Summary

Details

Currently, there are 3 active vaults. 1 where anyone can deposit DAI/USDT/USDC. At the time of this writing, any funds in these vaults are earning an approximate yield of 12% annually (12% APY), however, the individuals who have deposited their funds in these vaults do not receive any of this yield. Instead:

47.5% of the yield goes into the Autonomous Money Pile (AMP) 47.5% of the yield buys YFBETA tokens from Uniswap and burns them forever 5% of the yield is reserved for gas fees

This means that there is no personal gain to be had by depositing money in the existing vaults. To create an incentive to deposit funds, there is an ‘emission period’ of 30 days starting on approximately September 21, where each vault will directly reward depositors a total of 100 YFBETA tokens each day. This leads to a total of 9000 tokens being printed. The amount that each depositor receives can be calculated as:

Daily YFB Reward = 100 * [Deposit Amount] / [Total Value Locked] Daily USD Reward = [Daily YFB Reward] * YFB_PRICE

As of this writing, the APY received through this emission bonus is sitting at approximately 200%. Needless to say, there is a clear incentive to deposit funds in these vaults right now. Unfortunately, this hyperinflation of YFBETA tokens has caused prices to plummet from $1300 per token down to $230 in less than a week.

Valuing YFBETA Tokens

From the outline above, it would appear that anyone can enter the vaults so long as they are willing to deposit stable coins…and that is correct. There is no requirement or benefit to having YFBETA tokens in any way through the existing vaults. In fact, the only purpose of the tokens is to sell them to the open market to get your profit. A good question to ask might be who is buying YFBETA tokens and what value do they have?

Holding YFBETA tokens represents a partial ownership of the AMP that is growing through the yield generated by the vaults. With a max supply of 30,000 tokens, this essentially means that the absolute minimum value of 1 YFBETA token is:

YFBETA Price >= [AMP Value] / 30,000

Investors who believe that the AMP will grow to a significantly large size are buying tokens now while they are cheap, in the hope that they will be worth more in the future. In other words, they are playing a long term game where supply is guaranteed to fall (due to the burn mechanic), however the speed at which the AMP grows and the supply drops is critically dependent on the value locked in vaults. It should be noted that another two emission periods are planned in the near future, where another 9000 YFBETA will enter the market.

The Problem

There are a number of issues here:

During the emission period(s), the YFBETA price drops like a rock due to hyper-inflation. A falling YFB price is not attractive to new investors when they first hear of the ecosystem. Once the emission period is over, there is no personal gain by continuing to participate in the vaults, since the return will only add to the AMP and reduce supply of YFBETA. If you are not a YFBETA holder, then you would be best placed to move your funds elsewhere. Putting all of this together suggests that the future for YFBETA is that hyperinflation will drop the price per token significantly, and once the max supply is reached and there is no more emissions, everyone will exit the vaults and the AMP will not grow. This leaves the AMP very small, and consequently leaves the YFBETA token with very low intrinsic value (AMP / 30,000).

The fundamental issue is that there is no reason to stay in the vaults once emissions finish, and the only reason to hold YFBETA is for long-term faith that one day the AMP will be large AND that you will be able to redeem these tokens for the value stored in the AMP at some stage in the future.

Possible Solution

There is a critical need to create a more short-term value in holding YFBETA tokens in order to balance the supply/demand equation. This will be attractive to those who are looking to invest over a shorter horizon, and those who have no confidence that some day YFBETA tokens can be redeemed for cash held in the AMP. The solution is to simply modify the payout structure of the yield:

40% of the yield goes into the Autonomous Money Pile (AMP) 40% of the yield buys YFBETA tokens from Uniswap and burns them forever 10% of the yield is paid out to directly to depositors 5% of the yield is paid out to YFB holders. 5% of the yield is reserved for gas fees

Note, the %'s above can certainly be modified if deemed necessary. The introduction of this 5% payout gives an immediate value to holding YFB tokens and a competitive landscape arises. If the total value in the vaults is significantly large, then 5% of the yield corresponds to a very high return that is worth chasing after. In the meantime, the AMP will continue to grow (albeit at a smaller rate). A new problem is created however, which is what is the incentive of adding to the vault if you just need to lock up your YFB tokens to receive that 5%? A solution to this would be to enforce a deposit : YFB ratio requirement. For instance, for every $1,000 deposited, a maximum of 1 YFB can be locked up for the purpose of earning the 5%.

This combination of short-term and long-term value creates a duality where holding the tokens gives you an immediate return that you can cash out with at any time, but you also have comfort in knowing that the tokens you are holding are steadily increasing in value due to the burn mechanic working in your favor. It is my hypothesis that the reduced AMP rate (47.5% to 40%) will be offset by having a larger Total Value Locked in the vaults. I also believe that a more optimal solution would be to also include hybrid vaults in this design with different % breakdowns and risk profiles.

Additionally, the existing emission period has a very high APY of 200%, without any risk of capital. It is likely that a longer emission period, or a non-linear release of YFBETA tokens would still create enough of an incentive to keep funds locked in the vault. For example, if the current emission period was 60 days instead of 30 days, the APY would be 100%, which is almost certainly going to keep investors locked in vaults, with the added benefit that the AMP can grow for twice as long.

I think a combination of a slower emission schedule and an immediate benefit in holding YFB tokens creates price stability, and a longer term incentive to remain in vaults after emission periods are over.

TL;DR

A vote for Yes means: We would add an incentive to any new vaults that allows users to optionally stake yfB to earn a % of the vault profits. Users who choose to stake yfB for these rewards must also have a minimum amount of value locked in the vault. The profit will be shared across all users who are staking yfB in the same vault, in proportion to the amount they have staked.

The introduction of this idea converts yfB into a dividend paying token, causing immediate demand to increase the circulating supply to decrease as more yfB are staked in vaults. This is likely to lead to increased token price in the long term.

A vote for No means: No change to the current system and no yfB can be staked in any vaults.