YAMs Replanted and Rebased. What Now?
This piece has also been posted to the Yam Discourse Forum, join the conversation here.
Following a successful relaunch of the audited and fully functional YAM, it is time to turn our eyes towards the future. The relaunch of YAM was meant to largely replicate the initial YAM parameters in order to expedite the governance and auditing process. We are now able to begin gathering live data on the functioning protocol, tuning parameters for optimal functionality, and leveraging the treasury beyond high-yield stablecoins.
This is less of a roadmap than an opportunity set. It is the product of conversations I’ve had with multiple community members, but it is not exhaustive and there’s no mandate to address these opportunities for improvement, though I believe doing so will lead to the best outcomes for the protocol. It is ultimately up to community members as to where they would like to dedicate their time and resources.
At a high level, there are four main areas in need of development, each of which has several outstanding issues or areas for improvement.
As mentioned, the relaunched Yam protocol retains most parameters from V1. This was to enable a efficient governance and audit process, and was not to signal the protocol is fully optimized. We should be thinking critically about key system parameters.
- RageQuit Functionality. The RageQuit functionality would allow users to burn Yams for a proportional share of the treasury. This would fully enable the treasury to act as a price floor, as arbitrageurs would be able to purchase YAM and redeem from the treasury if it were to ever trade below its book value.
- Treasury Purchase Asset. One of the difficulties that has arisen in the relaunch is low liquidity and poor routing when trying to purchase YAM with standard assets. Purchasing a more standard stablecoin or ETH and then wrapping into yUSD may make more sense. This may also lead to more organic liquidity in the treasury’s purchase asset, potentially allowing for fewer incentives and less inflation.
- Rebasing Frequency. Currently the rebase occurs every 12 hours, which builds up demand and executes one large buy. It may be possible to rebase more frequently, resulting in less market impact from treasury purchases.
- Liquidity Incentives. Most liquidity farming programs have not been very deliberate in their reward schemes. The incentivized LP for Yam is used for a very specific purpose: ensure liquidity for treasury purchases. We can fine-tune the amount of incentives necessary to reach that goal. This may allow us to reduce incentives.
- Treasury Purchase Amount. There is potential to more systematically measure the appropriate treasury purchase amount (currently 10% of positive rebase).
- Governance and Voting. There is currently an obstacle to full governance participation, in that LP tokens are not recognized by governance. Therefore, we are actively incentivizing people to not participate in governance by being in the LP pool. Changes may be made in the governance system to rectify this conflict.
Treasury management is key to the success of YAM in many ways, as its ability to generate yield increases the size of the treasury and value of the protocol.
- Yield-bearing strategies. Currently the treasury employs a yield bearing strategy by utilizing yUSD. This allows for sustainable growth with limited downside, as it’s based in stablecoins. In the future, we could employ additional yield bearing strategies, utilizing aggregators or base protocols.
- Strategic Investments. While stablecoin yield generation is great for sustainability and downside protection, in the event of a DeFi boom it is likely going to underperform many protocol’s native assets. Allocating a portion of the treasury to a DeFi index (potentially the new DeFi Pulse Tokenset Index) could be an effective way to ensure the treasury grows with DeFi.
- Financial Protocols. This has always been the most exciting direction for the Yam treasury to me. Building financial protocols that Yam can help enable and seed liquidity to is probably the most impactful direction it can take, but also the most difficult and resource intensive.
Interface and Usability:
In addition to the direct functionality of the protocol and its treasury, there are a number of supporting tools and infrastructure that will improve awareness, usability, and transparency.
- Creation of on-chain governance interface. We expect this to be completed in the next few days, and will allow for the final piece of the governance process (forum discussion >> Snapshot signalling >> On-chain proposal and execution) to be easily accessible.
- Stats and trackers. On-chain analytics regarding market cap, price, rebasing, and treasury growth, would be extremely helpful to provide transparency and information. If helping build this is interesting to you, please reach out. I am committed to supporting community contributors being compensated by the protocol.
- Uniswap Routing. Currently Uniswap executes inefficient routing when trying to purchase YAM, as yUSD is not included in the default routing options. Improvements can be made to this routing algorithm that will route more efficiently through, for example, ETH>>yUSD>>YAM. A pull request with this functionality has been written by Brandon Curtis of Radar Relay (and YAM ChainWiki fame), and is being reviewed and worked on by other community members.
- Documentation. We need to create better documentation to onboard developers interested in working on or with the protocol.
While a lot of attention has been paid to how to support and compensate the users of Yam who delegated or missed migration, there has been little directed to how to make Yam a sustainable protocol that compensates its contributors. We must appropriately incentivize the people who enable Yam through their time, effort, and technical contributions. I think a strong precedent has been set for this in directing 1% of treasury purchases to Gitcoin Grants, but we must also take care of our own.
- Ecosystem Contributors. The creators of Zippo, the Yam Chainwiki, and yieldfarming.info have provided the Yam community indispensable information and interfaces for the Yam community (and more), and deserve to be rewarded.
- Community Moderators. The YAM Telegram and Discords have a combined over 9,000 members, and the community moderators have volunteered their time and energy tirelessly to answer questions, provide customer support, and help the team think through their decisions. It has at times been a thankless job, and I again believe it is imperative to reward these individuals — the project would not be here today without their many hours and late nights of service.
- Yam Core Contributors. Upgrades and maintenance to core functionality of the Yam protocol require a deep understanding that should ideally compound over time. We need to think critically about the best way to reward those who dedicate their time and expertise to Yam, and not rely on altruistic intentions or compensation through potential existing investments. If we want high quality, long term committed individuals working on a project, we need to compensate them accordingly.
As you can see, there is a lot of work that can be done to improve Yam. Despite the last month of progress, the relaunch of Yam is truly a starting point.
If you would like to get involved, you can join the Discord, or visit the forum.