On February 2nd at 6:00 p.m. UTC Yearn Improvement Proposal 57 passed the mandate that Yearn Finance, the decentralized and permissionless neo-hedge fund in which I work, mint 6,666 new YFI tokens.
YFI owners themselves passed this vote with 83% yes-votes and the highest level of commitment since Yearn’s now mythical start of the fair. The implications of this new twist in the history of DAOs – possibly the most important governance move in the history of DeFi’s most decentralized blue chip to date – are still being written. For me that changes everything.
Black holes & prokaryotes
I was caught up in Yearn’s vortex in late July 2020 – literally the day the YFI emission stopped. A friend wrote me “Buy YFI” and so I took a look.
It was . . . very complicated. As a nerd, I liked that. But what blew me away, what really got the hook down, was that the creator of the project, developer Andre Cronje, gave away all tokens. All of them. He didn’t hold up any or give any to its buds or investors. All 30,000 YFI tokens were distributed to users of its platform over a week. That was millions of dollars at the time. And today there are over a billion. A billion dollar gift.
And so I set out to do everything in my power to support this effort. I was so deeply inspired, like so many thousands since then, that we immediately became acolytes in the Church of the Start of Mass. I posted my earnings potential on the door and got to work.
I quickly realized that no one was responsible, at least not in the way you’d expect. Longing was a really decentralized, leaderless and aspiring collective intelligence. While there were executives who gathered strength, focused energies on goals, and gave up critical resources, there was no organizational chart, no C-suite, no direct reports, and no HR department. So I assumed the identity of a flying dinosaur (as they do in these times) and made a role for myself. I knew a couple of things so I started doing them. I was on the operation team with a rabbit and a glass of milk (the two glorious Russian hackers Banteg and Milkyklim – Daniel Lehnberg came to us shortly afterwards). Our job was to keep the wheels on the bus while the most talented engineers in the world sent code out faster than any organization I’ve ever seen.
Every company I’ve ever worked for or owned has the same basic structure, built piece by piece for a specific task. When companies are like machines, Yearn is more like a cell. It just popped up.
Andre built some sort of new whole-stuff psycho-industrial DNA, and in a matter of days a novel metabiology of collective activity emerged from nothing. This was the result of the start of the trade fair, the result of a DAO bloom in the wild without a Swiss foundation or a team supported by ICO to shape it. It was pure magic. But in perhaps the most intriguing twist of them all, it turned out that this wasn’t enough.
The fair start was like the birth of the prokaryote who could only sustain a single cell – but what Yearn wants to be is more of a monkey than an amoeba. For Yearn to work, it has to be a complex multicellular unit, a eukariote. And for that you need mitochondria.
But to remove the metaphors for Frens who read a little less science fiction than I do, what Yearn really needs is a way to process the bubbling excitement and energy in our community and into useful work for the users and YFI owners of Convert Yearn. And for that it takes money.
Yearn had a lot of money. In August 2020, Yearn paid dividends of $ 356,000 to YFI holders who put their tokens into governance – and nothing, literally zero, went into operations, salaries, or growth. A Ragtag team of geniuses worked around the clock building Yearn without getting paid. The gasoline cost was exceptional – over a million dollars last year. This and all the other issues were paid out of pocket of team members.
That was crazy. We saw how unsustainable this is and wrote YIP-41, a proposal that created a treasury of $ 500,000 and an operating budget of $ 200,000 per month. And in an inspired move that allowed both speed and accountability, that treasury was to be administered by the Multisig at the discretion of the DAO. YFI owners almost unanimously approved it with 99.9%, establishing a new paradigm of decentralized governance that we call a restricted delegation.
YIP-41 was six months ago, in August 2020. It enabled us to pay people and build the essential structures necessary for Yearn to grow. I received a recurring scholarship that was roughly 1/10 of the compensation I had earned in my previous employment and that was granted with no equity or legal protection. Others received even less, like our founder Andre, who refused to accept payments.
Developers like Banteg, who could easily start their own projects and make millions, had the same salary as me – maybe half what a junior engineer at Google would get. . . but for us who cared about something more than money it was enough.
The souls called into Yearn’s orbit in those early days did not come for the money. We could have done more elsewhere with significantly less effort. But enlightened nerds also have to pay bills.
