Intro
I’m new to this governance forum, so I recognise that I’m an outsider and probably missing a good deal of context in the decision making here, so take what I say with a pinch of salt. My background is in academia (Physics, Maths, Education) and institutional governance, which I’ve recently bailed out of to develop a crypto governance and voting start up. I’ve been designing token systems for a long while and believe DAOs are going to be transformative for the future of work and finance.
This, what is happening right here ITT, is an important moment in decentralised governance IMO and is a reality shifting moment for yearn (potentially a really bullish one). So I thought I would drop by and throw my two pennies in.
Position: As a team we’re YFI holders, we’re bullish on the yearn ecosystem and bullish on DAOs and DeFi generally. We have skin in the game. You could argue we have some vested interests on governance generally and I personally have a bias towards quadratic voting based systems and a “governance optimisation” approach.
General Thoughts
Firstly, it’s clear that yearn are entering into a post meme era of its token economics. I personally felt the 30k cap completely arbitrary and the justification for an inflation on the token system for a dev treasury is a sensible idea. The fact that this proposal includes market analysis and justification for its inflation schedule is a significant improvement of 30k “because meme”. It was also clear that the 30k stuck not because of an actual decision but because of lack of resolution on an open question. It looks like we’re on the way to resolving that open question.
The fair launch process struck me from day one as a not all that sensible approach, without any tokens in reserve it’s very difficult to maintain appropriate incentive alignment in a sustainable fashion into the future, which it is clear that the dev team have experienced first hand. However, it was unarguably successful up to this point, and represented an important shift of the Overton window in the space from excessive pre-mines and team allocations, which Andre himself has mentioned is a large threat to token economies (Unchained Podcast). There’s clearly a need for a balance.
I’ve watched yearn with interest (my analysis of the governance chat here is referenced in the proposal) as an example of a network that shifts away from the rather closed minded governance minimisation, “code is law” narrative that makes sense for Bitcoin but little else. Still, this pendulum can swing too far and if you’re looking for a governance optimisation “sweet spot,” it can be all to easy to swing into rapid governance decisions that spiral into chaos, confusion and / or centralisation of power.
I’ll run over my admittedly rushed and lightweight analysis of the discourse in this thread and use that to make some suggestions for going forward.
Discourse
Of the 129 posts in this debate so far, there exists some obvious emergent themes, I’ll go through them and present my rough figures for how prevalent they are in the thread.
Support - 10
There is around 10 posts that simply support the proposal in its entirety and lend their good will and support to the dev team, with the general sentiment that “a car with no fuel cannot move forward,” and “long term, this is very good for the project.” There are maybe 3-4 direct opposition posts and generally the discourse is largely supportive of the direction of the decision for a mint.
Too Much - 19
There was however, around 19 posts signalling their general feelings that the quoted 6,666k YFI mint was too large, with many people struggling to swallow the $213m (current spot price) of potential market sell pressure that might ensue. Some of these felt that the 6,666k was arrived at quickly with 3,333k another meme worthy suggestion from early in the week arriving and vanishing quickly.
Vesting - 17
17 posts wanted far greater detail on the vesting schedules for these minted tokens. Will the ~$70m landing in core team hands in the near future be vested or fully liquid, on what schedule? There was a few suggestions for how that can be done.
Mint Burn - 19
A lot of the discussion ended up getting cornered by the debate about what to do with the minting keys following this proposal and although people weren’t overly negative about the emission schedule itself, a fair amount of people wanted to know if this was the end of the minting. Somewhere in the middle a new proposal was formed for separating this discussion out.
Process - 33
This is a broad category, but probably the most significant topic of debate was on how the governance itself is working, has worked or will work in the future. Questions of amending proposals, how previous votes had influenced this one (including confusion over Andre’s burn proposal) etc. The most major of which was whether the BABY proposal still stands, or is still relevant after this one, or if it’s both, is it excessive etc. Others raised concern of the presence of the Compensation Working Group, how this would function, how transparent it would be etc.
Suggestions
Firstly, there is some excellent debate in here and it’s proof there is a strong core community of people interested in the governance and future of the yearn ecosystem, which is very good news. It’s important that the yearn team engage with these signals fully to keep these people on board. If they’re here in your governance forum, they’re holders, they’re users, they’re your people. Make them feel listened too.
Suggestion: produce a coherent team response to the emerging themes as a group if signatories. These questions will come back in the future, create a resource you can point to.
This proposal is hot on the heels of BABY and did feel a bit rushed from an outsiders perspective. I’m sure the internal work and debate that’s gone into this is astronomical, but do be mindful that external stakeholders aren’t privy to that decision making. This and the burning of the minting keys feel like overlapping issues that got enveloped into the discussion here and it diluted the decision making coherence a touch.
Suggestion: Propose two subsequent proposals, “burn minting keys” and “review BABY” following this YIP to resolve those hanging issues down the line. It’s kicking the can down the road, but that’s fine.
The worries about the vesting schedules are well warranted. There’s some huge question marks around whether these new tokens are hitting the market in the short term. Any new liquid tokens landing in core team hands following the mint will exist in an X-way prisoners dilemma, where the first dev to dump first gets the best payout and the last gets the lowest.
Suggestion: Clarify the vesting schedules before the vote. The details on individuals can be left in private, but the “total new tokens liquid” Vs time, can be collapsed into a single schedule that provides assurances that the maximum possible in-flow of new tokens into the market is X (less the whatever the team hold). We have contracts for something we call cliff-linear vesting which you may find useful, balloon payment in X months, remainder vested linearly for Y years. You could honestly 3X the entire supply if you manage supply shocks with vesting appropriately. Total amounts minted matter less than the market impact that they create. Transparent team vesting, along with assurances that the treatment of the remaining 2/3rds of the treasury will be distributed transparently will put the “too much” claim to bed.
The creation of a working group and committee feels a bit centralising and a significant departure from the exit to the community philosophy that yearn started with. Be careful not to take too much of the important decision making behind close doors. Yeah, the work gets done in small groups, but don’t confuse challenging questions from the community with bikeshedding.
Suggestion: Provide more detail on this group including who’s on it and why. Get some critical third parties (potentially even non token holders) to sit on it to provide assurances of fairness and clear arguments for decentralisation.
Processes are still a little woolly, hence some of the prevailing confusion in this thread. YIP-55 is an improvement, but what counts as quorum is still rather unclear. At what point do holders have to get their tokens into the governance vault in advance of the snapshot? For example, we’re just holding our tokens. How long do we have to get the tokens into contention for the voting? One user raised questions about the gini-coefficient and this is an important point especially for governance tokens. If the signatories of this YIP can out vote the community to approve it, then quorum is too low and the proposal is a fait accompli making this whole exercise pointless. It appears BABY was passed with less than 3% of the tokens in play.
Suggestion: Add a pre-snapshot rallying period and announce the snapshot through the official channels so there’s a clear opportunity for people to have their tokens in contention for the vote. I wouldn’t have know that the tokens need to be in a governance vault (which BABY promises to retire IIRC) unless I’d been digging in detail through these forum posts. You want a high turn out for this vote, it’s an important one.
Summary:
Overall, I’m supportive of the proposal, but have some questions about processes from here on. The 6,666k is aggressive as pointed out elsewhere, but that can be totally fine as long as the market risk is offset by a transparent vesting schedule. You may find sentiment could swing against you if it looks like a dev dump race is in effect. If this is handled correctly, yearn with a treasury is potentially an order of magnitude more valuable than one without one, but getting current believers rekt could be a hard hill to climb.