The Yearn Finance decentralized finance aggregator is undergoing a proposal vote that, if passed, will result in the minting of more YFI tokens to safeguard its future development.
The massive hype that occurred when Yearn Finance launched during last year’s DeFi boom was largely centered around its token supply. With a limit of just 30,000 YFI tokens, they were perceived as very exclusive. Hence, their price skyrocketed to four times what Bitcoin was trading for at the time.
There was no official hard cap set in stone at the time, however. In order to “safeguard its future,” the Yearn community has been discussing another mint for its recently approved YIP-56 proposal, “Buyback and Build Yearn” (BABY).
The proposal to use YFI staking rewards to buy back YFI on the open market to use as contributor rewards and other Yearn initiatives was passed with a 99.4% approval.
Minting Another 6,666 YFI
The current proposal is to mint more tokens for developers and the treasury;
“Mint 6,666 YFI. Use ~1/3 of minted YFI to reward key contributors and put ~2/3 of minted YFI in the Treasury under the control of the community through future proposals.”
The team believes that this latest funding proposal consolidates the vision of the BABY proposal while still retaining core contributors. Unlike rival platforms Uniswap and Compound, Yearn did not allocate any of its $500,000 treasury pot to the team.
Yearn, which also tweaked its fee structure recently, desperately wants to prevent its core developers from defecting to rival projects with better incentives, so the proposal to mint more was created. It added that minting may be the only option;
“Given that a conservative figure is presently an order of magnitude higher than annualized YFI holder income, the only reasonable way to bridge the gap in the near-term is through a mint.”
6,666 YFI tokens currently account for 22% of the supply. An increase of around 20% was determined to be the minimum viable amount to provide a competitive retention plan. It stated that this was in line with what other platforms have done. Aave, for example, minted 23% when it migrated from LEND to AAVE.
At the time of writing, the proposal had gained 70% approval with 209 votes out of 298. A formal governance vote is expected to follow.
YFI Price Update
Despite dropping back over the past couple of weeks, YFI is still up 38% since the same time last month. It currently sits 26% away from its all-time high, however.