- Yearn Finance contributor proposes overhaul.
- It will divert protocol revenue to YFI token holders.
- The new initiative must pass a DAO vote.
A Yearn Finance contributor has proposed a complete overhaul of the decentralised finance protocol in a bid to align stakeholders and kickstart growth.
The three-part proposal, authored by pseudonymous contributor 0xPickles, aims to centre the organisation around generating revenue, make contributors more accountable, and share value with holders of the protocol’s YFI governance token.
The most significant change is that the majority of all the revenue the protocol generates could soon be sent directly to those who lock up their YFI tokens.
“This proposal creates a new deal,” 0xPickles said. “90% of future revenue goes to stYFI holders, empowering them.”
Right now that’s not a huge amount of money. Last month, Yearn generated just under $200,000 in profit, per DefiLlama data.
The hope is that focusing on profitability and increasing accountability will put the protocol on a sustainable growth path that will increase revenues and make the YFI token more valuable.
The proposal comes as DeFi is enjoying a wave of new liquidity, which has pushed deposits to record heights this year.
For Yearn, which was once one of the biggest DeFi protocols and hit an all-time high of just under $7 billion in deposits in December 2021, the liquidity provides an opportunity to reclaim the success of the past.
Another revamp
Yearn is an aggregator service for DeFi founded by prolific developer Andre Cronje in 2020.
Users can deposit crypto tokens, like Ether, and the protocol will automatically manage them to earn the best yields available. In turn, Yearn automatically takes a small fee for its service.
It operates as a decentralised autonomous organisation, or DAO, which means holders of its YFI token can propose and vote on changes to the protocol.
Yearn hosts just $546 million worth of deposits, a 92% decline from the metric’s all-time high, while the YFI token is down 94% from its all-time high.
It’s not the first time Yearn has attempted a revamp in recent years.
In October 2023, the protocol introduced a new vote escrow token model, similar to ones used by other protocols such as Curve Finance, Balancer, and Velodrome.
Despite support from YFI token holders, the new model wasn’t widely adopted.
“Only 3.8% of the YFI supply is locked, a figure that is in decline,” 0xPickles said. “This demonstrates a fundamental lack of interest in the model.”
‘All-or-nothing’
0xPickles’ proposal will scrap the vote escrow model in favour of a simpler staking model.
Here, YFI holders can lock up their tokens through staking to receive a split of the protocol’s revenue.
Another proposal will restructure the DAO to make it more profit focused and mandate onchain financial reporting to justify budget requests from contributors.
0xPickles cited organisational misalignment and coordination inefficiency among the reasons for the changes.
A final proposal will formalise a plan to distribute 1,700 YFI tokens through strategic contributor incentives, create a capped performance bonus programme, and establish a long-term contributor retention pool.
The three proposals are currently being discussed on the Yearn governance forum ahead of a vote.
Due to the proposals forming a single initiative, they will be voted on as a single all-or-nothing package, 0xPickles said.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
