Yam Treasury Quarterly Report — Q3 2021
Preface: Cryptocurrency is very volatile. All numbers reported in this report is a snapshot of value on 10/12/2021. All assets will move up and down in value, and expenses and income are determined in US Dollar equivalent at the time of the snapshot.
When comparing the numbers in the Q3 report with previous reports, you may notice discrepancies in the revenue and asset numbers shown. This is a reflection of updated accounting practices and a more accurate on-chain analysis of revenues. We strive to provide the most accurate view of the finances of the DAO and will continue to iterate on all our processes, including accounting. Feel free to ask any questions about this in our discord server.
We’re happy to share our quarterly update for the Yam Treasury where we review DAO income, expenses, assets, and team contributor changes.
While the YAM token price has fallen from Q2 and is down from it’s highs of around 5 dollars last spring, the YAM treasury remains healthy and growing. The treasury, and it’s ability to pay contributors is key to the continued growth of the YamDAO. While the DAO has had some fits and starts with our products, the core contributors are focused on continuing to experiment and develop our existing and new products, and also solidify the role and aspirations for the DAO within the web3 space.
Link to Yam Quarterly Financial Summary Google Doc.
Total Revenue: $274,391.61
Operational Revenue
The DAO earned the following revenues from the products that it has developed.
- YamDAO generated operating revenues of $31991.41 worth of UMA from our Yam Synths product.
- YamDAO earned $46,906.86 worth of Sushi Tokens from it’s YAM/ETH SLP incentivizer.
A total of $78,898.27 was earned in Operational Revenue in Q3, 2021.
Investment Revenue
The DAO uses its treasury to invest in different products and services that help grow the DAO and bootstrap its products.
- Yam DAO earned $39,011.68 worth of UMA tokens from minting and providing liquidity for our Yam Synths products, including uGAS, uSTONKS, and uPUNKS.
- YAM DAO earned $118,127.67 worth of INDEX tokens from providing liquidity to the ETH/DPI Uniswap V2 pool.
A total of $157,139.35 was earned in Investment Revenue in Q3, 2021.
Context
Both the YAM Synths product and the Sushiswap ETH/YAM LP incentivizer continue to earn revenues for the DAO.
Sushi earned is down from last quarter, and we can expect this trend to continue as the the Sushi rewards issuance rate tapers off over the next year. Even with the reward rate dropping, this is as close as you can get to free money earned for the treasury and should continue to serve the DAO well in the next few quarters.
YAM Synths revenues, while up this quarter, are still not where we think they could be. We attribute this to a lack of product market fit and difficulty of use with our current synths. Contributors are hard at work on the next version of Yam Synths, which uses a new UMA contract model, will be deployed on polygon, and solves many of the problems that make the current synths hard to use. Keep your eyes peeled for more news on this front in the next weeks as we ramp up for a November launch.
INDEX tokens earned from LPing DPI and ETH have been strong for the last 3 quarters, but those rewards have now been stopped by the IndexCoop DAO. Per YIP-83, the community voted to pivot a large portion of the funds previously used to farm INDEX into earning additional UMA via our synth products. This should be a win-win for the DAO as we can earn ~30% on both ETH and stablecoins while also bootstrapping liquidity for our in-house product. The full rollout of this farming program will occur once the new LSP synths are launched.
Expenses
Total Expenses: $371,995.35
In the quarterly report, expenses are broken down both by contributor compensation and general expenses, and by USD and YAM expenses. Contributor compensation is paid to individuals who have worked on different aspects of the YAM DAO, typically in a combination of USDC and YAM. General expenses are the costs required to run the DAO and include gas costs for transactions, hosting and infrastructure costs, and other day to day expenses. These are paid in YAM where possible, but are also sometimes paid in USD or ETH.
USD/ETH Expenses
A total of $192,542.13 was spent from the treasury on Q3 expenses, including contributor compensation and general expenses. Only a very small portion of this was paid in ETH (~$1500)
YAM Expenses
A total of $179,453.22 was spent from the treasury on Q3 expenses, including contributor compensation and general expenses. The dollar value is determined by looking at the TWAP price at the Q3 snapshot date, which yields $0.51.
