Re-submission of proposal 1 which didn’t reach quorum but decision should be made
Summary:
Remove YFI burning from the protocol.
Abstract:
YFI represents a claim on yEarn protocol fees. To claim fees, YFI can either be burnt or staked in the governance pool.
This YIP is to decide whether or not to keep the burning mechanism.
Motivation:
It makes no sense to burn tokens because the price of YFI will always be higher than the claimable fee value. This is because YFI represents current assets in the fee pool plus future expected cashflows. Staking is just obviously better.
For: Remove YFI burning from the protocol.
Against: No change (start burning YFI for fees).
UPD: A bit more context since people are unaware of technicalities.
There 2 options how one can claim fees from Gov 2 pool (previously, Fee Rewards pool):
Staking YFI to claim yCRV (locking YFI in contract, as we do now with Gov 2 pool)
Burning YFI to claim yCRV (sending YFI to 0x000..000 address)
Despite us going for 1st option we should actually be going for 2nd, see Proposal 1 weird wording.
We are not burning YFI for yCRV only cause of a chaotic start and cause this feature was pushed back a bit. If people don’t vote “for” this time – burning will go live.
I don’t know that I agree despite the strong wording here. Burning has better tax implications and it offsets any future printing. While I also like staking, i dont see why both couldnt exist. Burn the amount that offsets and a little more the printing at a minimum in my opinion.
Are you talking about a mechanism that takes fees the protocol earns and uses them to buy YFI on the market, and then ‘burns’ it, acting effectively as a share buy back to return that value to all holders of YFI? That mechanism I can understand an argument for.
However, having to burn YFI as part of the direct claim process on individual rewards earned does indeed make no sense, and that is my read on the issue the above proposal is addressing.
Voting FOR. A burn schedule in a token with rather fair distribution and strict inflation policy doesn’t make much sense IMO. Burn schedules matter more when the token is distributed like an ICO or has lots of supply offered to others at a privilege.
100% FOR this. Burning makes absolutely zero sense and I made a post in General Chat as well to share that thought. We are a yield aggregator protocol. If we collect fees/revenues, it makes sense to go aggregate yield with it rather than get a 1-time burn of capital. The symmetry is elegant there and I believe in this proposal very strongly. We are building the infrastructure to efficiently compound capital and as someone planning to be a long term YFI holder I want that capital to grow/compound. Giving up future cash flow is bearish or meh under the most optimistic framing and completely takes away from some of the LT value of holding YFI as a yield producing asset.
So. I agree.
Burn to collect fees makes no sense.
But before I vote, will this also mean we will never be able to burn YFI for any other reason in the future?
If this is the case, then I’m against.
If we anticipating high inflation, there ought to be a way to reduce the token count at a later date too. (Always wanting a way to undo an experiment if it goes wrong the first go round)
If my above concern is a non issue then I’ll vote for.
Hm. Okay i see what youre saying now, at least. I still do not agree. Can we just move it off the API and accomplish the same thing? This could be a “programmer-only” feature meaning you have to know how to access the contract yourself and not have it on the website. But i dont see a reason to remove the mechanism. What if you personally need a chunk of money in the future, this burn mechanism allows it even if there is no market for yfi, like in a post apocalyptic world, at least you can always call your aDAI honeypot.
If further proposals sought to implement burning, only we as a community were to move ahead with utilizing an inflation schedule, then future distribution of fees via burning; as both are complementary, can take place.
Would like to add that the burning mechanism is a well-trodden path, for instance this is used in distributing stability fee widely to all wallets holding MKR (fixed supply) and recently proposed to be included for consideration on Eth 2.0 (inflationary):
In the case of POS inflation with validators getting block rewards; at the same time BASEFEE also gets burnt on each transaction, which translates to 15 times cheaper txs at scale.
EIP1557 would introduce a deflationary mechanism to ETH monetary policy.
To borrow from the article,
By adding to the scarcity of YFI today,
YFI’s security tomorrow is secured.