The Weekly Yax #16: DAO Governance

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

• August 3rd yAxis surpassed 25k YAXIS bought back by the revamped MetaVault launch.
• August 6th marked the 16th episode of Ya Herd? and its podcast format.
• August 7th yAxis updated its Kovan Test Network v3 Canonical Vault deployment.

Ya Herd? Week #16 Key Takeaways

This week’s episode was motivated by the flurry of recent events (both positive and controversial) surrounding DAO governance across the DeFi landscape. These events prompted yAxis to utilize this week’s Ya Herd? as an opportunity to educate the community on successful examples of DeFi governance, common models, approaches, and trade-offs, the role of yAxis’s governance, and guidance on contributing to yAxis governance.

Governance — A Look Around DeFi

The last couple weeks have been a wild time for governance within DeFi. Below we’ve gathered a snapshot of some recent circumstances in which governance has driven positive outcomes for various projects:

• Olympus DAO and Frax Finance collaborated to mutually increase the liquidity and demand for their respective products
• Badger DAO decided to claim + stake CVX and cvxCRV, rather than sell them, for its new Convex Finance vaults. Badger believes this approach is more mutually beneficial both for themselves and Convex. An approach similar to this was discussed in Week 15’s Ya Herd?.
• Olympus DAO voted to deploy some of its treasury funds into Convex Finance and maintain a CVX position, setting up a “meta governance” scenario, as we also discussed in Week 15’s Ya Herd?.

On the other hand, we’ve also highlighted some recent governance controversies:

• Sushi’s raise, which prompted community concerns that VCs were simply attempting to give themselves a 30% discount, as opposed to the original intent of treasury diversification.
• Uniswap’s funding of an opaque DeFi Education Fund, resurfacing concerns over the robustness of Uniswap’s governance.

Note: These are examples only and the summaries provided are based on ecosystem sentiment. They are not meant as criticism toward Sushi or Uniswap.

Design Processes & Experimentation

The intellectual curiosity throughout DeFi has produced a variety of governance model designs and approaches, all of which come with their unique set of trade-offs — trade-offs that drive both the good and the bad in the circumstances highlighted above.

We’ve summarized some of these governance models, approaches, and trade-offs:

Unique Models

• Direct Voting, whose process usually involves a proposal > review period > voting period (usually with some type of quorum, in which 1 token = 1 vote)  timelock deployment if the vote passes.
• Representative Democracy, which involves tokenholders electing members of a committee that vote on protocol changes on their behalf. These elected members are usually prominent and knowledgeable members of the project’s community. Synthetix’s Spartan Council provides an example of this model.
• Consensus Governance, which is grounded in the Rule of Non-Opposition, such that the decision to proceed with any changes is based on the prevalence of “no” votes. Keeper DAO provides an example of this model.

Common Approaches

• Starting with governance rather centralized and gradually turning over more power to the community.
• Initiating project changes with a discussion in forum-like environment > community approval > forum proposal > some method to determine consensus (three outlined above) > execution upon consensus.
• Implementing a timelock before project changes are implemented.
• Incentivizing quality contributions from community members to decentralize the project’s contributor base.

Trade-offs

• More centralized = quicker-moving and avoids governance apathy issues, but less secure and more fragile.
• More decentralized = slower-moving, but more secure with greater antifragility, reliability, and longevity.
• How and when to make the shift to greater decentralization is something with which every project must wrestle. Most projects tend to wait until they are in a “stable” state with an established Lindy before handing over greater control to the community. For instance, Compound Finance waited a year from its last major code changes to cap off its multi-year process to decentralize.
• More decentralized = issues with management of core contributors to implement changes approved by governance.
• Some leadership structure within a project still appears needed to facilitate coordination, but this leadership’s power over the project should be limited.

For an in-depth discussion of some of these topics, check out 9:39-hour timestamp on this discussion from Chainlink’s SmartCon. Thank you to Kain and Robert for their contributions to DeFi governance.

Role of yAxis’s Governance

Now that we have reviewed some background on DeFi governance, let’s dive into the role of yAxis’s governance both (1) today and (2) mid/long-term:

Today

• yAxis’s weighted voting formula to helps mitigate the impact of one individual actor.
• YIP-09 allocated funding for the project’s current operations and emission schedule.
• One funding component is the Champions Programme & Bounty Board, which incentivizes community contribution and helps decentralize the yAxis’s contributor base to foster agility and resiliency.
• yAxis governance votes on strategies and major project changes.
• yAxis governance develops Forum suggestions, proposals, and discussions, such as the recent Era 2 Emissions Discussion.

Mid/Long-term

• Gauges in v3 will enable YAXIS stakers to vote to direct emissions to their desired vaults.
• DAO-directed fund management with on-chain voting enabled by automation through the planned integration of Chainlink’s Keepers.
• Approving new asset support.
• Dictating an insurance event.

How to Contribute to yAxis Governance Today

With all of the background above as context, here’s some guidance on how to contribute today:

• Staying up on recent developments in the DeFi ecosystem empowers community members to generate well-informed suggestions that help yAxis stay nimble and flexible.
• Creating yAxis Forum discussion posts with suggestions and/or adding to other existing discussions. A potential discussion topic could be detailing and vetting a potential new yield strategy.
• Fostering partnerships with other communities by making governance discussion posts about partnering with yAxis and using our upcoming v3 product launch.

The full recording of this week’s episode can be found on YouTube and now in podcast format.

yAxis Project Stats of the Week

• MetaVault TVL $5.2 million.
• YAXIS staking 76% APY (57% APR) and LP 53% APY (44% APR).
• Nearly 430 YAXIS bought back with MetaVault revenue this week for distribution in The Great Harvest.
• Over 80% of the YAXIS supply has been continuously staked for more than two weeks for the first time in project history.

Community Content Spotlight

This week’s community content spotlight goes to zac and Nicolas, two active yAxis community members, for their contributions to #💡-ideas-hub in the yAxis Project Discord. Zac suggested a fantastic idea for yAxis to potentially serve as a cross-chain meta yield aggregator with a vault product that utilizes bridges to various other chains to earn yield beyond the Ethereum ecosystem. While bridge infrastructure likely needs more maturity before such a product could be developed, innovative ideas like this keep yAxis nimble in a fast-moving landscape.

Additionally, Nicolas made a great suggestion for etf-like yield products, which contain various percentages of BTC | ETH | LINK | Stablecoins earning yield in yAxis’s v3 Canonical Vaults. To develop such a product, yAxis could partner with another DeFi project that specializes in asset management products — thereby using yAxis as the building block yield infrastructure and plugging into an established userbase. Following the v3 launch, business development opportunities such as this one certainly have us excited about yAxis’s future!

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 recently added Convex Development Bounty, which has attracted some great interest from potential contributors.

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 sixteenth edition of The Weekly Yax. Thank you for reading and looking forward to many more!

Onward and upward, Herd!