YIP Proposal: Treasury investment strategy and allocation - Updated 10/16

YIP Proposal: Treasury investment strategy and allocation - Updated 10/16

Basic Summary
YAM’s treasury is currently the Most Valuable Piece MVP of YAM. Until there are new protocols developed like the Yam Crop Protection we need to take good care of the treasury.

Instead of a piecemeal approach to allocating and investing the treasury we should formalize some guidelines / strategy / allocation on how we will put the treasury to good use. Similar to an investment portfolio when you work with a financial advisor.

This is only the asset allocation portion of the portfolio, which I expect to be only a % of the treasury. We can still start brainstorming and parallel processing this piece without knowing the % yet.

Abstract
Again this is only a % of the entire treasury that we will be allocating to an “investment strategy” there will be other allocations for the Yam protocol products / Operation costs / ect. That % hasn’t been decided yet but that doesn’t stop us from figuring out what is a good risk adjusted return that we can get from investing.

TL:DR
A relatively conservative portfolio of
75% reduced risk Yield Farming
20% investments into other DEFI projects or partnerships
5% downside risk Hedging.

Details as follows:
Quick quality check of a few known and established farms:

Yields from some of those farms with the highest highlighted yellow:
Farms

Sample Portfolio if we were to invest in those yields with a simple allocation:

Sample Yield Farming Holdings
1000 ETH
75000 DAI
75000 USDC
75000 USDT
6.590509666 wBTC
874.2277655 DPI
Overall Allocation
75% Yield Farming
5% Hedging using Options
20% Left for partnership / DEFI project investments

This is just an example of what we could do.
**Pros: **

  1. With options we can partake in the upside with ETH but not the downside… Very important and good risk management.
  2. Upside ETH + 18% APY after covering the costs of options
  3. We still have 20% set aside for more aggressive investments / partnership.

Cons:

  1. DPI and wBTC are not hedged with options but they are a small % of the portfolio
  2. Tail risk with farming contracts
  3. Farm APY fluctuates - I chose farms with more stable rates.
  4. OPYN put options might not have enough liquidity to cover 1000 ETH or whatever the final result is
  5. Options Pricing change regularly and also have an expiration date.
  6. Requires semi active management along with regularly re-balancing the portfolio and monitoring of yields from farms

Motivation
Part of Yam’s beauty is the fact that there is a community governance of a treasury for the benefit of the whole. If we can manage this properly the value of the treasury will increase and along with it the value of Yams. We need a smart strategy to make sure we get good risk adjusted returns.

Structure is of extreme importance in decentralized governance, we can always change, but let’s get something together to start.

Poll to Measure Sentiment

  • Sample Portfolio is approximately what we would like
  • Portfolio needs a different strategy completely.

0 voters

With the farming pools, will we extract the farmed assets on a routine basis and reinvest it into the farming pool? Something that works like the Set Yield instruments.

I’d prefer options as opposed to leveraged tokens.

Have you thought about purchasing insurance as a portion of the treasury?

I love how bullish you are on the farming protocols. It’s pretty aggressive. Have they all been audited?

Yes, that’s where the yield comes from.

Options are the insurance. Is this what you mean?

Yes the farms that I am considering are audited.

What I meant about insurance was actually “cover” like Nexus Mutual offers.

I like it overall. I’m voting yes.

However, I would like to see more liquid WBTC holdings in the treasury.

Nexus Mutual does smart contract failure insurance, similar to what our YCP is going to do. We might be able to use it for tail risk smart contract failure.

Noted, allocations can change, the allocations were just 15% across the board.

1 Like

我希望可以投资一些初创企业,一些创新的想法,又或者使用国库做一些更有趣的事情,创建自己的swap,并创建子代币,和crv或者sushi一样的子代币。

创建自己的uni和养殖场,相信yam社区比其他任何一个社区具有活力

创建一个自己的swap很难吗?我相信并不难,所以我们可以创建自己的养殖场,种植yam来获得3-5倍的激励

No not difficult to create our own swap, but what would be the point? We wouldn’t have enough liquidity for any pairs vs uniswap or sushiswap. We don’t want to offer incentives for a swap, we’d rather save those incentives for another piece of Yam’s protocol, for example Yam Crop Protection.

我并不希望使用yam来作为交换的激励,我的想法是创建一个全新的swap硬币,使用这些硬币来进行激励,并且抽取流动性提供者百分之5的激励到yam国库,使用yam种植并收获这些硬币,当然奖励系数*5

Not quite sure I understand.
You want to create a new swap with new token and new incentives?
Use this new swap as a way to add tokens to Yam treasury?

是的,新的swap,新的令牌,yam种植激励系数5倍,加强yam和新令牌的关系,或许你有更好的想法

将国库资金投入农业是非常保守的做法,我们为何不集思广益创造一些农业,一些新的东西,不同的令牌,并加强它们和yam的联系,我相信这只需要一小部分的资金

Now the highest priority is to save yam back to live. I think core stay with compensation discuss and treasure too much. I did NOT find any creative ideas except how to divide the treasure.

Yam is possible to be a mass adoption stable coin. It’s is way better than Ampl, because it’s fairly distributed and has a community owned treasury, which make Yam less volatility. And the 2 new proposals will make it more stable.

Now the only question is how Yam to scale the market cap. Bigger market cap means more adoption and even less volatility. So we need stable and continued positive rebase. We need more new users to Yam. For now people scare the price will drop to negative rebase.

Could we take a proportion of treasury to setup a buy back fund? It make the treasury has the function to stable the price even in negative rebase, which will give token holder confidence. And also it will correct the misunderstanding that treasury is sucking money from token holder. We all know it not true but the current mechanic make it looks like that.

Monday I will start making official proposals to invest some of the treasury, please add feedback everyone! Thanks

ok,我们该改变市场走向了!盼望市值百亿!

YAM is NOT a stablecoin! This is a misconception for AMPL, and equally so for YAM. While the price may roughly move around a dollar, because the supply fluctuates internally, it is in no way “stable.”

This is also probably not true. YAM will continue to be volatile as it is a risky and ambitious project and people are unsure how to price it. A high marketcap that is not backed by revenue is just as likely to crash back down as go up. That is literally what happened a few weeks ago.

Without additional revenue that is not correlated to people simply buying more YAMs, this doesn’t do anything. You said yourself that the treasury isn’t sucking money from token holders, so the same is true of a buyback. It won’t materially make YAMs a better investment. It would just mean there are less funds to build things that will bring revenue. The team is in the process of creating a ragequit mechanism that may be wrapped up in another product, and that will create a price floor. But buybacks can’t happen until the treasury is growing and healthy.