Delta of Income vs. Expenses (excluding YAM): $43,495.49
Delta of Income vs. Expenses (including YAM): -$109,999.03
Context
Most of YAM’s expenses come from paying contributors to the DAO. This money spent has a high upside as just 1 successful product can lead to significant revenue growth and potential token price appreciation. The DAO voted for a change to the compensation model for contributors (YIP-84), which is intended to provide more stability to contributors and also add incentive alignment with YAM vesting.
Overall, the DAO had a revenue surplus when costs in YAM are ignored (+$43,495). The runway that the DAO has available using its treasury should extend multiple years, even in a bear market. The Treasury YAM reserves are something we need to keep an eye on though. Because of the drop in token price, The DAO ends up paying contributors a larger quantity of YAM, which more quickly depletes the contributor vesting pool. We only have about a year of runway available in YAM tokens to pay contributors and we will need to come up with solutions if the token price does not increase before then.
Total Q3 Non-YAM Treasury Asset Value: $7,514,114.29
Change in Value from Previous Quarter: +$1,504,124.30 (25% increase)
Non-Yam Assets are used to pay contributors to develop products for the DAO and for investment purposes to support the Yam ecosystem and projects.
The treasury has been re-balanced since Q2 per the following governance proposals (YIP-80, YIP-83) and portions of this rebalancing are on-going. There is a new framework to manage re-balancing and it will be undertaken upon the recommendation of the core contributors and advisors, with the approval of YAM voters.
Total Q3 YAM and General Expense Fund Asset Value: $667,380.67
Change in Value from Previous Quarter: -$507,550.27 (43.2% decrease)
YAM is primarily used for contributor compensation, general expenses, and incentives. The General Expense Fund is used for general expenses and contributor compensation during trial periods.
Context
The treasury remains diversified between ETH, USD, and DeFi Tokens. We maintain general DeFi exposure through the DPI index, and then hold individual positions in UMA, Sushi, Index, and GTC (airdropped). YIP-80 provides the framework for how much of each the treasury holds and is based on risk parameters designed by our YamDAOset manager, Krugman. We performed a rebalance in Q3 that is still partially ongoing due to low liquidity in some tokens we need to trade. These trades will occur in the next few months as we build out the tools to improve our ability to make decentralized swaps with different protocols.
Our YamDaoSet product is currently sitting empty due to the rebalance and we will be sending a more limited set of assets back into it in our next on-chain vote. We are also working on a NAV adapter that will allow anyone to buy the Set with ETH or USDC, giving anyone access to the same actively managed, ETH-benchmarked savings product that the treasury is using.
Other Funds and Incentives
The DAO’s only current incentive program is to incentivize liquidity in the ETH/YAM Sushiswap pair. It currently pays out 12,500 YAM per week. About 550,000 of the total 1.5M YAM allocated toward this pool have been used and it is set to run for another 76 weeks (~1.5 years). There has been little discussion about YAM issuance or incentives for our products, but it is something that the community should be considering. We have to think about the future of our liquidity pools and how we plan to maintain them as a semi-public good to all YAM holders. The rise of protocol owned liquidity has been a big part of the narrative around DeFi 2.0, and no matter what you think of Olympus, we should be thinking about how the DAO can sustainably maintain liquidity in YAM.
The first steps have been taken to start re-thinking incentives with the passing of Buyback and Build with Profits (YIP-89), but there is still a lot of work to be done. There have been internal discussions of updates to the tokenomics and governance processes of the DAO, but those are still in their infancy. Numerous contributors are working on cleaning up and organizing their thoughts so that these ideas can be presented to the community for further discussion and analysis.
For a deeper dive, see this link to Yam Quarterly Financial Summary Google Doc.
Closing Thoughts
We view the DAO as a living organization that needs to continue to evolve and grow in order to reach its potential. This involves continually working to improve our internal processes and workflows, as well as developing new ways in which we can incentivize outside contributions, participation, and collaborations. Together, we are defining new ways to work, create value, and organize in the Web3 space and beyond.
Be sure to follow us on Medium or Twitter for news. Also, please join our discord and participate!
