The Opinionated Treasury
Written by Yak Guide Bring
Yield Yak will soon deploy the $YAK token and its accompanying staking and governance contracts. Airdrop recipients will soon be able to claim $YAK tokens. Token holders will soon be able to stake and receive AVAX through the recently unveiled smart contracts.
Note: YAK token has not been deployed. Do not get scammed.
Yield Yak farming and governance are considered together. Stakers receive voting power, so they can steer the network on topics such as treasury management, while earning AVAX rewards.
In this article, I propose the Opinionated Treasury, which takes a generally bullish stance on the Avalanche defi (which YY depends on) while also contributing TVL and fees to the platform and ecosystem.
Stake YAK, Earn AVAX
The MasterYak contract works by distributing AVAX to stakers, who may stake YAK, LP tokens, YRT and even other tokens. The MasterYak contract is flexible and designed to handle changes depending on things like market and network conditions.
Balancing Distribution Velocity
The most important configuration is how fast we distribute rewards. In addition to finding a balanced distribution velocity, we also have a challenge to manage a treasury around those distributions.
I propose starting rewards in a controlled manner. If we distribute AVAX too quickly, and run out, $YAK will not be useful. If we distribute AVAX too slowly, and stakers are frustrated, $YAK will not be useful.
For example, assume we agree that the optimal velocity for rewards is 1.2 AVAX per YAK per year. And further assume that all 10,000 $YAK are staked. Under this hypothetical scenario, the MasterYak contract would need to distribute 12,000 AVAX over the course of a year.
Balancing Opportunity Cost
If all AVAX is deposited up-front to the MasterYak contract, we will severely under utilize the treasury by paying the opportunity cost of not farming with it over the year.
Instead, I propose using a two-week float with the remainder invested in farms, and other programs (e.g. the Yield Yak Validator).
For example, if we instead deposited 1,000 AVAX into MasterYak and put the remaining 11,000 AVAX into a farm (e.g. a 36% APR farm), the treasury would benefit from an extra 330 AVAX after the first month.
The Opinionated Treasury
Thoughtful treasury management will strengthen our treasury, plus improve YY TVL. We can and should be willing to go one step further.
It is a fact that even if we did nothing with our treasury, we take an opinion on treasury assets. If we push every AVAX to MasterYak, we choose to long spot AVAX until it is paid out. This leaves no room for diversification, no room to hold useful assets and no room to deposit in suitable farms. In other words, we will not take the basic actions of smart defi users.
It feels most appropriate to take a bullish stance on the emerging Avalanche defi ecosystem, with weighting towards established farms with useful assets (in other words, will the assets be useful to YY now or in the foreseeable future?). And with a budget to support projects in the ecosystem, including by bootstrapping new farms and products.
With this framework in mind, I present the Opinionated Treasury, which sends 10-days worth of AVAX rewards to MasterYak and holds the follow assets (subject to change):
- AVAX: Spot, YY, Validator
- AVAX/PNG: Yield Yak
- AVAX/ETH: Yield Yak
- AVAX/USDT: Yield Yak
- AVAX/XAVA: Yield Yak
- SNOB: Spot
- GDL: Yield Yak
- Emerging: Varies
Our strategy will never be final and must be adjusted over time with community input. At times, we should prefer stablecoins and those farms. At other times, we should focus more on bootstrapping new farms and products.
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