Yearn Governance Roundup #3

Week of October 5, 2020

Nomad

Published in

Yearn Governance Roundup

5 min readOct 9, 2020

Welcome to the Yearn Governance Roundup — a weekly newsletter covering everything in the Yearn Governance pipeline.

📋 Quick Hits

⚖️ Proposals and Discussions

Make sure you join the governance forum if you want to get involved with these discussions! Table of contents:

Vaults V2 Design
[Proposal] Adopt a Code of Conduct
Proposal: Create Four New Vaults Farming UNI
Bonus: [YFI] Collateral Onboarding Risk Evaluation

Vaults V2 Design

fubuloubu shared this proposal on Oct. 5. Here’s the summary:

This YIP proposes a redesign of the Yearn Vaults system to accommodate several improvements meant to increase the robustness, security, and flexibility of the Vaults moving forwards.

This is most exciting proposal this week! Due to the current yVault design, it can be difficult to maintain and is missing a number of features that could improve the risk/return profile of Vaults. The Vaults V2 Design proposes a refactor of the current yVault system that would introduce a variety of improvements:

Allow a Vault to have multiple strategies at the same time
Streamline the development cycle of new strategies using a standard API
Streamline the QA/Security process for Vaults, to ensure the highest quality code
Ensure the Vaults are tested to handle different types of Strategy risk/return/volatility thresholds
Make it easier and safer for integrators to use Vaults in their projects

According to responses from banteg, the specification is ~80% complete and any future changes can be tracked here. A Snapshot signaling poll was opened on Oct. 6 and closed on Oct. 9 — 99.6% of voters responded in favor of the vault redesign.

[Proposal] Adopt a Code of Conduct

lehnberg shared this proposal on Oct. 7. Here’s the summary:

Adopt a standard code of conduct template across the entire project. Encourage moderators to organize their own governance independent of project leadership.

As many of you know, it’s been a crazy couple of weeks in the Yearn ecosystem. Fortunately (or unfortunately?) it has revealed some holes in the Yearn community’s moderation and conduct practices that can be easily addressed.

Without a code of conduct, it is unclear what kind of language and behavior is tolerated in Yearn’s community. It makes enforcement arbitrary and subjective, complicating fair and appropriate moderation. Having a code of conduct makes it clear for community members what is acceptable behavior, and what to expect when there are violations.

A code of conduct is not to be taken lightly and is a reflection of Yearn, the community, and its values — we encourage everyone to give their thoughts. There is a Snapshot poll (started on Oct. 7) that is running until Oct. 17 — approval is currently sitting at 81%.

Proposal: Create Four New Vaults Farming UNI

franklin shared this proposal on Oct. 4. Here’s the summary:

Expand the current vault offering to create four new vaults that would farm UNI. One for each liquidity pool eligible to farm UNI.

This vault proposal— despite being out of the norm — is starting to gather attention. What it aims to do is relatively straightforward: Diversify the yield-generating vaults/strategies to farm UNI instead of solely focusing on CRV. Four new vaults would be created: ETH / USDC, ETH / USDT, ETH / DAI, and ETH / WBTC.

In the past, strategies that introduced impermanent loss have been avoided due to risk and decision making complexity. Curve strategies have been used because they avoid impermanent loss — which can lead to excessive losses for the Vault. It’s worth noting that out of 210 voters on the signaling poll, the majority are interested in these types of vaults despite the risk.

Since the introduction of these types of Vaults would be an entirely new direction for Yearn — please join in on the conversation and let everyone know what you think!

Bonus: [YFI] Collateral Onboarding Risk Evaluation

monet-supply shared this evaluation with the MakerDAO governance forum on Oct. 5.

YFI is being considered as collateral for the Maker system. As part of the process, the Maker community does onboarding risk evaluations that provide valuable insights into the asset considered. The post is too detailed to cover in this section, but here’s the highlights:

Summary Proposed Risk Parameters

Risk Premium: 4%
Liquidation Ratio: 175%
Debt Ceiling: 7 million
Auction Lot Size: 50.000
Minimum Bid Increment: 3%
Bid Duration: 6 hours
Max Auction Duration: 6 hours
Liquidation Penalty: 13%
Dust: 100 DAI

Summary of Notable Risks

YFI is a new asset with relatively short trading history and limited data.
Admin functions are currently in the hands of a community multisig. An on chain governance system is planned but full details are not yet public.
Yearn’s aggregation business exposes users to layers of technical and economic risk. A serious loss of funds could harm reputation. Unaffiliated projects made by Yearn contributors may also cause reputational blowback on YFI.
If yields decline for farming opportunities, yVaults may become less attractive and earn lower performance fees.
Withdrawal fee income is likely to decline as exchange liquidity for yVault tokens improves.
Competitors are emerging in many of Yearn’s business lines, particularly yield aggregation. This could lead to lower fee income and loss of market share.
While Yearn has an increasing number of participants, the project is heavily connected to Andre Cronje and might struggle without his continued contributions.