$AYM: A YAM-Built Stablecoin and Revenue Token
Now that YAM is no longer a rebasing token, it is time to look forward to the next evolution of YAM and explore how we can continue to innovate with DeFi Products. A stable token that is native to the YAM protocol is useful for the DAO and has potential utility beyond the YAM ecosystem.
The YAM token remains a governance token, but also has a role in creating, managing,and backing this new token.The new stable token would not grant any governance rights.
I propose that YAM holders Stake YAMs to mint a new token called $AYM (name not set in stone, but pronounced like “aim”) that is pegged to a price target by three means:
- By building a treasury through supply expansion sales when the price goes above a dollar, and selling from the treasury or staked YAM when it goes below a dollar.
- By accepting our stablecoin as always being worth $1 within our ecosystem of products.
- By incentivizing Yam DAO participants to hold it via revenue distribution.
This is a non-rebasing stablecoin that a holder should expect to remain around a dollar or whatever unit we wish based on our uniswap TWAP. It is backed by YAM and the ETH earned from non-inflationary price growth. YAM holders benefit directly by minting dollar (or other) stablecoins that can earn a yield based on the revenues of the DAO.
When the price of AYM is above $1, Tokens are minted and sold for ETH to push the price down and then the ETH is deposited into the AYM treasury. This treasury is then sold first to restore the peg before any staked YAM is sold. The AYM treasury has a streaming fee that goes to the YAM treasury. And ecosystem revenues go to AYM holders who stake their AYM.
Because the YAM treasury takes a fee from the AYM Treasury, YAM holders who value the DAO element of Yam will want that treasury to be as large as possible. Increasing the demand for AYM will increase the size of the AYM treasury and subsequently earn money for the YAM treasury via fees. If YamDAO product revenues go to AYM holders, we incentivize our own community to hold AYM for those rewards and give a base of dedicated holders. Since the only way to mint AYM is by staking YAM, we can either lock up or incentivize a large amount of YAM into beneficial pools and projects for the ecosystem.
YAM stakers earn AYM by staking sushiswap LP tokens. In doing this, they are putting their YAM and ETH at risk by doing so. There is also risk for all YAM holders as a downward peg break would sell staked YAM into the market. This is a dis-incentive to start out unsustainably, and instead limit quantities initially to test out the system.
All YamDAO revenues help restore the peg and provide rewards to YAM LP stakers. Revenues are sold to ETH and then AYM, and these AYM added to the AYM inflation rewards given to LP stakers. This pushes the price of AYM up, increasing issuance if over a dollar, or helping to restore the peg if under.
Pool 1: ETH/YAM - This pool is currently incentivized with YAM tokens. This would instead change to mint AYM over time. This LP token is at risk when staked as it can be sold to bolster the price of AYM if the AYM treasury is empty and AYM is below $1.
Pool 2: AYM/ETH - Needs to be incentivized for revenue buys and issuance sells. Earns YAM inflation rewards and lets users earn YAM without direct exposure to it. This pool is key to keeping AYM volatility low since more liquidity will limit slippage on buys and sells.
Pool 3: AYM/YAM LP - Needs to be incentivized for backstop AYM buys. - Stake ETH/YAM LP tokens in this pool to mint AYM as well as earn YamDAO Revenues. When a backstop buy is needed, X amount of the needed ETH/YAM LP tokens staked in pool 1 are sold for AYM and the AYM is distributed to Pool 1. At the same time, Y amount of AYM/YAM LP tokens are un-pooled. The ETH/YAM LP tokens are sold for AYM and it and the rest of the AYM goes to the revenue pool.
Distribution of different tokens to different pools, and in what amounts still needs to be analyzed and discussed.
Benefits to existing YAM holders:
- YamDAO can Merkle Drop existing YAM/ETH LPs and governance participants a premined amount of AYM tokens, but lock them as AYM/(ETH/YAM LP) tokens that get vested over time. These LP tokens earn unlocked AYM during their vesting period. Lots of details to work out here
- YamDAO can offer to pay contributors in AYM and/or YAM. By paying contributors in AYM we can still provide contributors exposure to Yam DAO revenues but require minting less YAM. Minting more AYM dilutes existing AYM holders’ claims on future revenues.
- Successfully managing the AYM peg and building the AYM treasury will fund the YAM treasury and benefit YAM holders who stake to earn AYM.
- A new farming opportunity could get people looking at YAM again.
- More people will lock their ETH/YAM LP tokens in our incentivizer, earning the treasury more sushi.
- The system is a little complicated and will have a learning curve. But really not that much more complicated than many of the mechanisms in DeFi.
- Adds price risk for all YAM holders. But also upside potential and gives YAM a yield in AYM.
- Mechanism(s) for determining issuance rates will need to be worked out. Because the primary defense against a peg break is the ETH treasury, building the supply via native demand will create a safer system. Increasing the issuance beyond what is sustainable puts YAM holders at risk of devaluing their YAM.
- Is there an attack vector where an attacker can Rug Pull YAM stakers by crashing the price of AYM in order to liquidate the treasury and crash the price of YAM?
- Could a whale come in, provide liquidity, buy a lot of AYM, remove liquidity and then sell the AYM at a loss?
- Probably not, but selecting a longer TWAP interval would be important here. A long enough time period to smooth the spikes and prevent the treasury or staked YAMs from being sold in a short term attack.
- From a regulatory standpoint, is there an advantage to creating a new token that collects Yam DAO revenues and does not grant governance rights?
- Not Cool
Let me know what you guys think!