YIP 31: YFI Inflation Distribution

Proposals YIPs
1

Simple Summary
Divide any further YFI inflation, allocating 50% to Liquidity Pools and 50% to the Multisig.

Abstract

  • There are currently no funds being allocated to developing and improving the yearn ecosystem.
  • Further inflation of YFI provides an opportunity to fulfill funding needs.

Motivation
Using YFI from inflation to fund development is a mechanism to strengthen the yearn ecosystem while aligning contributors.

FOR: Allocate 50% of YFI inflation to Liquidity Pools and 50% to the Multisig.

AGAINST: No changes to YFI inflation distribution.

Specification

  • Designate 50% of future YFI emissions to LP rewards contract.
  • Designate 50% of future YFI emissions to Multisig (or DAO if applicable).
  • This will stay in place until stopped or adjusted.

Rationale
Some YFI should be reserved to secure and improve the yearn ecosystem while properly incentivizing liquidity pools. Starting with a 50% // 50% split to LPs and Multisig, respectively, allows proper funding for both stakeholders, while retaining flexibility to adjust the distribution if necessary.

Reference Links:

Status: Proposed

YIP: https://yips.yearn.finance/YIPS/yip-31
Vote: https://ygov.finance/vote

3 Likes
3

Do we need to unstake YFI from pool #4 to make votes count?

4

If this proposal is rejected and YIP 30 is approved, will there then be a 75/25 split implemented according to YIP 30 instead?

Or will 100% inflation go to Liquidity pools?

2 Likes
5

How did we go from a 5% proposal for the reserve getting a majority (but lacking quorum) to 50% proposal? How at current prices are we expecting the reserve to need almost $5mil per year in funding? Seems very high.

I do support a reserve fund but not at 50%

10 Likes
6

Vote no to 31 people.

4 Likes
7

75/25? or 95/5?
It’s not clear

1 Like
8

If AGAINST succeeds, (and YIP30 passes), then we will be in a situation where the community has agreed to the gradual inflation to 50k. But no inflation begins because there is not agreement on how to distribute the inflation. Right?

I will be voting AGAINST this proposal as I would like more detail and a stronger proposal then simply distributing 50% to multisig and 50% to liquidity pools.

This proposal does not specify what liquidity pools, how they will work, how the multisig monies will be spent etc. I consider that vital information.

I will only vote FOR spending the newly-created money when there is at least more detail about the distribution. What kind of liquidity pools? How much to be distributed? These are very important.

9 Likes
9

Yes, if this YIP is not voted in, there will be no rewards until the community decides on a split. As for where to funnel the rewards, that’s still undecided too. I think it should be kept flexible so we can adjust when better strategies emerge.

The project is at the stage when it would benefit from more flexibility and more resources to leverage. Note that funds from the multisig can be used for incentives too and likely will be. See also my proposal which builds upon YIPs 30 and 31:

6 Likes
10

Do you have ideas in this regard? Would you put one forward?

11

I support the use of funds for the security and development of the project. Additional thoughts follow.

YIP 30 and YIP 31 are so intertwined that it is difficult to discuss them separately. I have made my opinion clear in the YIP 30 thread that that we do not need a 50k cap (it can be lower); whatever the cap, it need not be dolled out over 8 years (it can be given to the Multisig/DAO immediately); and that YFI need not be the incentive/reward for LPs (it could be aDAI, yUSDC, yCurve, or something else). Here I will focus on this last point. To attempt to keep the YIP 30 and YIP 31 ideas somewhat separated, I’ll assume that we agree to cap YFI at 50k (i.e., mint 20k more YFI).

YFI is divisible to 18 decimal points. We can have an unlimited number of YFI holders with whatever cap we decide. Any increase in YFI, however, will invariably dilute existing YFI holders. There may be good reasons for doing this, for example, to improve decentralization. Ok, current YFI holders will be diluted, and I am fine with that.

That dilution can benefit LPs or it can benefit the project. If it benefits the project, then all current the future YFI holders benefit. How? If YFI goes to LPs, then many of those LPs will sell, make money, and the YFI will end up in the hands of those interested in governing the project. There is nothing wrong with LPs making money, but those profits directly benefit the individual LPs and not the project. If, however, the YFI goes to the Multisig/DAO, then the Multisig/DAO enjoys those profits. This could be because there is a vote to sell some of the YFI or because the YFI earns rewards that go to the project for future uses.

But we need to provide incentives to LPs you say? Some would disagree – if Yearn products are providing attractive yields then no incentives are necessary. Let’s say LPs do need incentives though. Do they need YFI as that incentive or would incentives in the form of other tokens be valuable? There is no reason those incentives must be YFI. aDAI, yUSDC, yCurve, or other existing or to be developed tokens can provide any LP incentives necessary. If the Multisig/DAO held all 20k newly minted YFI, it would generate about 40% of all the revenue generated by Yearn. Without ever selling YFI, some of that revenue could be used as LP incentives. Some could be used to purchase more YFI from the market. Some could be distributed to YFI holders.

Governance is not diluted. Flexibility is increased. Additional value is retained by the project. If I am wrong, the YFI held by the Multisig/DAO could be given away directly, just as is being proposed now.

3 Likes
12

Good read thanks for the information I agree with that the liquidity providers don’t really need that much more incentives at the moment. YCurve have one of the highest paying defi stablecoin yeilds at the moment and there are not really any lack of liquidity.

If all YFI created would go to the Miltisig/DAO. Why even create it in the first place if we don’t have anything specific to spend it on at the moment, we can instead include the creation of the YFI we need to have in upcoming YIP’s to pay them?

2 Likes
13

We have some things to spend on now: audits and dev work for example. Also, if a portion of all YFI is in the hands of the Multisig/DAO, that is the project’s claim on Yearn earnings. Many would also be more comfortable with a known max YFI cap (either on a schedule or one time mint). All participants will have more faith in the project if the cap is known. Some have even suggested getting rid of the minting keys so that the cap cannot be modified.

2 Likes
14

How did we go from previous discussion of 75%/25% to 50%/50%?
Edit: seems like there was a last minute vote and 50/50 won the poll.

15

The poll was up for about 4 hours before the thread was closed.

16

I don’t think 4 hours is enough considering we are spread globally. I was asleep and missed it.

3 Likes
17

@1centwhale Well, do you think we should devote more or less than 50% of newly minted YFI to the Multisig/DAO. Personally, I’m in favor for more to the Multisig/DAO, potentially even 100% of any newly minted YFI. We can always incentivize LPs with yCurve, yUSDC, aDAI or something else that is generated from yearn product fees.

18

We will be in a hanging state. We should decide on a number, otherwise, we can’t distribute tokens.

19

I’m opposed to devoting anything until we know what is needed. 75/25 and 50/50 are guesses as far as I understand? I could be wrong but it seems smarter to get a more clear picture directly from Andre and Multisigs about what is actually needed. I’m in favor of giving more than is required as it’s harder to ask for more down the line but so far the discussion went from 5% to 25% to 50% so it just doesn’t seem super thought out yet.

1 Like
20

Distributing tokens may be your goal but not everyone’s. It seems to me Doge is making a point that we dont need this preemptive print

2 Likes