YIP-88: Governance Overhaul: ⓷ Incentives

Proposals Protocol and Governance
1

Authors: 0xPickles and the governance team contributors

1. Summary

This proposal allocates a portion of treasury-held YFI to create powerful, long-term incentive programs for core contributors and revenue-generating teams, directly aligning their success with the protocol’s profitability.

IMPORTANT NOTE: This proposal is the third of three interconnected parts of a single initiative designed to overhaul Yearn’s operations, tokenomics, and contributor incentives.

All three parts will be discussed in parallel on the forum but will be voted on as a single, all-or-nothing package in one Snapshot vote for YIP-XX. If the unified proposal passes, all three parts will be implemented. If it fails, none will be.

1.1 Status

Discussion
This proposal is in the discussion phase. As per YIP-55, it will remain here for at least 3 days with a non-binding forum poll. If sentiment is positive, it can move to Snapshot for a binding vote by veYFI holders on the combined three parts (see Summary above).

2. Abstract

If the complete YIP-XX initiative is adopted, this part of the proposal will:

  • Formalize a plan to deploy the remaining ~1,700 YFI already approved for strategic contributor incentives, alongside the remainder (~230 YFI) of the bought back YFI previously used for veYFI incentives.
  • Launch a second season of core contributor vests with a transparent “Accountability Package”.
  • Create a capped performance bonus program rewarding teams for net profit generation.
  • Establish a long-term contributor retention pool, The Yearn Builder’s Collective.

3. Background

To execute the ambitious revenue-focused strategy in Part I and maximize value for stYFI holders in Part II, Yearn must attract, retain, and motivate top-tier talent. This proposal outlines a transparent and accountable plan for deploying existing treasury assets to achieve that goal.

3.1 A Tale of Two Treasury Assets

The YFI held by the Yearn Treasury comes from two distinct sources:

  1. The YIP-57 Strategic Operations Mint (~1,700 YFI): YIP-57, passed nearly five years ago, gave the DAO an explicit mandate to use this YFI for strategic purposes, with contributor retention being a primary example[1]. This proposal does not ask for new YFI; it provides a transparent framework for deploying this already-approved asset.
  2. The veYFI Program Remainder (~230 YFI): The veYFI rewards program was funded by market buybacks. After accounting for all outstanding dYFI redemptions (~780 YFI)[3], only ~230 YFI remains[2]. With the program sunsetting, this proposal seeks to repurpose this small remainder for productive use in the new incentive system.

This YIP therefore formalizes a plan for a total of ~1,930 YFI (~1,700 + ~230). Approximately 88% of this allocation already has a clear mandate for contributor incentives. We are bringing this unified plan to the DAO for a vote to ensure full transparency and to create a holistic, performance-driven system for its use.

3.2 The Current Model: Stable Payments with Limited Alignment

For the past several years, contributors have been compensated primarily in stablecoins, based on their peers’ assessment of long-term value creation. This ensures predictable compensation but limits the direct link between contributors and the protocol’s growth. The proposed change does not replace stable payments as the main form of compensation; instead, it introduces YFI as an additional alignment mechanism. Revenues will flow more directly to teams holding YFI, reducing reliance on centralized assessment while tying contributors more closely to protocol performance.

4. Motivation

The incentive programs in this proposal are designed to make contributors aligned partners in the success of the protocol, creating a flywheel of alignment where contributor success directly translates to stYFI holder yield. Key motivations include:

  • Responsible Treasury Management: This proposal provides a clear, accountable, and DAO-approved plan for deploying fragmented treasury assets, turning passive holdings into an active catalyst for growth.
  • Elevating Ownership: The ownership mindset is already central to how Yearn contributors operate. YFI rewards linked to performance build on this strength and give it lasting impact.
  • Retaining Critical Talent: The Core Contributor Vests are a direct tool to retain Yearn’s top talent in a highly competitive market.
  • Driving Profitability: The Team Performance Bonus creates a direct, meritocratic link between a team’s financial contribution and their compensation, maximizing efficiency and revenue growth.
  • Ensuring Long-Term Alignment: The Yearn Builder’s Collective (YBC) creates a powerful incentive for contributors not just to earn YFI, but to hold and stake it for the long term.

5. Specification

The following numbered requirements will be implemented to create the contributor and team incentive programs.

5.1 Implementation Priority

  1. DAO-ops Responsibility: The DAOps team is responsible for the design, deployment, and implementation of all contracts and processes necessary for this incentive program.
  2. Implementation Timeline: This work is the top priority for the DAO-ops team immediately following the successful launch of the stYFI system described in Part II.

5.2 YFI Incentive Allocation

  1. Total Incentive Pool: A total of ~1,930 YFI is allocated for these programs. This comprises ~1,700 YFI from the strategic operations mint (YIP-57) and ~230 YFI from the veYFI program remainder.
  2. Program Allocation: This pool will be allocated as follows:
    • Up to 1,111 YFI for Season 2 Core Contributor Vests.
    • Up to 600 YFI for the Liquid Locker Redemption Facility (Part II)
    • The remainder, initially 200-400 YFI, will seed the Performance Bonus Program.
  3. Redemption Facility Wind-Down: Upon the conclusion of the Liquid Locker Redemption Facility, any unused YFI from its allocation will be transferred to the Performance Bonus Program.

