Yearn.finance’s core contributors and community members have submitted a proposal to increase the supply of YFI by 22%, or minting additional 6,666 tokens, worth around $200 million at current prices.
The proposal is the result of a wider debate about developer incentives for decentralized finance’s (DeFi) original yield vault project.
Other popular DeFi platforms such as Aave (AAVE), Synthetic (SNX), and 1inch (1INCH), reserve around 20%-30% of token supply for team members and contributors. By contrast, Yearn, which has a merely $500,000 treasury, has not reserved any YFI token supply to incentivize the team during the project’s “fair launch” liquidity mining event.
The proposal, titled “Funding Yearn’s Future”, noted Yearn’s launch “did not provide adequate incentives to retain existing and future contributors on an ongoing basis, nor did it provide the protocol with a war chest to fund future activities.”
“Let’s not be Bitcoin. This idea of hard caps for start-ups is very romantic but not necessarily the best execution path for maximal value,” a participant in Yearn’s governance forums wrote.
Token Mint Supports Yearn’s Buyback
The token mint proposal aims to “evolve the fair launch” and “safeguard Yearn’s future development”. It calls for a one-time mint of 6,666 additional YFI tokens, increasing YFI’s currently 30,000 supply by 22%, a third of which would be used to compensate current and early contributors, and the rest would go to the Treasury.
Yearn’s Operations Fund will oversee the Treasury which will be deployed, subject to Yearn’s existing governance, for uses including future contributor incentives, liquidity mining programs, staking rewards, protocol mergers and talent acquisitions, as well as cross-protocol incentives to tighten cooperation across the ecosystem family of projects.
This benefits Yearn by “capitalizing the Treasury to a scale comparable to industry peers in order to better support growth,” the proposal noted.
A “Compensation Working Group” will also be convened, and it will determine the exact distribution structure of the compensation tokens (2,222 YFI tokens).
Additionally, the proposal mentioned the benefit of the token minting to the community, as it moved forward with the Yearn Improvement Proposal called Buyback and Build Yearn (BABY) proposal.
The token mint would further support the BABY policy, which, according to the proposal, will only be able to buy 100-300 YFI tokens per year. “Earnings will likely not be enough to accumulate a sufficient amount of YFI for the Treasury,” the proposal authors contend.
With a positive sentiment across the community, the proposal will likely proceed to be voted on-chain at the end of the week.
At the time of writing, Yearn.finance’s native cryptocurrency YFI is trading at $32,322, down 7% over the last 24 hours.