YIP-56: Buyback and Build

If by pure speculation, you mean watching Yearn smart contracts lock up $100bns in capital, then yes, that’s what I’m here for.

I’m not here for pennies. If you are, leave and go buy Goldman Sachs equity–they have a good dividend.

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^This 100%. Plenty of dividend stocks out there if you need one right here right now. Kick the rent-seekers out and keep the future seekers in.


Another long tailwind about doing this is all the short term speculators who are playing checkers and not chess will capitulate/sell and ultimately the distribution will shuffle towards those who are more long term thinking. As an investor my #1 driver/thesis for YFI is betting on a big-brain team to grow a protocol that will one day touch hundreds of billions of dollars and generate revenue in doing so because it’s creating value. All I really want to do is align long term incentives to the dev team (meaning they are ALSO holding YFI, ideally vested) then sit back and get out of their way knowing they are smart enough to want to also make themselves rich. If/when they are holding YFI I will sleep soundly knowing they will find ways to drive value to the token long term… because I know they too would have a preference for wealth over non-wealth.

What (some) people do not seem to get is that even if you are only a greedy-self rational actor – okay that’s actually fine because believe it or not long term this is the way. For those on the fence, understand this is so and allow me help you help yourself.

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@kazuya so well said. Thank you.

That’s fine and all but we had this discussion in October and nobody bothered to write up a clear proposal. I’m sure the community will be in favor of it. What the community appears to not be in favor is minting the tokens, for I feel obvious reasons, particularly without a clear plan for their use.

re @onlylarping s point about there being a gap in funding, the treasury has accumulated I believe 8.5 YFI over the last 3 months and this hasn’t been touched. I think the community could easily raise more than this if needed to fill the gap, as has already been shown in the other topic.


It seems we have 3 different proposals + a pact from @Banteg that are essentially trying to accomplish the same thing reward, and further incentivize our excellent developers.

  1. Rethinking Capital Allocation @RyanWatkins
    (Passed, but is now closed, I don’t know what the state of development on this one is)
    TLDR- If the community were to enact this proposed YIP, we would use system income to buy back YFI to then use to reward different stakeholders for providing value to the Yearn ecosystem, instead of just distributing income to YFI stakers

  2. Developer Incentives@yfi_lit
    TLDR- A one-time issuance of 1k YFI for our core developers to distribute amongst themselves.

  3. Bantegs YFI Pact
    TLDR- When signed, Yearn Pact mints 666 YFI per year over 5 years, making the terminal YFI supply 33333 YFI. The contract is meant to be set as YFI token governance.

  4. Buyback and Build
    TLDR - (I hope you read because you’re here)

  • 1. Replace YFI staking rewards with YFI buybacks, until further notice.
  • 2. Enable YFI that’s actively being used in ways that bring benefit to Yearn to participate in Governance.
  • 3. Retire the YFI governance vault (yGov).

There’s clearly a divide in preferences between our developers and the HODL’ers (Disclaimer I’m a very small HODL’er who can’t code)

I haven’t read anything from any credible posters in these proposals from people who don’t want to increase the dev teams compensation, the disagreement seems to be on the best way to do that.

@DCinvestor raises good points regarding incentive alignment (Use 25% of the Buyback YFI to replace the rewards that are currently being issued to prevent burning the token holders, while still giving the Devs a larger piece of the pie they’re creating), and a periodic re-up to ensure the buybacks are working to everyone’s satisfaction.

I think some of us forget that the team is currently being paid monthly with yUSD (not enough for the value that’s being provided, hence all the proposals to give them YFI)

I think their yUSD salary would limit the amount of YFI devs would sell. This would mitigate the negative price impact.

I don’t think we run the risk of our developers picking up and running off the second they receive their chunk of the YFI, because they’d be abandoning a ton of their hard work (on YFI, and all of it’s integrations)

I say all of that to say this:
I think that an ongoing repurchase of YFI that’s used to compensate with some kind of vesting period for devs and reward holders (The split between which can be adjusted dynamically) is more favorable to me than minting more YFI, and seems to be more sustainable vs a minting scenario, and aligns both groups with long term incentives, we all want Yearn to be thriving in 10 years.