5.3 Core Contributor Vests (Season 2)

  1. Allocation: A fixed maximum of up to 1,111 YFI is allocated for a second season of vests.
  2. Vesting Terms: Vests will have a 3-year linear duration with a 6-month cliff, upholding the successful precedent set by YIP-57.
  3. Clawback: Unvested portions can be clawed back to the treasury, a function initially controlled by yChad.
  4. Accountability Package: To ensure transparency, the volunteer compensation committee must publish a document on the governance forum detailing the following before any vests are distributed:
    • A pre-set minimum and maximum number of recipients.
    • Clear, pre-defined vesting criteria.
    • Clear, pre-defined vesting tiers (e.g., amounts per tier).
  5. Community Review: The publication of the Accountability Package will serve as a final sense-check, allowing the community to provide feedback before yChad gives the final sign-off to deploy the vesting contracts.

5.4 Performance Bonus Program

  1. Mechanism: Revenue-generating teams are rewarded quarterly with YFI based on the net profit they generate, defined as Revenue Contributed - Budget Utilized.
  2. Bonus Calculation: The YFI reward is calculated as total_profit / bonus_yfi_price.
  3. Bonus YFI Price: The effective price of YFI is adjusted based on Yearn’s global quarter-over-quarter revenue growth: bonus_yfi_price = yfi_market_price * (1 - revenue_growth_rate).
  4. Configurable Growth Rate Cap: The revenue_growth_rate is capped (default +/- 25%, max +/- 80%) and is a DAO-configurable parameter.
  5. Bonus Cap: The total market value of a team’s quarterly YFI bonus, calculated at the time of distribution, cannot exceed 50% of the net profit the team generated during that quarter.
  6. Universal Bonus Split: All YFI rewards from this program are subject to a governance configurable split: 67% (default) to the team and 33% (default) to the Yearn Builder’s Collective (as stYFI).
  7. Bonus YFI: Bonus YFI is unrestricted and can be used at the team’s full discretion.

5.5 Yearn Builder’s Collective (YBC)

  1. Purpose: A long-term incentive pool for all whitelisted contributors, funded by a portion of all team performance bonuses.
  2. Initial Whitelist: The initial whitelist of YBC members will consist of all Season 2 Vest recipients as well as any yChad signer who wish to participate.
  3. Bootstrap Seeding: To bootstrap the pool’s weighting system, each initial member will be granted 0.01 stYFI upon opting into participate in the pool. The pool itself will be seeded with up to 200 stYFI, from the Performance Bonus Program.
  4. Permanent Staking: All YFI in the pool is permanently staked as stYFI to earn a share of protocol revenue. The underlying YFI can only be withdrawn back to the treasury by yChad, but may eventually become permanently locked in the future if the program proves successful.
  5. Weighting: A contributor’s claim on the pool’s yield is determined by the amount of stYFI they personally hold in their whitelisted address. They are free to top up, subject to cooldown to prevent abuse.
  6. Pool Governance: The whitelist of eligible contributors is governed by the members themselves, voting with their stYFI-based weight.
  7. Yearn Governance Participation: The stYFI held by the pool will be actively used to vote on Yearn governance proposals.
  8. Principle of Good Faith: The pool operates on a system of trust, where a member’s influence is based on their personal, long-term stake in the ecosystem. Actions that undermine this principle, such as borrowing YFI from third parties to temporarily inflate one’s weight, are considered a serious breach of trust.
  9. Expulsion Process: To protect the integrity of the pool, members can vote to expel (blacklist) another member for demonstrating bad faith.
  10. Voting Requirement: A proposal to blacklist a member requires a two-thirds (66.7%) qualified majority vote of the participating pool members to pass.
  11. Vote Exclusion: The stYFI weight of the member subject to the expulsion vote will not be counted in the vote’s tally.
  12. Consequences: If a member is expelled, their address is permanently removed from the whitelist and they forfeit the right to claim any future yield from the pool.

5.6 Contributor Delegation Vault, the new yvYFI

  1. Purpose: To provide a simple, gas-efficient way for all YFI holders to maximize their stYFI yield.
  2. Functionality: The vault will automatically stake YFI into stYFI and vote on all governance proposals to ensure its depositors receive the maximum APR boost.
  3. Voting Direction: Voting decisions for the vault will be directed by the weighted vote of the members of the Yearn Builder’s Collective.

6. Vote

Non-binding signaling poll

Do you support Part III (Contributor & Team Incentives) as a component of the full proposal?
  • Yes
  • No
0 voters

7. References

  1. YIP-57: Funding Yearn's Future
  2. https://dune.com/tobytiger/yfi-buyback
  3. ERC-20 Token | Address: 0x41252e86...b6797a275 | Etherscan

8. Changelog

  • Aug 21, 2025: First draft circulated with Yearn contributors and the governance team for initial feedback.
  • Sep 03, 2025: Contributor feedback incorporated. Second draft circulated to key governance participants and liquid locker teams (StakeDAO, Cove, 1UP) for feedback.
  • Sep 25, 2025: Revisions made based on comprehensive feedback from key stakeholders. Major changes include:
    • Updated to clarify the total YFI allocation, reflecting a more accurate breakdown of treasury assets and pre-existing mandates under YIP-57.
    • Capped the team performance bonus at 50% of net profit.
    • Added an “Accountability Package” for contributor vests, requiring public disclosure of recipient numbers, tiers, and criteria.
  • Sep 28, 2025: Proposal published on the Yearn governance forum.
2 Likes
2

Hi

There is 148 YFI lost in multichain bridge hack to FTM, could people get their YFI back from this YFI?

Regards

1 Like
4

The full proposal has been put up for a vote on Snapshot

6

This YIP has passed. See vote here: https://snapshot.box/#/s:veyfi.eth/proposal/0x9b3a40326411eea6c51ec389a802ed695de53961fa49f6d3525e256513d0a7f9