Placeholder Ad Banner

Yearn proposes a “repurchase and build” strategy to YFI holders

1.5k
VIEWS




Yearn.finance community is introducing proposal Reform YFI’s current token economics. The proposal is often referred to as “repurchase and construction” and aims to enhance the funding source of the project while also creating value for all stakeholders. Its author list includes Year’s core developers Banteg, Tracheopteryx and Lehnberg, as well as BSV Law partner and Yearn’s occasional contributor Gabriel Shapiro.

Currently, Yearn.finance uses equity and dividend models. Holders must put their tokens into the yGov contract and receive a portion of the income from their income strategy. The mechanism is somewhat similar to traditional dividends.

Related articles

Another value acquisition method used by some manufacturers (such as Maker) is to look at the agreement to buy back tokens on the open market and then “burn” or eliminate them. This mechanism will put pressure on the price of tokens to buy, and ideally will result in close coupling between the success of the agreement and its token price and the wealth of the ultimate stakeholders. In recent years, due to its flexibility and tax efficiency for holders, this strategy has gained great attention in the stock and crypto markets.

The Yearn proposal proposes a slightly different mechanism, inspired by article Written by Joel Monegro of Placeholder VC. Instead of withdrawing the repurchased tokens from the market, it is better to keep them in the treasury balance for emergencies. Reallocation for development and community planning. Future governance proposals will be able to use tokens in the vault as funds.

The proposal emphasizes that the purchase process must be continuous and automated, while avoiding the possibility of early operation or other utilization mechanisms. From a financial point of view, the proposal attempts to allow the YFI Ministry of Finance to obtain inflationary benefits through staking or liquid mining, while not expanding its supply of 30,000 YFI.

However, the fact that the tokens are expected to eventually recirculate limits the effectiveness of this value accumulation strategy. This is largely by design-one of the motivations for activating the mechanism is to concentrate all resources on the growth of the protocol. According to the author, Yearn.finance is still immature and unable to pay dividends to holders.

Other more practical benefits include that all tokens can participate in governance and receive protocol rewards. The cancellation of the yGov mortgage contract will also allow the establishment of more traditional revenue generation libraries involving YFI tokens.

The proposal is still in its early stages. Informal opinion polls show that more than 90% of community members are supporters, but the decision needs to be formally confirmed by voting on the chain.