Yearn Governance Roundup #8
Week Ending November 15, 2020
Welcome to the Yearn Governance Roundup — a weekly newsletter covering everything in the Yearn Governance pipeline.
📋 Quick Hits
- YIP-51: Set Vault v2 fee structure passed
- YFI is now available to use as collateral with Maker Vaults
- Logos on the yVaults page now show assets and protocols
- The Curve Compound LP yVault is live
- Yearn x Hegic: Options
- Yearn State of the Vaults #7
- Yearn Finance Newsletter #10
⚖️ Proposals and Discussions
Make sure you join the governance forum if you want to get involved with these discussions! Table of contents:
- YIP 52: Increase Strategist Rewards [Passed]
- YIP 53: yAcademy — Yearn’s Security Arm
- YIP 54: Formalize Operations Funding
- YIP 55: Formalize the YIP Introduction & Voting Process
YIP 52: Increase Strategist Rewards [Passed]
banteg, lehnberg, milkyklim shared this proposal on Nov. 9. Here’s the summary:
With 97.5% of the Vault’s performance fee going to the Yearn treasury, Strategists have little skin in the game. Such a misaligned balance of interests does not make it attractive for Strategists to build on Yearn. This could turn into an existential threat to the protocol.
This proposal sets Yearn and Strategists out to be equal partners in the success of a Vault, with each allocated an even share of the 20% performance fee:
— Treasury allocation: 10%
— Strategist: 10%
This YIP has been a long time coming as strategist fees have been a common topic. Specifically, how can we properly incentivize strategists to enter the Yearn ecosystem instead of building their own products or working somewhere else?
The next version of Yearn vaults will launch with a two-pronged fee structure:
- A 2% management fee levied on AUM that goes to the Treasury;
- A 20% performance fee levied on returns from the vault, which is split as follows: 19.5% to the Treasury and 0.5% to the Strategy creator.
Strategists are expected to cover their own development, testing, gas, and monitoring costs. Under the current allocation, Strategists will struggle to break even.
YIP 52 will fix this problem by introducing a new, 20% performance fee with:
- 10% allocated to Treasury
- 10% allocated to the Strategist
This should give strategists much more skin in the game and will do a better job of incentivizing strategists to stay focused on Yearn.
Voting for YIP 52 went live on Nov. 9 and closed on Nov. 12 where it passed with 83.76% in favor — Snapshot page here.
YIP 53: yAcademy — Yearn’s Security Arm
aliatiia shared this proposal on Nov. 11. Here’s the summary:
Launch the yAcademy: a security wing tasked with auditing Yearn’s contracts, attracting and retaining top talent, and eventually generating revenue by expanding its auditing services to the ecosystem at large. Mission: audit Yearn contracts in a collaborative and semi-structured process. Administrative costs are kept near zero, as the tasks of advocacy, event organizing, educational curriculum are handled by our partners at Gitcoin and Status.
This proposal mentions that Yearn is innovating at a rapid speed and efforts must be made to mitigate software bugs. Auditing talent is scarce in our industry because new, innovative contracts are popping up faster than the ecosystem is producing auditors — we need a solution.
yAcademy aims to solve this problem by creating a streamlined process for auditors to enter the ecosystem directly. The program would be run with the help of the KERNEL program facilitated by our partners at Gitcoin and Status:
This proposal aims to incentivize rising stars to stay and continue to work on Yearn contracts full time. As Yearn matures, yAcademy can begin to offer services to the outside world. To align incentives, equity in the yAcademy is distributed to YFI holders (65%), Gitcoin (10%), Status (10%), and the first five permanent auditors (5%, 4%, 3%, 1.5%, 1.5% to the 1st, 2nd, 3rd, 4th, and 5th members respectively).
That said: There’s much more to this proposal and it’s worth reading in its entirety. Voting for this proposal opened on Nov. 11 and closes on Nov. 14 — make sure to vote.
