Much better than what we wrote…
— yearn.finance (@iearnfinance) July 18, 2020
For those who missed it, the YFI token launch was met with unprecedented demand, despite the literature openly stating that the token has zero value outside of governance. To synthesis the root of demand, yield farmers flocked to the three different pools in which YFI could be ONLY be earned through liquidity mining. Given there was no premine and no IDO, this launch provided an open playing field for anyone to get involved at the ground level.
The token is to manage the platform. If you aren't interested in managing the platform, stay away from the token. pic.twitter.com/KE0dk24s3z
— yearn.finance (@iearnfinance) July 21, 2020
At its peak, YFI traded at $2,500/token, representing a nearly 80x gain from it’s first recorded listing price of ~$30/token. This high price fueled APY’s as high as 1800%, as the value to be earned from farming attracted over $150M worth of new capital in the span of 72 hours.
$78M daily trading volume, $168M TVL. That's our ATH metrics so far!
Just to sink that in. Daily trading volume is higher than Kraken's today, and half of Coinbase's pic.twitter.com/HXbNi4j4Pc
— Curve (@CurveFinance) July 19, 2020
These returns in tandem with extensive composability built on unaudited contracts led many prominent community members to head caution on those flocking to these pools with little to no prior insight or semblance of risk awareness. The contention peaked with the discovery of YFI minting belonging to yEarn’s founder – Andre Cronje – who *could* have minted infinite tokens to drain the DAI/YFI pool of $66M worth of DeFi’s defacto stablecoin at the time of writing.
Balancer responded to this issue by posting a severe warning message, doing everything in their power to warn users from entering a pool with risky assets. Still, yield farmers flocked into yEarn pools in heaps, as yEarn’s Proposal 0 looks to suggest that the supply will be capped at 30,000 YFI in perpetuity following the end of it’s voting period on July 23rd.
Where is yEarn Now?
In response to the crisis regarding YFI minting, Andre has transferred ownership of the YFI governance contract – responsible for setting who can mint new YFI – to 9 trusted community members via a Gnosis Safe 6/9 multisig. More on this process can be found here.
— ChainLinkGod.eth (@ChainLinkGod) July 21, 2020
This decision also came with two newly launched discussion channels, including a yEarn governance forum and a Discord channel. It’s important to highlight that all of these mediums were established by community members with no compensation in mind – further tying into the truly community-owned ethos of the ongoing experiment.
Looking to participate in @iearnfinance governance?
Forum for all things $YFI now live⚡️
More details on Propsals 0 & 1 🔽https://t.co/Nmbbp59sjN
— Cooper Turley 🔥_🔥 (@Cooopahtroopa) July 20, 2020
With over 4k views and counting on the forum in its 48 hours of launch, it’s clear that all eyes are pointed on one of DeFi’s most interesting forms of decentralized governance to date. The community has suggested a suite of new proposals that are set to address issues regarding the supply, fee claiming, and emission rates of remaining YFI.
As if it wasn’t obvious, the launch of YFI drastically exploded beyond anyone (including the founders) initial expectations. When asked for comment, Andre stated that he “was hoping this would move a lot slower than it did”.
Alas, here we are and the conversation is only just getting started. It will be extremely interesting to watch how the DeFi community looks to navigate a rapidly evolving beast of a governance token.
Those participating in YFI should take full note of the risk they are taking on and that experiments like this come with an even more significant degree of risk than your typical yield farming opportunity.
To add some color to the story, it’s fascinating to consider just how much impact a black swan even could have had on the wider DeFi ecosystem. While various aspects of that risk are still looming, it’s refreshing to see prominent community members band together to establish mechanisms for constructive discussions to take form.
If nothing else, yEarn goes to show DeFi is ripe with individuals willing to participate in governance, and one can only hope that over time those incentives to participate stem from making the world a better place, rather than to enrich themselves.
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.