Brrrr-less & open source
Most of the folks at DeFi know the story of how SushiSwap forked Uniswap and created an incredible community log. Much has been made of this “vampire attack” – the theory is that projects with no subsidy tokens, like Uniswap Pre-UNI, were vulnerable because someone could fork them, add a token printer on top of brrrrr incentives, and suck in liquidity with better APY (due to the additional token value). Uniswap once experienced a vampire attack and there was a riot. The same thing has happened to Yearn since YFII launched in August 2020.
Andre’s founding vision was that YFI tokenomics should be a continuous subsidy for Yearns products, but he had given control of the protocol to the community early on, so YFI’s total offering was limited to 30,000 until governance decided otherwise. This made us vulnerable. There have since been dozens of Yearn Vault v1 forks, all of which could add a token printer to run TVL. Some have added value and innovation, some have been frauds, others merely pursue clout and wealth creation. This is DeFi: Forking is part of the game, and Forkers ‘moral standing is as diverse as TV vampires’.
When added value is created, it is a win for the community. Yearn partnered with Pickle and most recently partnered with Badger – our open source and generous spirit has its advantages. And while we’ve found new ways to thrive, Yearn is significantly underfunded compared to its forks. Some forks basically have an infinite amount of brrrr and offer developers in one notable case: up to $ 90,000 per week work on strategies. Compare that to working for free at Yearn in the hope that one day your strategy will earn you some of the fees.
But like all minds drawn to Yearn, most strategists were looking for more than just money. You were at Yearn to learn and work together to invent the future of France with the greatest minds in DeFi. Even so, given the poaching efforts of competitors, some of them have had to make serious financial decisions – and who could really blame them? It was up to the Yearn community to get this right.
Buyback & Build
What should we do? It was January 2021, and the idiosyncrasies of an emerging decentralized governance process crossed with an exuberant, community-driven meme anniversary resulted in a fetishistic attachment to the number 30,000. At the time, nobody thought of increasing the supply. Our only hope was to pass more fees on to the team and strategists.
We had already started this process with our YIP trilogy: YIPs 51, 52, and 54, which together reformed our vault’s fee structure, increased rewards for strategists 20 times, and directed more sustainable funding to the core team. But that wasn’t enough. Yearn was allowed to have a maximum of $ 500,000 in his treasury, while many of our colleagues in the DeFi Protocol had over a billion – and had the forks, our direct competition hundreds of millions Acquire talent.
Yearn had the best technology and the most talented team (I dare to deny this), and we shipped faster than ever, but we lost TVL, and worst of all, we couldn’t really reward people who had sweat blood for months. We lost her.
This was the impetus for BABY: Buyback and Build Yearn. Based on Ryan Watkins from Messari, it was proposed for the first time in October 2020 to invest the system fees in growing yearn instead of paying them out as stake dividends.
This proposal initially met with a degree of skepticism, including from myself and other members of the core team, but the wisdom is now clear to me. We were too young and frankly too poor to be paying millions in dividends annually so that we could better invest in our team and grow Yearn. The community agreed and BABY agreed with an overwhelming 99.44%.
But the story didn’t end there. While BABY was still in the works, a little-known community member, YFI_LIT, posted an alternative proposal to engage contributors by minting 1,000 new YFIs.
Now it is important to remember that this was not the first time an imprint has been suggested. In fact, embossing has probably been the most suggested topic on our forum. The ability to mint coins was approved in Yearn’s first proposal, YIP-0. Plans were then suggested in YIPs 5, 8, and 30, and then suggested at least seven more times by my quick count. None of these initiatives could be completed successfully. Ten attempts had all failed – you’d think that would rule out the possibility, no?
No DAOs you see are something new. In traditional Dominator hierarchies, where top-down processes analyze rising signals and make decisions for branching work streams and people to execute, leadership is limited and fragile. A CEO who makes a decision that was previously rejected by the board ten times may not last long. But a DAO is the mind between the minds, the possibilities are endless, and leadership is available to anyone who knows how to use it.
When, like most of the team, I read the YFI_LIT coin suggestion for the first time, I was against it. I also hosted the 30k only Replicator. But then something changed. Another coin suggestion popped up. This was wisdom that came out of the collective. A voice of leadership rose from the crowd speaking to me. I questioned my beliefs and quickly realized how restricted my mind had been.
Our co-author of the BABY proposal Ryan Watkins wrote it best:
“While many in the community make fun of inflation because of the industry’s anti-Keynesian intellectual origins, the mentality in the context of the DeFi Protocols makes little sense. DeFi tokens are not money. So why try to limit inflation in favor of a scarcity meme? “
DeFi tokens are not money. It was a bit struck by lightning. The 30k cap didn’t make sense! Longing wasn’t Bitcoin, it certainly wasn’t the Fed, and the hard cap was an accident. Our minds had been hijacked by a meme. YFI should always be embossed. It just wasn’t there yet.
