Yam Finance (YAM)

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Basics

"A DAO that funded itself via a rebasing mechanism (found in algorithmic stablecoins), and has used that funding to produce the Umbrella Protocol, a smart contract insurance platform, and Degenerative Finance, a platform focused on building unique synthetics on UMA Protocol. And there’s still plenty of capital left over to fund more ventures."

History

"Timeline of events:

  1. YAM launched
  2. Bug found, YAM needs saving
  3. YAM couldn’t be saved, post-rescue attempt update posted
  4. YAM migration plan announced
  5. YAM sets up a Gitcoin Grant and raises over 100,000 Dai

All of this happened in about 3 days!"

"Daniel Elitzer: We’ve been kicking around some ideas, and obviously, just very deep into DeFi. We're inspired by seeing Ampleforth and just, personally, at first, I thought it was pretty stupid and then, as I saw it being used more, realized how interesting of a mechanism this actually was with the rebases, and we were all very inspired by YFI, and how that was distributed and then grew, and was very active in the Compound governance process as well. 

Clinton and I collaborated on a couple things previously, but I hadn't really worked with the other members of the team before. It was just really incredibly even over the short, 10-day time that we were working on this, everybody got their hands involved in a lot of different pieces of the concept and how it came together. Clinton was just an absolute wizard doing all the front end stuff, which has then turned into the template that is being used by all of these different yield farms. Brock, obviously, just incredible, doing all the substantial smart contract developments. Then Trent, Will and I helped a little bit more with strategy, communications and other things.

YFI + AMPLEFORTH = YAM

I think at the core, it was the idea of having a rebasing currency that was building a treasury, if it grew, that it would build a treasury to create some floor potentially underneath it and then do it fully on-chain governance from day one."

Audits & Exploits

"While the initial creators of the Yam protocol have made reasonable efforts to attempt to ensure the security of the contracts, including forking much of the codebase from existing well-audited projects and soliciting review from friends, nothing approaching the rigor of a formal audit has been conducted at this time. This was a 10-day project from start to launch. We STRONGLY urge caution to anyone who chooses to engage with these contracts and think a proper professional audit would be highly advisable if this project gets any meaningful use."

  • From The Defiant (19-8-2020):

"After receiving $115k in donations to seed a security audit, Yam presented a two-phase rollout in which the protocol transitions to a fully audited system."

Bugs & Exploits

  • There was a governance attack on the DAO that has been thwarted. From their twitter (9-7-2022):

"An unverified contract was deployed and governance proposal submitted via internal transactions to make it harder to notice. But the attack was noticed and the proposal has been cancelled."

"Yam Finance post mortem from minting 20 billion YAM in error."

  • From The Defiant (19-8-2020):

"Despite V1 marked as a failure, optimistic farmers have continued to farm YAM, with roughly $175M in DeFi tokens still staked in the protocol."

"Yam Finance TVL went from $0 to as high as $500M, now to $280. YAM token jumped over $150 and is now trading at just below $1. The team discovered a bug in the code, which the community organized to fix, but ultimately made governance impossible. It was at this time that a bug was found in the unaudited code where the YAM reserve inflated by 10x more than what was originally anticipated. The reserve is designed to purchase funds from Uniswap’s YAM/yCRV pool, but the inflated supply meant it would be impossible to reach quorum as the new YAM doesn’t have voting rights. Governance would be blocked, and so would funds in the treasury. The community of YAM holders rallied to pass a governance vote in which rebases are paused and governance is migrated to a new contract. YAM token holders were called to delegate their voting power in exchange for added rewards so that the team could submit the bug fix, and while the vote count was low at first, the YAM count quickly picked up, culminating in a nail-biting event which came down to the wire. Ultimately, not even the fix could save Yam governance. “We concluded that the rebaser bug would interact with the governance module and prevent this proposal from succeeding,” the team wrote in a blog post. So where does YAM go from here? The token will continue to exist, with its supply expanding and contracting to keep its $1 peg, and YAM can still be farmed from staked tokens, but there will be no governance possible. The YAM/yCRV Uniswap pool, which now holds $1.4M in liquidity, remains unsafe and traders should withdraw their funds. The Yam team will look to relaunch following a community-funded audit. “If the funding goal is reached, upon the completion of the audit, we plan to support the launch of YAM 2.0 via migration contract from YAM.”

Governance

DAO

  • Once the tokens are distributed, YAM holders will entirely govern the protocol.

Treasury

"Total Revenue: $414.02 - YamDAO earned $414.02 worth of Sushi Tokens from its YAM/ETH SLP incentivizer.

Total Expenses: $125.864.16 - The lion’s share of these expenses are payroll expenses, paid in USDC.

While the revenue shortfall of the DAO was negative again in Q2, the shortfall has been lessened, mainly due to limiting expenses. Most of the change came in the dollar amount of YAM paid out due to the DAO losing a contributor paid entirely in YAM. The runway that the DAO has available using its treasury should extend multiple years, even in a bear market. But the treasury’s YAM reserves are now depleted. There is a new proposal to mint YAM on an on-going basis to pay contributors on a monthly basis.

