YIP: Add RageQuit Functionality

YIP: Add RageQuit Functionality

Basic Summary
Develop a function that allows YAM to be redeemed for a pro rata portion of the Treasury.

Abstract
A core value proposition for YAM has always been the unique value of our growing Treasury model. While it has been assumed that YAM value would be linked to the Treasury, this proposal would make it official that YAM will be backed by the Treasury and immediately signal a price floor.

Motivation
With market volatility and a complex story to tell (elastic finance), YAM price has fallen significantly since launch. This function would create a hard price floor, as arbitrage would exist if the Treasury ever exceeded market cap. It also creates a clear story that YAM holders are entitled a portion of the Treasury. (While not widely used, YFI launched with a burn mechanism that created narratives about how YFI holders are entitled to Yearn revenue and immediately established a price floor.) A vote For would immediately signal that this will become official, even if it is not yet developed, thus creating an immediate price floor based on our rapidly growing Treasury value.

Specifications
Mechanisms to be developed further in discussion with the community. This initial vote is to first determine officially whether we should or should not develop this function. This does not preclude other solutions, such as staking, from being proposed or developed. (RageQuit was originally named by MolochDAO. This proposal uses the name as a temporary shortcut; the official naming can be decided later with the community.)

Poll to Measure Sentiment

  • For: We should develop a RageQuit-like function
  • Against: We should not develop a RageQuit-like function

0 voters

3 Likes

This should be added immediately

1 Like

Yeah we need this right now. Loyal Yam holders are hurting right now

2 Likes

Strong support here.

1 Like

I think adding RageQuit Functionality is fundamentally important. Def an equitable way for folks to exit the YAM organization.

Our main limitation with RageQuit, imho, is that in order to function fully, the YAM Treasury must hold liquid, fully divisible assets. This might be in slight conflict with our goals for Treasury Diversification - we may want to hold a significant portion of illiquid assets in order to earn greater returns.

So how do we handle RageQuit for a diversified treasury?

A possible solution to this is the idea of Liquidity Mechanism, proposed by Aragon in a 2018 blog post Trust Minimized Governance Tokens, where they suggest:

“One potential way is to create a liquidity policy that can automatically take on debt in order to provide liquidity for participants to exit. The organization can automatically auction bonds to facilitate immediate exit — then, the remaining members of the organization can strategically liquidate assets in order to pay any outstanding bonds. To ensure that bonds are actually repaid, the organization’s permissions can prevent additional fund transfers from the treasury until all outstanding bonds have been cleared.”

So essentially:

  1. Determine treasury disbursement based on YAM tokens
  2. Pay out the user from reserves from YAM Treasury OR issue bonds at an equivalent face value.
  3. Bonds are auctioned off and the funds given to the user who burned tokens.
  4. All future YAM Treasury inflow must first pay off debt from bonds before flowing to the YAM Treasury

Once bonds have been issued, this might be a possible workflow to ensure payback:

This might be a complicated idea, but I think it’s important to ensure to YAM Holders that they can receive a proportional share of YAM’s treasury, no matter how many people RageQuit at the same time.

Excited to brainstorm!

4 Likes

For, agree. however, we need to consider the risk of bank run if the token price drops dramatically in a short period and the marketcap is lower than the treasury. Then people may have a bank run reaction to withdraw a large amount of treasury. There should be a limitation of withdraws in a period.

如你所见,前期参与者都是处于严重亏损状态,目前急需团队调整好思路,健康的发展下去。

The point of this is that it won’t go below because people will buy it up knowing that there is a floor to the price. People buying makes price go up. If there was to be a drop, bots would arbitrage the price back up to the treasury value.

this is the idea case for sure. but this is crypto market, anything can happen. I agree it will be an extremely rare case, but still needs to consider about it.

I agree, this def needs to be considered if we change the base funds of the treasury. As a stable coin, the risk is minimal.

I have a grave concern about RageQuit. I was originally pro Ragequit, because it sounds nice and fair, but I’ve been thinking more about how this could be a mechanism for abuse, or use by arb bots/humans.

As I understand it:
If the value of total Yams (as backed by the Treasury) is less than the Treasury, then I can burn my Yams (as a percentage of total yams) for the same percentage of the Treasury, and receive that relative sum.

Example:
The market mood is poor, most of crypto is facing selling pressure. I am able to buy some Yam at a significant discount to book value, let’s say 10%, which accounts for 10% of total Yams. Then, I RageQuit, burning 10% of total Yams.
So 10% of the Treasury is gone, leaving the community and now in my hands. I made a profit at the expense of the community.

The market mood hasn’t immediately changed after this transaction. Now there is a smaller treasury (price floor), and everyone left has a greater % of the treasury. Price/Yam should be greater now. However, if the treasury is the price floor, then there should naturally be selling pressure by 10%. If the price falls below the price floor, then another Ragequit occurs, eventually resulting in more selling pressure. If I am right in my assertion, RageQuit could be very very bad.

I’m just thinking about the cascading effects of the RageQuit mechanism.
I think it could happen. And it doesn’t have to be from a bad actor in the example; the first person utilizing RageQuit could just use it as intended.

If I am off base and my worries aren’t warranted, because I’m not understanding how RageQuit works, please explain to me why.

2 Likes