YAM Savings Account

This brainstorming proposal is for a YAM Savings Account. This product would be integrated into a YAM lending/borrowing platform and the YAM rage quit function that the community are already considering/implementing.

The general idea is:

  • Deposited interest earning YAM on a lending/borrowing exchange could also borrow against ragequit value
  • Lenders that are borrowing against their YAM could use their borrowed value to purchase YAM and deposit it to be lent out to earn more interest

I propose to build a very simple and user friendly frontend called a YAM Savings Account accompanied by a smart contract backend that when the user deposited YAM would automatically borrow against rage quit value, purchase YAM and deposit it to earn additional interest for the user.

Pro: This could result in additional utility for YAM and is also something YAM is uniquely able to do, I think a YAM savings product is very on brand for us

Con: Complexity increases risk of system failure due to liquidations

Some additional options to consider:

  • Borrowers utilizing the YAM Savings account to borrow against rage quit value could borrow at a 0% interest rate, while borrowers borrowing against rage quit value through the lending/borrowing platform would incur a small interest rate that would accrue to the ragequit pool providing self sustaining growth for the pool **Note that borrowers using the lending/borrowing platform would do so because they would be able to use their borrowed funds as they please, whereas if the YSA is used, the borrowed value is automatically used to purchase YAM and lend out to earn more interest.
  • A fee on exit could be implemented that would accrue to the ragequit pool, also providing self sustaining growth

Now someone tell me this won’t work and why.

4 Likes

I think it’s a good idea of having something like this in place when the incentive pool’s distribution gets reduced to a level wherein pool providers could be motivated to move their funds to higher returning alternatives. An in house alternative would serve the Yam community better.

I like the idea that you can use the lending token to borrow against the rage quit at 0%. This is especially important if the yield is relatively low for lenders.

How this could fail:
As you mentioned, liquidations could cause it to fail.

If the code that runs the borrowing and lending does not detect the change of supply during rebases and price changes/Yam, this could result in unintended consequences.

Although I like the idea, I worry about involving the Ragequit value into this, because this would directly involve the Treasury. Compartmentalizing funds would be more prudent imo. It would really depend how large the treasury is in the future; it is possible that the TVL in Yam lending and borrowing could be relatively negligible.

2 Likes

I really like a lot of these aspects. Definitely concerned about the liquidations issue - you need an army of bots to make liquidiations efficient.

But i really like the idea of allowing people to get a little leverage on YAM and have some vault like strategies. Trying to figure out if this can be a standalone thing or if there’s a necessary first step of full lending platform…

3 Likes

An MVP of this might work as follows:

  • YAM deposited into the “YSA” (not attached to the name btw) borrows at 0% against rage quit value, funds are used to purchase YAM and deposited into “YSA”, up to some max TBD number of times. This is effectively longing yam with no liquidation risk.
  • YAM deposited into another contract borrows at some small % rate against rage quit value, funds are issued in yUSD to be used as desired.
  • Interest paid by borrowers in the second contract could be:
    • Paid to borrowers in the “YSA”
    • Or paid to the ragequit pool

The outcome is fairly straightforward if interest is paid to “YSA” – reward the highly committed hyperhodlers.

If paid to the rage quit pool it looks a little more complex and interesting and should have the following characteristics:

  • The pools growth becomes self-sustaining (beyond yUSD growth) – doesn’t require additional funding from treasury
  • Pool growth is a net benefit for all YAM holders, as it increases size of treasury, as well as, increases available value to be immediately accessed by YAM holders

A few potential problems I see with this:

  • Participation in the YSA will likely reach its capacity very quickly. The question of how to structure participation will need to be answered. Is it first come first serve or a set percentage of each YAM?
  • Participation will also favor YSA over the 2nd contract. A solution to this might be to split the pool 50/50 for each use. Alternatively, a self adjusting interest rate mechanism and a self adjusting mechanism for the number of times YAM could be used to borrow and buy might be used to solve this.

A superduper simple MVP would just be to enable automatic no liquidation risk YAM longs. :wink:

1 Like

I’d been thinking about how to simplify rebasing risk, and you articulated it. I love it.

I think YSA should be set percentage of the initial and subsequent deposits. This should allow it to scale on it’s own. I believe we would want it to scale as it would take YAM out of circulation, and increase holding participation and reducing selling pressure. At 0%, this is very attractive. If you’re worried about the YSA taking too much of the attention to the detriment of the 2nd Contract usage, we could always decrease the amount that can be borrowed against the YSA deposits.

Limiting borrowing to a set percentage would mitigate one of the potential problems. You wouldn’t need to limit the number of times YAMs could be borrowed since every subsequent borrow would get smaller and smaller until the benefit becomes negligible. No formal cap needed, since the depositors/borrowers cap themselves.

This would reduce liquidity, but the YAM LPs reward would be greater/LP, since fees will be distributed to less participants. IL may or may not be worse, but that’s the risk/reward.

2nd Contract:

  1. 2nd contract interest should be paid to YSA for sure.

  2. To reduce complexity that lending yUSD entails, and worry about rebalances as it relates to yUSD on the lend/borrow platform, we could just lend Yams. The onus of swapping Yam for XYZ token would be on the borrower. This will also reduce liquidation risk, since borrowers would only have to worry about the interest risk. Interest would accrue in the form of Yams, so no swapping would be necessary when paid to ragequit or YSA.

1 Like

@TOTv3 still processing this idea, but liking it so far. I’d love to find a way to get those interested in the potential lending/borrowing executions of YAM more organized so those of us with a passion for that (whether as individual MVP products or an integrated platform) can start to hash out what will be necessary to accomplish it when we have the requisite dev resources available.

2 Likes

This is a great idea, we should discuss and perfect it as soon as possible, and we should put it into action as soon as possible, looking forward to its birth.

considering the rage quit is so little, holding
one yam can borrow 0.2 yam at first time.

It’s creative. It’s unique for yam

Where is the interest generated from?
Are you proposing to continue printing more and more Yam to pay the interest out and thereby further inflate the supply? This inflation will depreciate Yam and dilute holders even faster than we currently are.

Yam is not minted. Yam is contributed by lenders. Interest is accrued and paid by the borrowers to the lenders.

Working on an updated design. Will post when done.

2 Likes

Yeah, I think this will begin to come together more soon.

1 Like

No minting required here. I’ll post an updated design soon and maybe that will make the idea more clear.

2 Likes

时间,我们需要时间,金库的利用该加快。而不是一个个构思

1 Like