On the same day Ryan published this article, I started the Telegram group to write YIP-57. I asked for Ryan’s help and our Ops team, of course, and then we brought in four of the biggest YFI owners and longing supporters: Santiago Santos from ParaFi Capital, Vance Spencer from Framework Ventures, Eli Krenzke from Polychain Capital and Aleks Larsen from Blockchain Capital. Did I want their voices? Absolutely. YIP-30 had failed because a major owner changed his mind at the last minute. I wanted to buy myself in from the start. But beyond that, I wanted your help.
Venture capitalists can get a bad rap – and rightly so in many cases. But our VCs were dope. They received no bonus and were no seed capital providers. They farmed or bought it like everyone else. They were community members. Santiago and Vance had been part of our team, doing the real work, showing up for meetings and making shit possible. Real contributors and one of the most sophisticated DeFi thinkers out there. You knew better than I how beneficial an increase in supply would be.
But even with their tokens, we only had a few percent of the offer. Sehnsucht is one of the most decentralized DAOs, nobody has enough tokens to overwhelm the collective. And even if we did, it would have broken the community. It was up to us to make the best possible argument and leave it to the DAO to decide. This is the way.
In the next two weeks, I experienced what was arguably the fastest Overton window shift in DeFi history. On January 15th, the vast majority were against Mint, but by the end of the vote on February 2nd, over 80% had voted in favor. During that time, Andre and Banteg absolutely went monkey business on Twitter. Shit posting like real masters. The rest of us did our best to keep up.
Could shape up to 21m. You know, just for the memes. I’m just saying …
– Andre Cronje (@AndreCronjeTech), January 17, 2021
Price pumped 15%. We can now shape 15% of the supply.
– Banteg (@bantg) January 18, 2021
Whatever emerges from this current governance explosion, I think we are overcoming some critical cognitive limitations related to longing and its possibilities.
– tracheopteryx.eth (@tracheopteryx) January 16, 2021
Similarly epic were the debates in Yearn’s rat nest of Telegram groups. We formed a group called YFI distribution and invited to anyone who wanted to join – there are currently 73 members. Another Yearn group did crowd sourcing, which was perhaps the most compelling argument: a comparative analysis of token distributions in other DeFi projects. Seeing these numbers made our situation clear. Their treasures were over 100 times the size of ours, and they all shaped.
The core team, critical community members and complete Randos made it and covered every imaginable aspect. One after another, I would see the same message: I was totally against it, but then [insight]and now I support. The power of this cascading realization was deeply invigorating.
On Friday, February 5, after the three-day time-out for the coinage, 6,666 new YFIs were created out of nowhere. Today that’s worth more than $ 300,000,000.
But YFI is not money. While it has value, it is a governance token serving the Yearn protocol and is subject to Yearn’s DAO. YFI holders can decide what to do with YFI. We’re a messy, sticky, petty, gurgling, capital-efficient, decentralized animal that is literally breaking free of what came before.
If you had never seen a caterpillar before, how could you ever predict what might become of it? We are the cells. We don’t know how to build a butterfly on our own, but when we drive through the chaos together we become something bigger than anyone can imagine.
Next the stars
The fair start had to evolve, and the community did it that way. Growth is never smooth, especially in uncharted territory. Where many see the bumps and bruises on our way as evidence of weakness, I know that it is strength. If you were to compare Yearn with what we know, you will never see it for what it is. The next level of human cooperation requires completely new thinking in order to go beyond the coordination structures of our predecessors.
Next, Yearn has to move on to decentralized management. We have proposals in the works to move more decision-making powers from the shoulders of the multisig to a network of autonomous and self-governing teams.
We are building Coordinape, a new system of decentralized grants where community contributors decide how to allocate funds. And we implement the best concepts from teal, self-management and computer-aided social choice theories as new fascia to hold us together.
This space butterfly is ready, my chads. But we still have a lot to do. If money is the blood of a collective organism, there remains a detailed work to strengthen our circulatory system, our muscles and our organ bodies. This is where my real passion lies. I’m here because I believe Yearn is the most advanced decentralized autonomous entity in the world. It’s a new way of life.
At Yearn, we are all leaders. We don’t need permission. All we need is to separate attraction from dislike, find its roots in us, and then look up.