Total Q4 Non-YAM Treasury Asset Value: $3,052,969.76

Change in Value from Previous Quarter: -$2,600,635.51 (46% decrease)"

  • Portion of Rebase Used for Reserve: 10%.
  • From their quarterly treasury report (2-1-2021):

"The Yam treasury was initially funded through positive rebases: a portion of each supply expansion was used to purchase yUSD for our community governed treasury. This has led to the Yam Treasury accumulating 2,500,000 yUSD (valued at ~$2.9M USD) within 45 days of the YAMv3 launch.

During this process, the Yam community has decided to:

  1. Direct 1% of all Treasury Inflow to Gitcoin Grants
  2. Purchase ETH + DPI to farm INDEX
  3. Allocate YAM/ETH LP Tokens to farm SUSHI

On December 29th, 2020, the Yam community voted to disable the treasury funding and rebasing / elastic supply function of YAM. The Yam treasury will no longer receive infusions of ETH from positive rebases.

Yam is building the “Great Yam Wall,” which will allocate funds to execute buybacks if Yam’s marketcap is ever less than the treasury value."

"The rebase removal proposal also suggests implementing 3% annual inflation to continue growing the treasury. Still, there’s a separate vote against adding ongoing issuance to the protocol."

  1. "Total Non-YAM Asset Value $7,296,607
  2. Total YAM Asset Value $5,743,639"

Token

Launch

  • YAM was distributed in the spirit of YFI: no premine, no founder shares, no VC interests.

"The token was born with “zero value” and without an audit, as the Medium post specified. Still, yield farmers couldn’t get enough YAMs and according to Etherscan $90M USD was deposited in the protocol within the first 90 mins, while YAM price jumped to ~50 DAI –– which sounds a lot more impressive when you take into account it was supposed to be pegged to $1. Less than 24hrs later, more than $400M has been deposited in Yam’s smart contracts, and YAM has climbed to ~$95. The only purpose of these pools of tokens is to get YAM rewards, which are producing double-digit weekly returns."

"A new governance token for people to farm that offers APY’s from 1,000% to over 10,000%. You can farm this token using a range of other “DeFi Tokens” including ETH, YFI, LINK, LEND, COMP, MKR, SNX and AMPL. The most amazing thing about this whole launch is that the Yam Protocol went from $0 locked to over $400 million in just ~18 hours which I believe is a record for all of DeFi. This growth was possible because of the fact that the protocol allowed multiple very popular tokens to be staked to earn YAM (which also led to a price rise in these tokens which turned this into a feedback loop of sorts)."

  • From The Defiant (12-8-2020):

"Yam Finance TVL went from $0 to as high as $500M, now to $280. YAM token jumped over $150 and is now trading at just below $1. The team discovered a bug in the code, which the community organized to fix, but ultimately made governance impossible.”

Token allocation

"Underpinning YAM are rebases every 12 hours, meaning the supply contracts and expands by trying to reach a $1 peg. This phenomenon is what drove AMPL’s marketcap by more than 500% in the past month once 4chan got wind of being able to hold extra tokens earned from rebases.

The supply of YAM is initially set at 5M tokens, split as follows:

  1. 2M to YAM farmers over the first 7 days
  2. 3M to YAM LPs for the yCRV/YAM Uniswap Pool"

Utility

  • From Token Tuesdays (12-8-2020):

"YAM is the governance token of Yam.finance - a platform with no purpose other than to farm YAM by staking popular DeFi tokens. 10% of the daily rebase is used to purchase yCRV (interest-earning stablecoins) and seed a yield farming treasury."

"In addition, it is possible to give “fee rebates” for YAM holder who stake their token. Imagine someone who uses a lot of Degenerative Finance projects.This investors could potentially save a lot of fees. This “fee rebate” and staking mechanism has not been implemented yet. We want to create adoption for Degenerative Finance and Umbrella and then the community can vote any mechanism that will accrue value to $YAM.

It’s important to understand the synergies among the projects in order to drive value to YAM:

  1. DAO House will drive demand and visible fees to YAM. This should increase the price.
  2. Any YAM incentives for Degenerative Finance will increase in value, attracting more TVL. In return, there are more people who want to create synths, creating more TVL, higher YAM price, higher APR etc.
  3. This will launch a flywheel of positive reflexivity that also benefits Umbrella and DAO House as well as future projects."

Token Details

Tech

  • Whitepaper can be found [insert here].
  • Code can be viewed [insert here].

Implementations

"Because of its elastic supply, YAM is not a standard ERC-20 token and it could be risky to use it as collateral in pools or other protocols. We already saw how experimenting with token standards led to a Balancer Labs pool getting drained."