BABY proposal is the extension of Ryan’s propsal, we’ve been closely working with him on it.


Your reply demonstrates why we need the 6 months vote.


Can you guys explain how this is attractive for people looking to potentially invest in YFI? Because it seems like this is taking away literally all of the only thing ($) people are interested in by being a stakeholder. With no burning like the Maker model, I see zero buy pressure and lots of selling pressure if this passes.

Seems like a short term fix to the v1 cash flow without even seeing what v2 cash flow is like after the reworked incentives we just passed are active. Has someone done some math that has them convinced it won’t be enough money when v2 is launched?


Has the idea of yDEBT been discussed. If we feel we need more funds to pay devs and create incentives then why not have a debt offering. If we truly believe in the longevity and success of this project I feel there will be plenty of holders that would be more than happy to give up their YFI for a debt token that has access to future v2 buyback returns.

If we don’t believe v2 will help jumpstart the fee generation and buyback process then im worried this wont be the first time we end up minting more YFI.

Happy to discuss this and I feel like its the correct approach going forward.

Thanks for the link! So are you in favor of this and minting more like your YIFPact proposes?

A similar idea has been discussed here. The idea was to use a YFI vault that invests elsewhere and the profit is shared between stakeholders and used for operations.

Somewhere down the thread people started suggesting that a voluntary vault split from the governance vault (instead of migrating over) will be more well-received.

YFI Pact is not a formal proposal yet, just an idea. Trach made a group to further iterate on it.

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I’m new to community and not a large YFI holder (yet, but building position), but to me this makes the most sense. Inflating token supply is the easy way out- like the govt printing USD to airdrop…just makes everyone a little poorer. I’m sure the devs found passion in YFI due to the sound principals of a fixed supply and fair launch, like we all did- why monkey with that aspect?

At the same time, I am 100% behind aligning incentives and handsomely rewarding those putting in the work to make YFI great. By using fees to buy YFI on open market for allocation to devs, we would incentivize growing AUM to increase fees. By allocating to devs YFI that vests over time we are locking up YFI, which would decrease supply and increase YFI price…good for all stakeholders. By keeping supply capped at 30k, we are staying true to the roots of YFI.

Let’s give the devs an easy path to realizing the fruits of their labor while keeping one of the core components of YFI intact. I’d be fore allocating 100% of fees to FYI dev buyback fund now with a long term, say 20 year phase out. Like for '21-'22 100% allocated to fund; '23-'24, 92%; '25-'26, 84%; etc. By 2040 fees are split 80% to YFI holders and 20% to current dev team. You could put a vesting schedule on dev tokens to incentivize to stick with project.

I think everyone agrees the devs deserve much reward for building the best defi interface (can’t wait to see v2 live), but changing a core component of YFI (30k hard cap) is a seismic shift that I do not think is needed given the revenue is already in place to fund a buyback.

On another note, decentralized governance is pretty sweet.


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Voting is now live on Snapshot


isn’t this just the same equity argument as dividends vs buybacks? buybacks help accelerate growth during early stages compared to dividends

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Long-term shareholders will be better off if management would forecast total excess cash and evenly distribute it each calendar quarter as “dividends” in the form of share repurchases. CFOs can approach such regular buybacks in two ways.

First, they can repurchase shares as excess cash becomes available. The most straightforward approach and the one least likely to send adverse signals to investors around the potential for extra money or cash shortfalls. It is probably right for most tokens, even if it generates lower returns.

Second, a project can evenly distribute similarly sized repurchases over time. For those willing to stand by their forecasts of future cash flows, this dividend-like approach will probably generate higher returns for shareholders. Investors will, however, inevitably try to determine precisely what the board is thinking, given the level of repurchases it sets.

Vote has passed with 99.44% For.


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