Proposal to retire Yield Delegating Vaults and reallocate Liquidity Mining rewards

Summary/Abstract:

• Proposal to retire Yield Delegating Vaults (YDVs) by setting $RLY rewards to 0 and reallocate Liquidity Mining rewards to Uniswap LP Pool

• Existing YDV capital participants can continue to leave funds in YDVs and earn the full compounding interest of the underlying Yearn vaults until it is convenient for the user to withdrawal funds

• The core team recommends users withdraw funds from YDVs as quickly as feasible, due to ongoing potential changes in the underlying Yearn Vault strategies that YDV smart contracts utilize

• Rally core development team will no longer support YDV smart contracts once rewards are set to zero

• For the deeper community discussion, please see the Discourse post: https://forum.rally.io/t/retiring-yield-delegating-vaults-and-next-steps/411

Background: The YDVs were the first feature Rally launched to Ethereum mainnet and have been an important part of early plans to distribute $RLY to supportive community members and start building a community treasury that could fund ongoing growth and development of the Rally Network. The core motivations for YDVs were:

• Introduce the Rally project to the Ethereum DeFi community
• Provide a fair distribution mechanism to start getting $RLY in the hands of contributing community members
• Enable users to earn $RLY through active participation in the Rally Network
• Create a sustainable way in which contributors could support building a community treasury without taking on significant capital risk

YDVs have largely performed as expected to date but the risk profile seems to be changing. We chose Yearn vaults for the yield delegation and $RLY distribution strategy because of the quality of their engineering team, the stability of their protocol, and our understanding of the level of risk associated with their yield generating strategies.

As Yearn builds forward on their vaults and starts migrating to their v2 design, this risk profile starts to change substantially. The Yearn v2 design allows for more rapid iteration on strategies, dynamic rebalancing within a single vault in order to support multiple strategies simultaneously, and a general move towards capital efficiency and leverage possibilities. All of these are fantastic ideas and should continue to position Yearn as a leader in the DeFi space. However, they all also increase the risk profile of Yearn vaults in a way that makes them less compatible with the motivations behind the introduction of YDVs. And this is all exacerbated by the fact that one of the seemingly minor modifications supporting the v2 transition opened the door to an exploit of one of Yearn’s v1 vaults (https://www.coindesk.com/yearn-finance-dai-vault-exploit).

Perhaps most importantly, we no longer need to continue funding the treasury through YDVs as we conclude the first part of the Rally community fundraise (https://forum.rally.io/t/community-treasury-fundraise-update-and-next-steps/378/).

Proposal

• Set all Yield Delegating Vault rewards to 0 $RLY (https://vaults.rally.io/vaults), and return the full underlying yearn vault interest to the capital contributor
• Reallocate the current Pool 6 rewards for Curve 3pool LPs to the Pool 1 Uniswap Pool LP reward (https://info.uniswap.org/pair/0x27fd0857f0ef224097001e87e61026e39e1b04d1/), increasing the Uniswap LP Rewards by roughly 15%

A Yes vote for this proposal would accomplish the following: Approval of the above terms to enable the core development team to set YDV rewards to 0 and reallocate Liquidity Mining Rewards to the Uniswap LP Pool

A No vote would result in rejection of these terms.