How it works

  • Removed its rebase system after a vote (29-12-2020). How it used to work can be read below:

"It’s like Ampleforth, so it trades volatility in price for volatility in supply – which is still volatility. One key difference, however, is that each time YAM expands the supply it automatically buys the revenue-generating coin, yCRV, on Yearn.Finance. YAM is distributed by users putting funds into different liquidity pools, and YAM very much leans into governance."

"Yam is an experimental protocol mashing up some of the most exciting innovations in programmable money and governance. Built by a team of DeFi natives, it features:

  1. an elastic supply to seek eventual price stability
  2. a governable treasury to further support stability
  3. fully on-chain governance to enable decentralized control and evolution from Day 1
  4. a fair distribution mechanism that incentivizes key community members to actively take the reins of governance

At its core, YAM is an elastic supply cryptocurrency, which expands and contracts supply in response to market conditions, initially targeting 1 USD per YAM. This stability mechanism is supplemented by one key addition to existing elastic supply models such as Ampleforth: a portion of each supply expansion is used to buy yCRV (a high-yield USD-denominated stablecoin) and add it to the Yam treasury, which is controlled via Yam community governance.

We have built Yam to be a minimally viable monetary experiment, and at launch there will be zero value in the YAM token. After deployment, it is entirely dependent upon YAM holders to determine its value and future development. We have employed a fork of the Compound governance module, which will ensure all updates to the Yam protocol happen entirely on-chain through community voting. Immediately upon launch, ownership of every contract in the Yam protocol is given to the time-locked governance contract, controlled by YAM holders."

Staking

Fees

Upgrades

  • From The Defiant (19-8-2020):

"After receiving $115k in donations to seed a security audit, Yam presented a two-phase rollout in which the protocol transitions to a fully audited system. Once the results of the audit have been implemented, YAM2 will undergo a migration to YAM3 - the final form of the protocol (for now) which incorporates all code updates and re-enables both rebases and community governance of Yam’s treasury in Curve Finance’s liquidity pool yCRV."

"Yam Finance relaunches with a migration from its V2 to V3 contracts and YAM yield farming campaign."

"Yam Finance v3 is an elastic-supply token project that’s been optimized and audited to overcome shortcomings in the original Yam protocol."

  • Removed its rebase system after a vote (29-12-2020).

Liquidity Mining

Scaling

Interoperability

Other Details

Oracle Method

Privacy Method

Compliance

Their Projects

DAO House

"DAO House is a turnkey, customizable, on-chain, and actively managed treasury management solution for DAOs. Featuring an active portfolio manager who can respond to changing market conditions quickly — all within guardrails and smart contract restrictions — and all under the full control of the DAO. DAO House was designed by Yam Finance to serve as a DAO cornerstone for future growth and long-term sustainability. yamHOUSE: The token that represents assets within the YAM DAO House Set"

Umbrella

The Yam community now has its sight set on a suite of DeFi products, including an insurance product called Umbrella.

"The Umbrella Protocol is designed with these factors in mind, featuring perpetual ERC20 streaming coverage, immutable coverage pools, and permissionless factory-based pool creation that allows for customization and iteration over time.

In building Umbrella, we’ve taken inspiration from factory designs pioneered by Uniswap and Balancer, token functionality similar to Compound’s cTokens, and a funding model inspired by crypto’s perpetual futures markets. The result is a new experiment in DeFi protection."

YAM Factory

  • Incubator for novel DeFi concepts based by community input.

Yam Synths

  • Their first product is uGas, which offers futures on gas prices (17-1-2021).
  • Another product is uPUNKS (22-6-2021).

Roadmap

  • The YAM team provided a roadmap update (5-10-2020) covering 4 key areas - protocol, treasury, ecosystem/community, and organization.
  • From EthHub #130 (7-9-2020):

"This post from the Yam Finance team summarized all of the changes that will be included with Yam v3 (as voted on by YAM token holders)."

  • The new roadmap is expected in early April (12-3-2021).

Usage

Projects that use or built on it

Competition

Pros and Cons

Pros

Cons

Team, Funding, Partners

Team

  • Full team can be found [here].
  • From its announcement (11-8-2020):

"The Yam protocol was crafted and planted by Brock Elmore, Trent Elmore, Clinton Bembry, Dan Elitzer, and Will Price. It will be left entirely to those who choose to farm YAM to decide the future direction and evolution of the protocol and its crop(s). We have no collective entity or interest other than an excitement to see how this experiment plays out. At this time, we have no intent to play a further role in the Yam protocol, aside from some of us expecting to harvest YAM on a modest scale on equal footing with all other farmers."

Funding

  • The Yam Finance community voted to purchase $250,000 worth of the Index Coop Set for the Yam treasury (6-10-2020). They are voting to farm INDEX tokens with it (2-11-2020).
  • According to its treasury report (15-4-2021) it had a total income of $1,681,302 for the first quarter. Total general expenses paid from multi-sig general expense fund was $34,811 in $YAM.

Partners 

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