YIP 54: Formalize Operations Funding
banteg, lehnberg, lex_node, milkyklim, tracheopteryx shared this proposal on Nov. 12. Here’s the summary:
YIP-36 laid the groundwork for Yearn operations funding. YIP-41 extended this with the inclusion of a one-off operations budget. A forum thread envisioned the Multisig acting as an “operations special interest group”. Today, there are multiple special interest groups (such as development, documentation, governance, branding/design, and communications) that are not directly related to the Multisig, but partly financed through the YIP-41 budget. The Multisig acts as an executor of the spending decisions of these groups.
This YIP builds on the previously adopted proposals to formalize a structure for sustainable funding of operations, to further Yearn’s development and growth.
What YIP 54 aims to do is relatively straightforward, but is important to get right. Here’s the proposed outcomes:
- Transform the one-off YIP-41 budget into an Operations Fund that is allocated the same amount of funding on a continuous basis.
- Permit the Fund to buy back YFI or other assets at its discretion.
- Publish a quarterly report to make it easy for YFI holders to audit fund activities.
- This proposal supersedes the treasury cap of YIP-36 and the operations budget of YIP-41. Future changes can be made through additional YIPs.
- Together with the previously approved YIP-51 and YIP-52, this is the final piece in a trilogy of YIPs seeking to upgrade Yearn operations and financials.
If you need a refresher: YIP 41 Temporarily empowered the Multisig members to make basic, limited operational decisions including budgetary expenditures, protocol grants, and hiring for six months.
YIP 54 is proposing to remove this time limit so the Multisig can continue to cover operational expenses and quickly react to changes — a net positive. Along with this change, the Multisig will be required to provide quarterly financial reports of Operations Fund activities and decisions.
Remember: The Operations Fund, its asset purchase authorization, and the other matters contemplated herein are not permanent, and can be altered or replaced by YFI holders as required, through the passing of a new YIP.
You can read the proposal in its entirety here. Voting for this proposal went live on Nov. 12 and closes on Nov. 15 — make sure to vote.
YIP 55: Formalize the YIP Intro & Voting Process
franklin shared this proposal on Nov. 12. Here’s the summary:
The purpose of this proposal is to standardize the Yearn Improvement Proposal (YIP) introduction, voting, and implementation process that governs the Yearn Finance protocol.
If you’ve been following the Yearn governance process over the past few months, you may have noticed that the process hasn’t been super clear. Although there are several informal standards governing the YIP introduction, voting, and implementation process — there is no single, clear policy.
Additionally, no YIP or formal policy has been implemented that specifies votes conducted via Snapshot are formal and binding. This YIP aims to define and formalize the process, and reduce any confusion regarding YIP introductions and voting. The specification would be as follows:
Introducing the YIP. In order to submit a potential YIP for voting, a user must first create a thread for the proposal on the Yearn governance forum (https://gov.yearn.finance). Then, the user should complete the auto-populated fields that appear when creating a proposal on the forum. Easy!
Additionally, the thread should include a poll from the governance forum to gauge interest from the community. After the thread has been on the governance forum for at least 3 days and has received over 25% “For” votes — it can proceed to formal voting via Snapshot. YIP numbers will be assigned by moderators prior to a vote taking place.
Formal Voting Phase. Snapshot will be used for formal, binding votes. The user who authored the YIP will also create the Snapshot proposal using this link (https://snapshot.page/#/yearn). Snapshot requires 1 YFI in a user’s wallet to create a proposal. If the author does not meet this requirement then contact a moderator who will submit the proposal on your behalf.
The voting period will require a minimum of 72 hours. In order for a vote to pass it needs to have a majority approval (>50%) and also needs to meet quorum. Quorum is defined as 20% of the YFI eligible to vote. The eligible vote is defined as YFI held in the governance staking contract and the yYFI vault at the time the vote is proposed on Snapshot. If the Snapshot vote does not meet a 50% majority approval and the quorum requirement then the vote is rejected and no changes will be enacted.
Overall, this seems like a great next step to formalize the YIP / Yearn Governance process. You can vote — on the forum — for this proposal here.
💵 Treasury Update
- Some grant payments were made over the past couple of days — pending announcement.