in favor of a hard cap.
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FOR
This was an excellent compromise for all sides after an incredible week of debate.
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I was thinking that as well although proposed a 1 year freeze on minting at which time reevaluate
I actually think this is smart. If YIP 30 does not pass, I hope we consider something more flexible and purposeful like this idea. It is looking like YIP 30 will not get approved. In some ways, it would feel like a set back. But I encourage people to think of it as an opportunity to improve on the inflation issue.
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I am very disappointed that thanks to Andrew Kang’s Twitter campaign (https://twitter.com/Rewkang/status/1289688600729096192), the normal operation of the protocol will be stopped for an indefinite time, as we will wait for a decision on inflation, which should be according to proposal 1 (https://yips.yearn.finance/YIPS/yip-1).
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Yip0 didnt say amounts. A rejection here may be the voters wanting to “live within their means” such as only using the aDAI rewards that come in rather than taxing investors through prints. We can honor yip0 with a 5 YFI print for Andre.
I appreciate @rewkang proposal. I would also suggest it could be done even without a YFI print.
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and you must wait at least another 3 days for this decision to take effect. As I said, the protocol has been stopped for an indefinite time.
And if YIP 30 doesn’t get approved, can we focus on funding YFI’s operational budget? I think that issue is less combative and complicated. Budget their operational costs and fund it.
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