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Now, here’s what’s going on in DeFi:
YFI governance is on overdrive
UMA launches fixed rate token
Gemini to custody .crypto domains
and more 🙂
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YFI Surges +70x Pushing Governance Limits
This is what radical community governance looks like.
yEarn Finance’s YFI token is one of the most interesting projects on Ethereum right now. In one week since it launched, it’s gone through a parabolic price increase, eye-popping returns for yield farmers, hundreds of millions deposited into the platform’s liquidity pools and —this is likely the most unique aspect— seven on-chain votes.
yEarn Finance is the first project on Ethereum, whose governance is entirely in the hands of token holders. While other teams like MakerDAO and Compound Finance give users the power to participate in major decisions via token-based voting, yEarn is different in that there is no foundation, early venture investors or management holding large stakes.
YFI is distributed among those who supply liquidity for the yEarn platform and that’s the only primary market — there was no pre-sale or initial DEX offering. The system has worked out, with YFI up more than 70x in one week, climbing to almost $2,500, a record.
Image source: CoinGecko
The “token for the people,” narrative coupled with yields of over 1,000% annually resulting from its program to incentivize liquidity (aka yield farming), have fostered an especially active community. Token holders have become so engaged in the platform, they’ve been proposing improvements and holding on-chain votes literally all week.
.@AndreCronjeTech ‘s newest creation has almost consumed my life since it launched last Friday. The community are here to see the long term success of @iearnfinance, but first we must mitigate the risk of hostile takeover of governance I present YIP 10YIP 10: Transitionary YFI Only VotingSimple Summary The current yEarn governance mechanism puts the protocol at risk of a hostile takeover. The best immediate course of action would be to temporarily transition the protocol to a new voting contract recently deployed by Andre Abstract Update the ygov.finance voting page to link to the …gov.yearn.finance
July 23rd 2020
29 Retweets157 Likes
Of the seven on-chain votes held so far, the first one, called Proposal 0, passed. This proposal was to decide whether YFI supply should be capped at its current total supply of 30,000 in perpetuity or if the protocol should retain the ability to mint additional tokens in the future. 61% of participants voted to allow for YFI minting beyond the 30,000 supply.
While 63% of token holders voted in Proposal 0, the next six on-chain votes didn’t meet the required 33% quorum, so they were declined.
Image source: ygov.finance/vote
There are six ongoing votes, with Proposal 10 attracting the most attention from token holders. Proposal 10 was made by Andrew Kang, an active crypto investor, who argues that only YFI token holders should be able to vote in yEarn’s governance. The current yEarn voting contract accepts BPT tokens, which are issued from depositing liquidity to yEarn’s Balancer Pool, of which YFI tokens represent just 2%. That means stablecoin holders’ are receiving a larger amount of voting shares than YFI holders.
“Governance should be dictated by those with the most vested long term interest of the protocol – YFI holders – irrespective of their portfolio composition,” Kang said in the proposal. “More importantly, the protocol is currently vulnerable to a hostile takeover of governance by stablecoin whales who could potentially pass a proposal to mint a large supply of YFI and disproportionately reward themselves (via favoring large stablecoin holders).”
The large majority of participants, or 99.6%, have voted in favor of the proposal. Still, with 21% of token voters participating, it’s below the quorum 22 hours before the vote ends.
yEarn’s governance left entirely in the hands of the community has elevated founder Andre Cronje to something close to a hero in the DeFi community. Cronje also gave up control over YFI issuance —which it solely held after launch to the concern of many— and put it in a multi-signature wallet, which requires 6 out of 9 participants to agree on changes. Cronje isn’t one of the signatories in the multisig.
It’s early to say whether this experiment works out. One question to look out for is whether YFI’s token holders’ interests will match the sustainability of yEarn platform, or will they privilege short term profits over long-term health.
UMA Launches Fixed Rate Stablecoin
UMA is starting to ramp up its permissionless synthetic asset platform with the release of its third token yUSD.
Leveraging the Yield Protocol, yUSD offers a fixed rate, fixed term stablecoin which expires on September 1st. This “yield dollar” allows anyone to mint tokens similar to the way DAI is minted in Maker.
Using UMA’s EMP tools, users lock collateral in the form of WETH to mint yUSD. These positions are overcollateralized to the tune of 125% and can be closed at expiry for $1/yUSD.
Image Source: UMA Project
What’s different about yUSD from DAI is that interest rates change relative to the time in which the tokens are minted, and are fixed throughout the life of the position. This is unlike Maker’s Stability Fee for borrowing and Dai Savings Rate for lending in which rates are variable and subject to change. Instead, minters create yUSD at different prices above or below its peg, with all positions rounding out to $1 at the time of expiry.
To kickstart this initiative, UMA has alluded to a liquidity mining program – granting users who provide yUSD liquidity to a soon-to-be announced AMM with UMA rewards. Given the resources which point to this 50/50 yUSD/USDC Balancer pool, we can assume this will be one the first pair eligible for liquidity mining when the details are announced this week.
While UMA’s tooling is not for the faint of heart, the premise of issuing interest-earning stablecoins with fixed expiry dates is one of the more novel approaches to automated yield farming. In tandem with the ETHBTC and yCOMP tokens, UMA’s token price has jumped over 40% since the announcement, which mentioned a “liquidity mining pilot.”
Unstoppable Domains has announced that you can entrust your .crypto domain names with Gemini Custody, the custodial service run by Cameron and Tyler Winklevoss.
KR1 PLC said it has sold 35,128 tokens in the Nexus Mutual project at an average price of US$14.03 each, netting the company US$492,991. The digital asset investment firm said it had acquired the tokens at an average price of US$2.24 each during a seed round for the project.
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About the founder: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.