YIP-12: Community Fund and Treasury Thoughts

One of the majorly debated elements of YIP-2 is the additional 1M YAM supply delegated to the community fund, inflating the supply of YAMv3 from the original protocol’s 5M YAM to 6M YAMv3. The long and short of my personal stance is that either direction can lead to a strong V3 launch, but after conversations with the community, no community fund is probably cleaner.

YIP-12 seeks to eliminate the community fund: https://snapshot.page/#/yam/proposal/QmctSLYFvLhPoePehigZMwoLhdgyrMxjnrroFyPdmCVJoc

To go a little deeper, it’s first and foremost important to recognize that at some point in the future, Yam will have additional development costs that must be paid for somehow. This may be protocol development, audits, community development, and/or organizational development/hiring needs. The protocol and community will not be able to grow in the long term if it does not invest in itself.

There are ultimately two ways Yam can choose to fund initiatives like those mentioned above: from the treasury and from YAM token distribution.

I personally see the treasury as the fundamental source of YAM value. While some like to think of YAM as a currency, I prefer to see its potential from a more “business-like” perspective. Along this line of thinking, the “business” of Yam is to use its treasury to generate additional revenue. The fundamentals of the token rely on how much revenue the treasury can generate. Bigger treasury = more revenue, smaller treasury = less revenue. This leads me to believe that utilizing the treasury for expenses decreases the value proposition of YAM. I’d rather see the treasury go to powering a new financial protocol built on the backend or something…

But if the treasury is not used, it still does not necessarily mean we need the community fund –– the community can just mint YAMs on an ‘as needed’ basis. The one issue I see with this is that it creates a dynamic in which there is no precedent set for a cap on supply. Ideally the very nature of rejecting the community fund reflects a fiscal responsibility, but there’s no guarantee of that in the future.

Basically in my mind, the question boils down to: lump sum inflation at re-launch or piece-wise in the future. I’m interested to see which way the community goes.

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I am going to summarize my thoughts for this proposal over the many conversations I have had so far.

This proposal would eliminate the 1 million YAM Community fund from YIP-2 bringing the YAM supply back to the original 5 million YAMs. This proposal does not signal that inflating the supply is bad, but rather that this approach of using an open-ended, slush-fund is the wrong approach.

One idea for a more fiscally responsible approach could include the following principles:

  1. Well researched (what are we doing, why are we doing it, what is the value-add, etc)
  2. Well discussed (what are the communities thoughts)
  3. Quantified (what is the actual cost. i.e. how much dilution to existing holders will this cause)
  4. Approved by a majority vote of the community

Creating proposals on an as-needed basis creates friction and slows the process. This is a positive thing. Spending funds and inflating/diluting the supply should never be easy or quick. That process should have friction as that gives the community time to contemplate the implications and decide if the value being created is worth the cost.

There is a belief that creating a large fund will reduce the chances that the supply ceiling will be raised in the future. I would argue the exact opposite. If we can inflate the supply by such a large amount (20%) and do it so quickly and easily, then that creates a precedence to do so again in the future and perhaps even more easily.

The following ideas are a few ways we can fund expenditures in the future:

  1. Spend using the treasury as to not dilute supply
  2. Spend using inflation/dilution but only do so on as as-needed basis and when approved by a majority of the community
  3. Create an inflation schedule that continuously mints a small amount of YAM and places it into the treasury or other fund to be spent. The community can only spend what has been accumulated up to that point.

I personally prefer option #1 or #2. Option #3 is a unique approach that does allow for open-ended inflation but it does so in a predictable and low-impact way. How we choose to spend funds in the future does not have to be decided right now but is a discussion we should begin having as v3 approaches.

In summary, I do think an open-ended, slush-fund-style approach is the wrong approach and sets a bad precedence in the very early days of this protocol. I would rather we reverse the decision to create this fund and then have a discussion as a community on a better approach.

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I completely agree with your thoughts

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There is no need for a community fund. Yam treasury can be used for any future developments.

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Any minting after the finished product sounds like making room for laziness. Seems to easy to say “that didn’t work, wheres my undo button?” there it is, lets mint more yams."
The finished protocol ought to be self sufficient, if its not worth spending treasury funds why are we doing it?
With that in mind, the initial inflation of 5m to 6m is agreeable as a 1 time “for real this time” nobodies here to hold our hand. We got lucky the first time had some donations for audits.

I believe the community fund would encourage community, imagine that? It would be seen as this we spend a particular way, building a community. Perhaps relaunch eternal lands to bring people in that way, even if its small amounts. With their “free ticket” they get to be a part of it and see if they want a larger part.
There is no reason why treasury funds could not be used for this, I just personally feel there would be less squabbling over what % gets allocated where.

I am vehemently against printing yams after initial launch of v3. The dilution of holders could be detrimental to adoption of newcomers. The value of new adopter’s yams decreasing meanwhile the treasury is spending funds could easily be misconstrued as outright theft. Especially since the treasury will most likely be funding projects of the yam developers. “they took a part of my yams and used it to pay for their…(lambos)” There are of course other ways the price could decrease but those would involve investments gone awry, yUSD somehow losing value. But in those cases its easy to see everyone got the whatever end of the stick is appropriate.

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I agree with the no printing afterwards. Brrrr is not popular at the moment :joy:

1mill yam fund. That would give the community a significant backbone

Increase from 5 to 6mil …it is still really low.i don’t think it would make a differnce.

I think arbitrarily setting a proportion of the total supply of a base money to anything, whether it’s a public good or not, could be improved by dynamically setting the proportion of all principle needs of that base money. Therefore, I’m leaning towards an as needed piece-wise distribution of treasury/community funds.

Don’t agreed to set up 100 community funds, which adds additional supplies, dilute YAMV2 monetary value, for existing YAMV2 user unfair. Later can be used to withdraw money from YAMV3 community fund and the Ministry of Finance to subsequent development.

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I agree that we do have to be careful with how it is set up. There should be a lock for a period so that proper mechanisms are set up to stop an attack. It would be a perfect target.

Would’nt want to hear someone bought an island in the Bahamas

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https://snapshot.page/#/yam/proposal/QmctSLYFvLhPoePehigZMwoLhdgyrMxjnrroFyPdmCVJoc