YIP 36: System Rewards as Operational Capital


@andre.cronje @iTo @n00b @banteg


Assign system rewards as operational capital for expenditures instead of streaming them to governance.


Cover operational expenses with no immediate issuance of YFI required.


The YFI community is currently working with Delphi and Gauntlet to develop an economic model and inflation schedule. Until this process is complete, the project lacks the funds for any operational expenses including, but not exclusive to, security audits, deployment costs, consulting expenses, and compensations.

But with the state of the market, the system rewards are adequately sufficient to cover operational expenses. The YIP proposes that the system rewards are directed to the multisig instead of streamed to governance stakers. This allows the multisig to cover operational expenses without minting additional YFI.


100% of rewards collected by the system are directed to multisig treasury.

Treasury should maintain a buffer of 500,000 USD equivalent, with further rewards distributed to YFI staked in the governance pool.

All surplus rewards are directed to the governance pool.


For: Use system rewards for operational expenses with $500k treasury cap and surplus distributed to governance stakers.

Against: Keep streaming rewards to governance stakers.



No brainer, FOR. Going to vote when gas price is lower.


I am afraid current wording will cause people who only read the first two lines (let’s be honest - that’s most people) to vote against, because they will assume it’s unlimited and forever.

Can we update to “temporarily divert governance rewards to treasury to cover operational expenses, such as security audits, deployment costs and Andre. Treasury should maintain a buffer of 500,000 USD equivalent. All further rewards remain dedicated to YFI in the governance pool”.

Or something.

We are making life harder for ourselves for no reason.


Do it. Yes. FOR. Please pass.


Summary could use clarification to describe the specification section more clearly.

Otherwise -
FOR this proposal.


Let’s pass this ASAP. We need to invest all of our earnings back into our builders/insurance…it’s the best allocation of capital and will keep our balance sheet growing


Agreed, needs to be clarified if the treasury is a 1 time deal or if it is continuously replenished to maintain a $500K balance going forward .

Very much FOR in any case though, since funding for Andre + potential team he might want to build is absolutely crucial at this stage.


It’s continuously replenished. Compare to Maker’s surplus buffer where holders only get rewards if it’s above $500k.


I like this idea - is there a simple way to do quarterly operational expense reporting for transparency (though everything might be on-chain so this might be ez)?


Found a volunteer to track real world payments and put them in a spread sheet. Everything else is collectible from chain.


Easy YES vote! Let’s get this done

Yes - this seems to be the trade off between those that want to govern for the use of the protocol and yields vs the $YFI holders that are seeking a capital return. I get both sides and think some compromise is sound.

The cap of $500k will allow for the protocol to be funded before the holders which is the most important aspect, development, maintenance and audits are the key to making this a protocol we can use safely.

After listening to Andre the yesterday I understand what he means by using this token for governance and being a yield farmer with Liquidity in the game. So funds for the system are first.

The next decisions from here is who we use for Auditing and potentially putting an allocation aside for community bug bounties as well. Whatever we can do to give Andre comfort to continue to build tired and sleep deprived knowing that the community are there checking it twice.

Let’s get this passed and implement the fund so that we can move onto the next phase of audits, protocol deployments and governance.


I would be for this. When will this be posted on chain?

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The voting is live for both YIP 35 and 36.


I would have liked this YIP should it have also said a maximum of 75% at any one time may be funneled into this fund and/or the funneling is limited to 18 months. How do I know this won’t take 100% of all rewards for all the years to come with future quorums unmet?

Edit: or for a total of $20m at which time we’d need to enact a new budget. This yip just seems way too unspecific to my liking

FOR. Makes sense, you fill up the $500k treasury then any excess gets paid to governance. This enables opex for new strategies and audits to be undertaken which increases the value of YFI.

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One thing that strikes me is why are we asking Gauntlet and Delphi Digital about how to do our inflation model…they’re going to have their own incentives, which we do not know. As YFI holders and a DeFi savvy community, why can’t we do it ourselves?

I’d like to make a presentation, free of charge. Is it possible for me to do that and to present to Andre/milky/the Multi-sig gang/all community members who wish to join?

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One thing that seems to get lost behind the discussion around inflation models is a bigger and more critical question: what is our vision for yearn?

What does this community want? There are at least a few groups with different agenda, eg yield farmers and YFI speculators. I think @andre.cronje explained this well in his recent Bankless interview. Before we decide if we should mint more tokens or how many, we have to know what we want and what we stand for.


Agreed 100%. Inflation needs to be allocated to the future we want. I’d have that in the presentation (both my opinion and alternative opinions).