The Weekly Yax #13: Emissions Strategy

The Weekly Yax is the easiest way to keep up with the yAxis Project.

Every Sunday, we highlight major news and developments, alongside key takeaways from the week’s episode of Ya Herd?

Major News & Developments

Ya Herd? Week #13 Key Takeaways

The driving purpose behind this week’s episode was to foster well-informed, objective community discussion around the yAxis Project’s emission strategy for Era 2 and beyond.

Role That Emissions Play

At their core, emissions are essentially a mechanism for incentivizing users to utilize a platform. “Liquidity mining,” “user rewards,” “liquidity incentives,” etc. are all variants of emissions strategies. One of the most notable (and successful) examples of an emission strategy within DeFi is Uniswap’s usage of UNI liquidity mining rewards to bootstrap its liquidity provider userbase. While Amazon operates in a non-DeFi market vertical, the story of their rise represents a great parallel to the concept behind emissions. For years, Amazon operated at a loss and sold their product under their costs, which is essentially the same concept of “paying” users to use their platform. Ultimately, Amazon bootstrapped a massive userbase with this strategy and has since shifted to extracting value from their userbase. This is the general lifecycle of a successful user incentive strategy.

Protecting the Token

Because emissions mean that you’re paying for users to use your platform in your own token, projects like yAxis need to be cognizant of protecting the value of those incentives. A couple of key considerations include:

  • Adapting to Broader Market Conditions — Bearish market conditions typically cause product users to dump, rather than hold onto, their governance token rewards. The yAxis Era 1 emission strategy was decided during bullish market conditions. yAxis certainly plans adapt to the current shift in market conditions for Era 2. Community sentiment in the Forum discussion seems to be rallying around a “ramped up” emissions approach for vault users that scales proportionate to TVL and underlying base yield to protect the YAXIS token from mercenary capital sell pressure.
  • Driving Token Utility — The goal is to make governance token rewards useful so that product users would rather hold them than sell them. The Curve Finance ecosystem is a leader in this discipline with its Gauges, which yAxis is implementing as a major improvement to Era 2 tokenomics, and cvxCRV, which uses Convex Finance to turn CRV into a highly productive asset. Using a portion of the CRV from the Metavault performance fee and turning CRV into cvxCRV to earn cash flows for the yAxis stakers and treasury is another idea being considered in the Era 2 Forum Discussion.

How Emissions Can Create Value

For more mature projects, the holy grail for an emissions strategy is to establish the condition where the marginal value created per $ of emission is greater than the value of the emission itself. Prominent DeFi investor Andrew Kang recently offered a great Twitter thread on this topic if you’d like to read more. Achieving this condition is a mid-term goal for yAxis, which becomes more feasible as we target less competitive asset classes, such as BTC | ETH | LINK with Canonical Vaults, and roll out better strategies.

Currently, for early-stage projects like yAxis, emissions help bootstrap a userbase, which opens the door for the generation of network effect and sticky users. The end goal is to generate future cash flows from these stick users who enjoy the UX even in a non-emission environment — as evidenced by the Uniswap example mentioned earlier.

Facilitating yAxis’s Long-Term Vision

yAxis has mentioned many times its long-term plan to attract sticky users — so how do emissions feed into this plan?

The answer lies in bootstrapping a userbase of more speculative capital with a higher risk tolerance (and thus demands higher yields) to allow yAxis to operate with high TVL for an extended period. This time operating at scale generates brand trust and Lindy Effect. Marketing a product that’s already proven to operate effectively and securely at scale then enables yAxis to attract stickier users that see value in the product. At this stage, yAxis is able to leverage the Lindy facilitated by emissions and speculative capital to scale down emissions and focus on loyal capital that doesn’t need emissions — feeding into the broader institutional capital strategy with the COSIMO X strategic backing.

The full recording of this week’s episode can be found here (sorry for the quiet audio this week).

yAxis Project Stats of the Week

Community Content Spotlight

This week’s community content spotlight goes to Lover Plaid (aka FlannelHandler), who wrote a thoughtful comment on the Era 2 Emissions Forum Discussion. Lover Plaid put forth some insightful suggestions — rewarding sticky vault capital, ramping up emissions for vault users over the course of the Era, and penetrating the noise of the crypto space during the Canonical Vault launch — that we were able to walk through on this week’s Ya Herd for all community members to hear. While much of Lover Plaid’s sentiment is shared by the yAxis team and active community members, yAxis welcomes input from all perspectives. Feel free to add your thoughts to the Era 2 Emissions Discussion here. A vibrant and active community continues to propel the yAxis Project through all market conditions.

Join Us: Bounties & Jobs

Coordinated by the yAxis Champions Programme, the yAxis Bounty Board lists requests for proposals (RFPs), where community members can respond to specific Project needs and receive compensation upon task completion. See the current opportunities below and check the Bounty Board frequently as more opportunities will be added over time, such as the Convex Development Bounty added this week.

If none of the current opportunities appeal to you, but you would still like to contribute, reach out to waali@yaxis.io. You have the opportunity to shape the next era of yAxis.

That concludes the thirteenth edition of The Weekly Yax. Thank you for reading and looking forward to many more!

Onward and upward, Yax Herd!

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