RFC: Replace Yam Rebase Mechanism
This post is a request for feedback on removing the rebase treasury building mechanism and replacing it with a simpler and easier to understand inflation mechanism.
In the Beginning:
We’ve come a long way since the launch of Yam back on August 11th. As we move forward and learn from past choices, some fascinating dichotomies of programmable money and the people that govern them arise; the features of Yam are incompatible.
Yam seeks price stability by changing the supply of Yams in your wallet without trying to adjust the value in your wallet, but that hasn’t worked very well. The price moves in the direction of the peg, but the problem comes when the community, who govern the protocol, seek price appreciation and not stability.
Token holders want appreciation of Yam:
How do these two things all fit together? Well, they don’t…
There needs to be a positive feedback loop between community governance, the YAM governance token, and value creation by Yam Treasury investments, and by all accounts the rebasing mechanism is holding us back.
We are currently developing multiple products in tandem including Umbrella, UMA-Degenerative, and YAM DAO Set (YDS). All of which have some component of revenue generation. We are also installing the machinery for our Yam Factory to hopefully create even more products. I would like the Yam community to focus on what we are building and not the rebasing function.
Here are the Pros of a rebasing asset:
- It can be gamified (largely due to artificial price movements and supply changes)
- It’s an interesting experiment that could lead to unique use cases that non-rebasing assets cannot do.
- Stable-ish (in theory)
- If there is anything else, please comment below.
Here are the Cons of a rebasing asset:
- More complicated to understand and calculate profit/loss than a non-rebasing asset.
- Composability between other protocols like AMMs need to be whitelisted otherwise YAMs staked as a liquidity provider could be lost.
- Any centralized exchange needs to constantly update account balances according to the changes in supply.
- high gas fees for calling the rebase function an syncing whitelisted pools for the balance updates (high $100’s to low $1,000’s per month just in gas fees)
Instead of the rebasing mechanism, there are other ways to raise funds for the Treasury. We propose a simple 3% yearly inflation of Yams fed into the Treasury for future strategic investments.
Possible uses of the Yam to directly support the Yam ecosystem:
- Add additional distributions as farming incentives currently allocated to Yam/ETH Sushiswap pool.
- Buy ETH to pair with Yam to provide liquidity on the Yam/ETH Sushiswap pool and farm Sushi.
How does this help you as a token holder?
- Easier to understand provides less barriers to enter for new investors. They are able to understand the purpose of their investment and the goals of Yam.
- Composability is important for long term sustainability. We are already finding new collaborations with other DeFi protocols and we don’t plan on stopping there. Potentially some of these collaborations will be hindered by a rebasing asset.
- Easier to integrate for CEX.
- Additional liquidity allows for larger purchasers to enter and exit.
- Allows the treasury to continue to grow via Sushi farming.
Developer light to implement. The scaling factor would be fixed at a specified time and the rebase function deactivated by calling this function:
Making it so no address can execute rebase
Poll to Measure Sentiment
- Replace current rebase mechanism with 3% inflation.
- Do not replace, let’s discuss.
12.9.2020 Edit with additional poll due to comments from community members.
So we have a few options presented as ways to proceed:
- Keep Rebase and Treasury Purchase
- Keep Rebase, Remove Treasury Purchase, Add Inflation
- Remove Rebase, Remove Treasury Purchase, Add Inflation
Seems like almost everyone is against Option 1, so looking primarily at options 2 and 3:
Option 2: We become a little more money like, and are a standard rebasing token. We can play around in the elastic finance space, but we’re still severely limited in our ability to interact with much of DeFi (as collateral, easy trading pair, etc).
Option 3. We become a standard ERC20 token more or less, able to do all the things normal ERC20s can. This limits some governance overhead (adding sync/gulp to everything) and opens up new possibilities of collateral inclusion. Also allows for centralized exchanges to more easily list, and incentivizes them to convert V2 to V3 (not that I really give a fuck about CEX’s but I know many of you do).