What rights do you have as a YFI holder?
Over the past few weeks, it has become clear that there is a significant amount of confusion in the Yearn community regarding what being a YFI holder actually means. Many in the community voiced their concerns about how YFI token holders were neither informed nor consulted about the various mergers that Yearn has been executing. While we appreciate Andre’s most recent move to put some of these partnerships, such as the one with Sushiswap, up for a Snapshot vote, most of these acquisitions were decided unilaterally and led to community outcry.
This open dissent has made us realize that YFI governance needs a more formalized structure to ensure that token holders are well represented. Formalized governance structures are the basis of civilization and social organization. These structures set the norms to ensure cultures remain honest and to foster deeper trust between a leadership team and the community.
While previous actions have been disconcerting, we want to address this structureless governance process before it becomes a greater issue in the future. As long as the governance structure is informal, the rules of how decisions are made are known only to a few and the awareness of power is limited to those who know these unwritten rules. This structurelessness raises issues of accountability, trust, and transparency. Robust community governance and long term sustainability of the project requires explicit governance structures rather than implicit ones.
Currently, we have a “benevolent dictatorship” because there has been no governance structure defined. We have decentralized architecture with centralized governance. The best path forward for the Yearn community is having both decentralized architecture and decentralized governance.
Furthermore, through having a more defined structure that can easily be referenced and seen by YFI holders, Yearn community members will be more engaged in governance. Competition for highly sought after Yearn roles, such as multisig holders, should be the norm. Additionally, there should be campaigning by candidates who are looking to be Lead of Operations so that they can sell their community on their vision. Competition for Yearn leadership roles will increase community agency and participation.
Our goal is to establish a more transparent hierarchy structure with more accountability by introducing competition into the equation. In the long-run, formalized governance will enhance the longevity and sustainability of the protocol and allow for a smoother transition of power when necessary.
Multisig signers should be voted upon once every year in a token weighted vote, with reelections of existing members being permitted. The voting period should be at the same time every year and last one week. 1 YFI = 1 vote. The top nine addresses to receive votes win. Furthermore, YFI holders should be able to split their YFI to vote for different candidates. For example, if I have 100 YFI, I can utilize 50 YFI to vote for candidate 1 and 50 YFI to vote for candidate 2. Snapshot can be utilized for this voting process.
When deciding on who to vote for, YFI holders should evaluate these multisig candidates on their contributions to Yearn (both governance and development), how much YFI they hold, and the strategic value these multisig signers can bring to Yearn.
Multisig signer candidates should create documents that are disseminated to the community that discuss why they are the optimal candidate and why they are the aligned with the Yearn community.
Once elected, multisig signers should be compensated with a small amount ($10,000 per annum each is our suggestion, but can be determined at a later date) of YFI each year for the work they contribute. This compensation should become from the treasury vault reserves, and the amount of treasury reserves set aside for compensation purposes should increase from $500,000 to $1,000,000 in order to account for this structure.
After being elected, the first agenda item for multisig signers is nominating the Operational Lead of Yearn and what their compensation structure should be, with each multisig signer having the ability to nominate one candidate. The Operational Lead holds office for one year before having to be relected. Multisig signers can come to a consensus prior to the nomination period and decide to nominate only one candidate for the community.
In the scenario that multiple candidates are nominated, the YFI community will vote in a token weighted vote for the Operational Lead. The candidate who receives the most token weighted votes for Operational Lead wins.
The Operational Lead of Yearn has full commit approval abilities for all code that doesn’t affect the treasury fund. Furthermore, the Operational Lead is in charge of vetting new strategies that have come from the community, determining what percentage strategy composers should receive of revenue or deposits that stem from the strategies, and proposing mergers for YFI holders.
A “merger” is anything that requires any of Yearn’s strategies/vaults to merge with an existing project’s strategies/vaults, usually leading to an increase in TVL. A merger must be approved by the community in a token weighted vote.
In this definition, Pickle and Cream would be considered mergers, but Cover would not be considered a merger.
The reason why mergers must be voted upon by the community is the following:
- Yearn brand can be dramatically affected by a merger
- There is technical risk when combining Yearn’s existing strategies/vaults with the strategies/vaults of other projects
- New developers will be officially joining the Yearn team and will be compensated with treasury funds that are owned by the community
After the Operational Lead proposes a merger, there will be a one week voting period for the token weighted vote. If more than 50% of the YFI token weighted vote that participated in the vote is “for” the merger, the merger is executed. In this system, a non-vote is an abstention.
Other YFI compensated team members
The Yearn Operational lead should propose who they think should be compensated as a team member. Each time a new team member, or a slate of new team members in the case of a merger, is proposed, the Yearn community must vote to approve these new team members in a “for” or “against” vote.
Each team member must be voted back in every year.
In this structure, the YFI community votes for everything related to treasury funds being utilized. Additionally, they vote for who the multisig holders should be every year and they vote for who the Operational Lead for the year should be that is nominated by the multisig holders. Finally, the community votes on mergers.
These bylaws should be posted on a Yearn related website and should be referenced when there is a conflict. The rules of governance can be amended by the community at any time with a 2/3 super majority of all existing YFI tokens.
In the future, the governance structure can implement a reputation system so that people who contribute more to Yearn might have more say rather than having 1 YFI = 1 vote.
We at The Ether are developing a reputational framework that could be utilized for this purpose if the Yearn community believed it would be useful.
If you are interested in debating why or why not this proposal should be implemented, you can post arguments on a claim we created here.
Proposed by Mattison Asher and Julien Bell
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