A New Era for Yearn.finance
The Yearn.finance community is paving the way for a revolutionary approach with their latest proposal dubbed “buyback and build.” This initiative aims to enhance the project’s treasury while generating value across the board for stakeholders. The brains behind this brainchild include renowned Yearn core developers such as Banteg, Tracheopteryx, and Lehnberg, alongside Gabriel Shapiro from BSV Law, who occasionally lends his expertise to Yearn.
Current Model: A Look under the Hood
At present, Yearn.finance operates on a staking and dividends model where holders park their tokens in the yGov contract. Think of it as putting your cash in a high-yield savings account where you get a juicy cut from the revenue churned by yield strategies—much like traditional dividends, but with a crypto twist.
Alternative Approaches: A 101 on Token Buybacks
Some protocols, like Maker, have adopted a different approach—buying tokens back on the open market and then retiring them. This creates buying pressure that can enhance the token’s price by tightly linking the protocol’s triumphs to their token’s value. Basically, the more successful the protocol, the more your crypto is worth—a win-win if you will.
Yearn’s Unique Strategy: Hold ‘Em, Don’t Fold ‘Em
Now, here’s where Yearn bucks the trend. Inspired by Placeholder VC’s Joel Monegro, the proposal states that instead of burning the repurchased tokens, they will be holstered in the treasury’s balance, ready to fund development and community-led initiatives. Future governance proposals could tap into this treasury for cash, giving the community more skin in the game.
Benefits and Challenges: Navigating the Road Ahead
The buyback process is envisioned to be continuous and automated—a well-oiled machine designed to avoid pitfalls like front-running. From a financial perspective, it intends to benefit from inflation while keeping YFI’s total supply constrained to 30,000. However, here’s the kicker: since the tokens are poised to eventually re-enter circulation, the true efficacy of this value-accrual strategy might be limited. This is an intentional design choice aimed at channeling resources towards protocol expansion, especially since the authors believe Yearn is still in its infancy when it comes to paying dividends.
On the practical side, all tokens will get a voice in governance and will be eligible for protocol rewards. Additionally, by retiring the yGov staking contract, Yearn could concoct more traditional yield generation vaults with YFI at the helm.
Community Sentiment and Next Steps
At this stage, the waters appear promising. An informal poll reveals over 90% of community members are backing this proposal. However, for this baby to officially take its first steps, it will require formal validation via on-chain voting. Talk about a democratic process!
