Yam Finance’s first successful monetary exercise yesterday marks a new start to DeFi’s original food-based token.
YAM is an experiment in rebasing cryptocurrencies, plus token incentives (aka yield farming) to drive liquidity, plus full on-chain governance, plus a DAO-like treasury managed by token holders. It’s also testing the power of the emoji 🍠.
Its Aug. 11 launch immediately attracted hundreds of millions of dollars and a fierce community rallying around the project. But a bug which rendered governance impossible was found in the unaudited code two days later, prompting it to raise funds for an audit and relaunch an improved version.
Yesterday, it passed its first test.
It targets a peg of 1 yUSD (Yearn Finance’s stablecoin) which it tries to achieve by adjusting, or “rebasing,” its supply. Whenever the price of YAM is above 1.05 yUSD, supply expands to lower the price, and when the price is below 0.95, supply contracts to raise it.
When supply expands, Yam’s treasury mints 10% of the rebase amount and sells it to the YAM/yUSD pool in Uniswap. In other words, it buys yUSD, which gets deposited in the treasury, and is managed by token holders. The project also directs 1% of inflows into the treasury to Gitcoin grants funding Ethereum public goods.
Monday was YAM’s first successful rebase. Since the YAM price was way above the peg at almost $20, supply expanded and $571k in yUSD was added to the treasury, while $5.71k was contributed to Gitcoin.
The price dropped to below $7, but YAM holders’ wallet balance increased by 2.49x. The rebase happens every 12 hours and is meant to gradually push the price back to 1 yUSD.
The future of Yam Finance is now in the power of YAM holders, who can vote to change anything from protocol parameters, to treasure management to contributors’ compensation.
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