We have several very excited and invested but still very much casual strategists. If fees were much higher, they would focus way more on working for us, as we reward high performing individuals (unlike other projects). Some might even work exclusively for us, helping us improve not only the tribal knowledge of writing strategies (an underappreciated benefit of network effects) but also the tooling necessary for creating strategies (further creating network effects by making it easy to become a strategist in the first place)
Each strategy should in theory attract a certain amount of capital. Therefore If you work for multiple protocols the same amount of capital should reach each strategy. Only competition between protocols would be for strategist reward portion which is what we are discussing. But the strategist needs the platform to be safe and secure and users to have confidence. These intangible benefits are why strategists should choose yearn in addition to having a highly competitive strategist rewards fee. 10% is appropriate
I get that part, but if I were a strategist, I would want my strategy used on as many platforms as possible.
How does YFI paying a high fee to incentivize smart, industrious, and capable DeFi devs to become full time strategists prevent these people from also working for competing platforms? Said another way, why wouldn’t a full-time strategist maximize their income by getting their strategies used on as many platforms as possible?
I appreciate @banteg’s point about Yearn’s unique hooks, but doesn’t that undermine the need for such a large increase in strategist competition to attract strategists to Yearn?
This is a fair point. Developing a strategy is a lot of upfront work, and it may seem like the best way to see returns of that work is to leverage that work with multiple protocols. But, that is zero-sum for the strategist because their strategy is likely to fight with itself, so they may actually earn less if it were in multiple places.
But, leaving that aside, other important things to consider is that it’s not just the upfront work of developing a new strategy, you need to continually invest in improvements to it, which means watching how it performs, tweaking parameters you have control over, deploying migrations for things that are not optimizable, and in general keeping up with the fast-paced culture of yearn and DeFi in general.
A Strategist only has so much mental energy to spare. They will seek to only be involved in as few (maybe even just one) Strategist communities as possible. Most likely the one that appreciates their contributions the most, both financially and culturally.
No you wouldn’t want it on as many platforms. You are thinking of a platform as marketing and that is incorrect. Dollars will flow to the strategies in as large a capacity as the strategy can handle. If 100 will go to strategy A and yearn offers 10% strategist reward and platform X offer 9% strategist why would the strategist want it on platform x?
This makes sense if we assume a perfectly frictionless & efficient market, but I think there is quite a bit of stickiness that remains in this industry. With that said, @fubuloubu’s point is fairly persuasive.
I think it’s worth clarifying—how does this process apply to devs who are already on Yearn’s payroll? Up until now, almost all of the strategies have come from protocol devs.
From the outside, it would seem to be an issue that Yearn’s developers are paid to create strategies/maintain the protocol (with monthly grants), and then earn extra money on top of that from the strategies as any community member would. For instance, what is to preclude @banteg or @fubuloubu from spending most of their time developing cool strategies and not working much on the protocol itself?
And I’m not even saying that would necessarily be a problem—hell, new, sexy strategies that generate high yield is what we want the most anyway. But it seems like it would be beneficial to have some sort of check in place here so it doesn’t appear that Yearn’s core devs are “double-dipping”. Additionally, it’s not prudent to pay someone to be developing the core protocol or new products when really they’re spending most of their time developing strategies. If one of the core devs wants to focus on strategy development full-time that’s awesome, but then it doesn’t make sense to treat them differently from other strategists with an extra paycheck just because they previously worked on core protocol features. Especially since most users/stakers don’t actually know who is doing what behind the scenes, it might be good to clear up any potential confusion here.
It’s arbitrary as it is a starting point hence the post justification. With time the only way to get to a number with a quantitative justification would be to correlate it with strategy performance versus yearn competition to find the sweet spot between rewarding them just enough to have the best.
There is no point at this time into voting between small difference number as we don’t have full quantitative justification yet.
Past that it become subjective as to what it take to keep the best to attack the most AUM.
The 50/50 isn’t 0 sum game, getting the best strategy out there is positive sum so 50 should be a minimum to start.
If you are interested past this proposal to correlate numbers to arrive with a more precise proposal I agree it could be beneficial to discuss more in detail the number itself.
Smart devs make more from scale/pooling - pooling makes more from smart devs. I like this. This should be a 50/50 partnership. I don’t 100% understand how strategies get approved & implemented, but my only concern would be whether/how this might change incentives for proper audit/review of new strategies? Does this make room for more short-sighted review because #1 there’s incentive for strategist and “friend” devs to get things through, plus #2 any risks are perceived as borne more by the vault/strategy rather than Yearn as a whole?
I think most of the community is in favor of properly incentivizing strategists, and we all know that the current model is not adequate to achieve the goal of retaining and bringing even more talent. The differences in opinions might come from details such as how to achieve it. More discussion should be made in future proposals prior to submitting such a critical YIP, so that everyone can contribute to improving it, as the acceptance or rejection of it might lead to either stakers or strategists no longer incentivized enough to continue.
Right now we have to lean in favor of bringing more strategists and contributors though, as it will eventually lead to more TVL, and higher treasury earnings too. Maybe we can consider in other proposals the idea of strategists receiving their reward in YFI and some kind of vesting so that they can continue contributing and interested in the success of YFI. What skin in the game does a strategist have if a hack is made because of an exploit in its strategy, that lead to the price of YFI going down?
Strategists will be rewarded in shares of their own vaults. If their vaults are hacked, then they lose that money too.
I’m not sure if there’s been much of a discussion of vesting fees for strategists, but this could be an interesting safety valve in case of an early exploit of their strategy. Even just a schedule with a cliff of only a few weeks could be enough in my mind. Say, their fees accumulate for the first 2-4 weeks after public launch, and once the threshold is reached those funds start to flow.
I’d be interested to hear about what actual strategists think about this—will having a vesting schedule for rewards meaningfully harm strategists? The goal would be just a few weeks of cushion in case of an exploit, not to actually withhold any funds as long as things go smoothly.
