YAM Finance

Nick Sawinyh on 04 Nov 2020

Trent talks about YAM Finance backstory, community ownership economy, and decentralized governance.

Hello! What’s your background, and what are you working on?

I’m Trent Elmore, and I’m one of the original launchers of YAM, currently working full time on strategy and community management for the protocol. I’ve been working in DeFi since early 2019 when my brother Brock and I started looking at optimizing interest rates across lending protocols. I studied art history in college and went on to work in advertising for a couple years––I’ve always been interested in the intersection of culture and finance. Within my DeFi work, there’s been a focus on composability; first with the optimized rate product, then switching to liquidations and arbitrage when rates compressed in January of this year.

Yam is a community-owned project with fully decentralized on-chain governance –– no multisigs here. While I work on the project full time, I hold no special role and we’ve attracted a smart and diverse group of contributors who are strategizing and building together. From a technical perspective, YAM is a rebasing token that adjusts supply according to demand and during an inflationary rebase, uses a portion of the new supply to purchase funds to add to the treasury. This treasury is then governed and deployed by tokenholders however they see fit. The potential of Yam, however, really lies in how the community deploys that treasury and what it builds on top.

What’s YAM backstory?

YAM has had quite an eventful history for its short life. The original idea came from mashing up some of the recent DeFi developments we found interesting or exciting at the time. We didn’t set out to build a protocol. It started with a conversation regarding how one might prevent the “death spiral” in Ampleforth negative rebases with a treasury –– and then what if it was fair launched like Yearn? Well, it’s going to be community-owned, why not make it community governed using Compound’s module? Before we knew it, we had a pretty exciting concept, and we realized before most of DeFi that you can just…launch a protocol.

And so we did. No VCs, no founder allocation. From the first conversation to launch was 10 days of building. In retrospect, that was too quick, but this was an exciting side project, and we all had full time jobs elsewhere. We drastically underestimated the response, which within the first 24 hours was at least an order of magnitude greater than our most optimistic projections.

Of course what followed was the bug, the attempt to save Yam, the migration to a V2, an audit, and the relaunch of the protocol. While you can sum up the events in a single sentence like that, it definitely doesn’t do justice to the excitement, terror, pain, and hardship involved in that process. Ultimately, however, a passionate community emerged that remains true to the culture set by the initial launch: a protocol owned, developed, and governed by the community that seeks to continue experimenting and pushing the bounds of DeFi.

What went into building the YAM?

In a very real way, YAM is still being built. Again, the original protocol was built in 10 days and was a minimally viable experiment. We had run some analysis and thought through mechanisms to the best of our ability, but the protocol was far from optimized. After the bug and migration to the interim V2, the community voted on some small changes, but it remained largely in that minimally viable form.

Much of the work Yam has been doing in this first month or two of V3 being live is expanding its capabilities and improving functionality. The launch team put forth a protocol that was very rough around the edges, and it’s been the community’s job to refine and optimize it. So we’ve modified rebase parameters, changed the treasury purchase asset, updated our liquidity incentive structure, and provided frameworks for how to grow the organization and compensate our contributors.

But there’s still a lot of work to be done. The Yam protocol is a complex system: there’s the protocol itself with a lot of levers and design space, the treasury with currently about $3M to manage, future products to build, an organization to run, and a governance process that has to handle all of those pieces.

There’s not exactly a playbook on how to do these things in a trustless and decentralized way, so the Yam community is constantly experimenting and pioneering. There are some very exciting collaborations we’re working on for active treasury management. We’re expanding our governance capabilities by deploying multiple Governor contracts to fit different decision-making processes. We have multiple innovative product proposals gaining traction and beginning development.

Yam is ultimately a young start up, continually being built by the community with fundamental goals of innovation and pushing the bounds of DeFi.

What’s your business model?

The business model of Yam is essentially to use the funds in the treasury to generate more funds for the treasury, which is controlled by YAM tokenholders. We can do this through strategic investments, like our recent purchase of $250k of the DeFi Pulse Index Set, as well as deploying yield farming strategies. We can do this through lending treasury funds and generating fees. And we can do this by building new financial products and generating fees on those products, as we plan to do by acting as arbiter for claims in our bug/hack protection protocol in development. Ultimately, we have an extremely flexible model, and we’re still experimenting to see what is going to create the most value.

What’s your position on the regulatory landscape today?

The regulatory landscape is obviously extremely gray and difficult to navigate currently. With Yam, our approach is to constantly maximize decentralization –– tokenholders all over the globe determine updates to the protocol, contributor compensation, treasury allocation, everything. Yam’s approach is unique compared to a lot of DeFi projects in that way, but we still do have to be concerned with an outdated and nebulous regulatory environment. Like most projects, we’re trying to do the best we can, and hope that there will be clarity in the future on exactly how to do that.

What are your goals for the future?

Our goal for the future is to continue innovating at the intersection of decentralized governance and programmable finance. We have a unique structure and approach at Yam that mandates we do this. Necessity is the mother of invention, and the Yam community is constantly looking for opportunities to expand its functionality through innovation and experimentation, which is what makes it such an exciting project to work on.

Specifically I’m excited for some of our treasury management ideas, new governance tactics for funding contributors, and our upcoming products. Through Yam’s ups and downs, we’ve built a strong community of contributors that are taking ownership of various initiatives while actively receiving input and feedback from the community to develop their ideas. Operating through decentralized on-chain governance can be difficult, but it offers a really stimulating design space and an openness that allows anyone to jump in and start tackling problems.

What are your future thoughts for the DeFi market?

It feels like DeFi has been in a major state of flux in the past couple months and going through a lot of growing pains –– a wild west period that Yam helped kick off. For the past couple years of bear market, I think a lot of assumptions were made: the forkability of protocols, the value of tokens, the idea that 12% yields were unsustainable. Now we’ve seen unbelievable APYs, non-sticky liquidity, mooning and crashing gov tokens –– we have Eth2 on the horizon and a proliferation of L2 solutions and Eth killers trying to build DeFi. It’s a more adversarial market than we’ve seen in a long time, with smarter hackers and bigger traders.

It’s not always going to be pretty, some of it’s going to look dumb in hindsight, but there are so many 10x improvements in DeFi, I only imagine it going one way in the long term.

Where can we go to learn more?

You can check out the below links to get involved in the Yam community.


DeFi is coming. Don't get left behind

About the author
Nick Sawinyh
Nick Sawinyh is a crypto entrepreneur based in LA. He founded DeFiprime in 2019 to offer information on emerging DeFi ecosystem. He owns small amounts of different cryptocurrencies.

The Latest: