Bankless - 25 - YFI: Farming the Farmers | Andre Cronje

Episode Date: August 10, 2020

Episode: #25 August 10, 2020 ----- Tools from our sponsors to go bankless: Loopring - trade & pay on Ethereum w/ near-0 gas fees! (use "Bankless" for VIP4 status & trades at 6bps!) Monolith - holy grail of bankless Visa cards Aave - money lego for lending & borrowing Rocket Dollar - tax shelter your crypto ($50 w/ "BANKLESS") (Read this on IRAs and 401ks) ---- Andre Cronje calls himself just another DeFi dev, but you can't help but wonder, is he's underselling himself with that title? In a few short months he single-handedly created a fleet of DeFi yield farming money robots that locked up over $400m in assets in his yearn protocol. He launched a YFI token that grew in value by over 1,000% in its first week, one of the most explosive price charts crypto has ever seen. No pre-mine, no VC, no founders reward. Maybe a better title is King of the Yield Farmers. DeFi's Satoshi. Who is this guy? What did he build and why is it brilliant? Why did YFI go from $3 on July 17th to $5000 on August 8th? This is everything you need to know about yearn, YFI, and Andre. We cover: How Andre's really feeling What's up with "I test in prod" Why high YFI price can be bad How Yearn automates yield farming Andre's money robots Incenting strategy writers Risks of yearn Launching YFI to scale Why people buy YFI Organic governance Is Andre The Joker? What's coming next Join us next Monday for a fresh episode! ----- Resources discussed: yearn protocol yearn governance yfi price chart Acronym helper: LP = liquidity provider yearn (or "Y-earn") = Andre's protocol cUSD, cDAI = stablecoins in Compound TLV = total locked valued in a DeFi protocol Look up other assets on DeFiMarketCap ----- Episode Actions: Try yearn protocol - "tested in prod" you could lose it all Get involved in yearn governance Listen to SOTN#7 - YFI Token Magic w/ Daryl Lau Also...subscribe to Bankless YouTube to watch State of the Nation every Tuesday. ----- Subscribe to podcast on iTunes | Spotify | YouTube | RSS Feed Leave a review on iTunes Share the episode with someone you know! ----- Don't stop at the podcast! Subscribe to the Bankless newsletter program Watch Bankless shows and tutorials on YouTube Visit official Bankless website for resources Follow Bankless on Twitter Follow Ryan on Twitter Follow David on Twitter ----- Not financial or tax advice. This podcast is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.  Do your own research.

Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we are here to help you become more bankless. David, how are you doing today? Just fantastic, Ryan. It came out of an interview with Andre Cronier, the creator of the Y-Earn Protocol and the Wi-Eafi-Token. Some people may know this token as the Wi-Fi token, the Yiffy token, the Wi-Fi token.

Apparently, according to Andre, it's the Wi-Fi token. And this protocol, Yerne, just kind of came out of nowhere and exploded into the Defi ecosystem and got everyone really, really excited, specifically with about how the token came to be, how the protocol came to be, and also the fact that the creator, Andre, allows the token to govern his life. And so that is how Andre came to be on the bankless podcast. We submitted a proposal to the Y Earned governance page that asked for opinions as to whether or not Andre should come on the bankless podcast. Of course, it passed with flying colors at 95%. And so here we are recording with Andre, Croney, creator of the urine protocol. So he was compelled to come on the podcast. In his words,

he had no choice. And you know, as we were interviewing Andre, I was kind of thinking like, What should the episode title name be for this? In fact, like, what is Andre? He, you know, he calls himself just an ordinary defy dev, but he's almost like this king of yield farmers because he's raised both this group of money robots to do yield farming out of all the defy opportunities that are out there. And he's also created a cohort, a group of other yield farmers

that are writing strategies for this Y-Earned Protocol. call thing. It's incredibly fascinating the group that he's built and the capability that he's built out. This is probably one of the most effective yield farming technologies and yield farming strategies that's out there. While interviewing Andre, I'm reminded of that old comic. I can't remember who made it, but it was an engineer that, you know, made, made, made a, wrote a script, worked his ass off for 36 hours to write a script so that he could automate his job for the rest of of his life. And so he goes into work and just like scroll through Reddit and doesn't do his job because he made a script that did his job forward him. And to make that metaphor of concrete, that job is

yield farming. And the script is the urine protocol. And so we kind of go in to Andre as to like what he was doing that, you know, spun up the wire and protocol. Like first, first he was using using these various protocols to earn interest on his stable coins. And then he had to update it to add a new protocol and then liquidity mining came out. And so all of these technologies stacked on top of each other. And so he finally came out with the urine protocol, which is this thing that automates everything together all at once so that he doesn't have to do any more work. Unfortunately, he's super busy.

And that's kind of what we got into the episode a little bit because this turns out this is this turned into an absolute cannonball of a protocol into the defy ecosystem. And so we kind of, we go through the protocol step by step with Andre to get him to explain it to us so we can understand it so we can pass that knowledge onto the bankless nation. Absolutely. The one thing I was left with with this interview is that Andre really cares a lot about defy and he really cares deeply about defy users, particularly people like him, the liquidity providers, as he calls them. And I think in this conversation, you're going to hear a lot of acronyms thrown around. Things like LPs, Andre says often. That means liquidity providers,

flash loans, for instance, you know, that's a split-second sort of loan that happens in a block within the protocol. You're going to hear all sorts of different asset names. So we get pretty deep into Defy geek talk in this episode. I think if you have hung with us for the previous 24 episodes, you should be able to keep up. But we do try to take some pauses and explain things throughout the interview and summarize things. So I think listeners will be able to keep up with things, but we will include a few other resources in the show notes with definitions and prior episodes that you can listen to.

Yeah, I've gone through a number of different attempts to fully comprehend yiffy and yearn. And it's so, it really stretches my capacity to be able to understand these things. As a listener, if you are listening to this and you don't really get it the first time around. Like, don't blame yourself. This shit is complicated.

And what Andre has built is one of the most integrated and composable applications, which makes it really requires a ton of prerequisite knowledge. And so this is like Defi 401 level content that we go through. And so even I had a hard time keeping up. So don't stress about that. Yeah, totally. And you know what you just did there? You call it EFB, David, instead of Wi-Fi.

Hang me up. See, there you go. So yiffy, wifey, same token name for the Y Earned Protocol. But that's the kind of thing, these terms you'll hear throughout this episode. It is a fantastic episode for you advanced folks. And I do think beginners will be able to keep up as well. We should get right into it. But first, let's talk about our sponsors. The first sponsor I want to tell you about is AVE.

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economic incentives to reward protocol growth. One of the coolest things is it actually introduces a safety module. So there is, Staked AVE becomes a collateral of last resort. You can find out about AVEA, Avanomics, start using the protocol at AVE.com. That's AAV.E. for those of you that have been transacting on Ethereum, you've noticed that the gas prices have just been insanely high. You know, 60 guay on a good day and sometimes all the way up to 100 which is really reducing the amount of activities that is really feasible to be able to do on Ethereum. This is where our newest sponsor, Loopring, comes in. Loopering is a ZK roll-up scaling protocol for Ethereum for both trading and for payments. ZK roll-ups, that stands for zero

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mobile smart contract wallet with ZK rollups tucked in natively. I'm really excited for how this is going to impact the adoption of Ethereum. The rest of the rest of the market. The rest of of the world will be able to experience Venmo-type transactions, but with the same amount of trustlessness and security of the decentralized future ahead of us. So if you're a trader that's being eaten alive by gas fees, visit loopering.io to get onboarded into Ethereum's cheapest and fastest exchange. All it requires is an Ethereum address and you can trade on a high-performance order book completely gas-free and transferring ether and ERC-20 tokens on the platform is completely free. If you visit loopering.io, enter the code bankless in order to get the highest VIP tier for six months.

So check that out. There's a link in the show notes. Visit loopring.com, enter code bankless. All right, guys, let's go ahead and get right into the interview with Andre Cronier. Bankless Nation, we are incredibly excited about our next guest. This is a first. I think first in crypto history, first in podcast history. maybe. We have a guest who is on the bankless podcast by way of token vote. And we're going to

explain what that means in just a moment. Want to introduce you to Andre Conier. You may know him from the YERN protocol or the Wi-Ey token, which has been going crazy for the last month or so. But he'd introduce himself as just another defy dev. Andre, how are you doing today, sir? You want an honest answer or you want a polite answer should we continue this call? You know what? Let's do the honest answer because that's how we roll on the bankless podcast. Honest answers only. Oh yeah, honest answers only.

Well, then I'm kind of shit. Like I haven't really slept in a few days and I, um, I, there's, everything's just a blur at this point. There's just so much going on. Yeah, I don't know. I'll probably be close to tapping out in a few days. and then I'll take it from there again. Is this all because of stuff that's going on with the urine protocol? Yeah, yeah, there's just too much happening.

And it's got too much traction to the point where I don't have the support infrastructure to keep up with it. So it's murdering me. Like there is such a thing as too big, too fast. Okay. Tell us a little bit more about that. Like what grew too big, too fast and what is sucking up all of your, attention and energy. Well, it's, it's expectation management mostly, you know, because like,

like the building part, that's fine. Like, like that, that I do. I love building. I'm going to keep building. I'm going to enjoy building. But, but there's so much extra onus now. You know, there's, there's, there's a lot more interaction required of me on like the, the social media side. Like, I have so many inbound requests. I'm like, I, I don't want to be that guy that doesn't respond. so I still try and respond to each person that contacts me. There's sort of the governance stuff I have to jump in every so often because that's just a, I don't know, it's turning into a little bit of a circle jerk on that side.

There's just, you know, and ever since, that's why I was, I was very apprehensive about, I knew it was going to happen. I was worried about the token having a price component, because as soon as it has a price component, people's mentalities change. And I've noticed this in the governance forums and in the communication people have with me. Because the people that farmed it, they're chill.

And they're some of the strongest supporters, and they're actually quite actively engaged, and they're trying to benefit the, the ecosystem, the people that bought it, they, they feel they owed something. All of a sudden, there's, there's a responsibility towards them. And like, like, there's a lot of negativity on that side that, that, that, that drags me down quite a bit. So, so, yeah, it's just, I'm trying to keep up with the pace is, is definitely, it's definitely

getting me. So, Andre, you know, I think what you're saying is, it sounds like what you're saying is it's more, it's not the building that's tiring you out, right? that maybe maybe maybe get energy from that i'm not sure but it's more it's more the social side that's really uh exhausting you and tiring you out and now with the launch of the wifie token and governance and the expectations around that it sounds like the social aspect of things has just accelerated to a degree that is frankly exhausting but you've always been someone to uh dampen expectations right so like famously

go to your Twitter profile right now. Go to Andre's Twitter profile right now, guys. Here's what it says in the bio. I test in fraud, right? You know, that's a, that's a lower your expectation type of statement. It means, look, guys, I'm not doing all of the audits in this thing. I'm not like, well, you know what? Why don't you explain it? Like, why do you make statements like that? Why do you make statements when you rolled out the wifie token that this token has zero value? Why do you have disclaimers that say things like when I build software, I build it for myself. If you interact with it, use caution, there will be bugs. Why do you do that sort of thing?

So a big reason why. So originally when I built out the first I earn sort of first iteration back in Jan, Fab, I had gotten my audits. I had published them. and people flooded in capital. And what I realized was people use audits like a blanket safety net. When you say it's an audit, they think, oh, okay, it's fine. I don't have to do my due diligence. I don't have to do my own research.

I'm just going to throw my money in. So a big reason why I emphasize to people that look, I, I mean, in all honesty, I do still get audits. I just don't publish them and I refuse to publish them because I don't want people to have a sense of false security. It's important to me that when you manage your money, that's what you should be doing. You should be managing your money.

Now, I don't necessarily mean actively. I mean, most of the yearn protocol is there to automate your management, but you should at least at a high level know where that money is going and why it is going there. I think those are two very important questions to at least answer before you put your money into something. And I feel that's like a baseline due diligence.

But if you have a protocol and you start shouting numbers like 100 million TVL, 30% APR, and, you know, 12-bit audits, then all of a sudden people don't think about that stuff and they just throw money. And I think that is more dangerous than me trying to shout at the top of my lungs. The stuff is dangerous. Please be careful. I didn't build it for you. You're going to lose money.

And then they actually investigate. At that point, I have a lot more comfort with them putting their money in it than if they were to just blindly follow because there's a report I published. So I'm seeing a lot of contrast between, you know, Yiffy and Weifie and Yerne and why it's so special. Why people are so excited about it is the way that it was, it's genesis, how it was created. And so many people like it because it wasn't created by like a VC group that funded a team that, you know, did all the, the tied off all the things before they released it, right? Instead, Wi-Fi was, you know, kind of put out there, put out to Ethereum more, more or less like using Ethereum as like test production.

And then it got into the hands of the community basically instantly. And that's why people love it so much. But that's also what I'm hearing from you is kind of a big detriment where like there's not a team that got venture capital to, you know, help support you, Andre, like the CEO or the leader or whatever, whatever one of title you would theoretically bestow yourself. Like you are, they kind of, there's a lot of weight on one single individual who kind of just built out this protocol just for himself. And the beautiful thing about it is that, you know, you turned over the key, the keys to the community. But then the community is trying to like have things both ways where they're like they love that it's Genesis and they love that you donated this, this project to the greater Ethereum ecosystem. And they love that the VC backing never was there, but also at the same time, they wish there was this VC backed team that had like these salaries that could go and do all these things. How do you see that juxtaposition kind of like playing out in your experiences?

So first things first, I agree 100% with what you just said. I as a little bit, I mean, I also propose that out of necessity, but I also proposed it as a little bit of a social experiment because I was curious. So the platform generates its own rewards and fees systems. And now that it's a very positive market cycle, the fees are actually high enough to cover like audits, server expenses, you know, all of those things. I mean, it's not high to run, but it is there. So I propose, look, instead of any further issuance of the token, because I'm actually quite against

any further issuance, I don't believe in liquidity mining at all. So instead of any further issuance, let's use the reward systems and let's take expenses out of that. And it's, if you want to have a read on the forum, the general consensus, it's a good idea, but dividends should flow to token holders. So everyone says there should be like a minimum cap, so 5% or 10% or whatever, and everything else should go to the token holders. Now, as a social experiment, I find that very interesting, because again, I did not sell this token to anyone. Like, I was very adamant.

If you gained this token, be sure you earned it without spending any money other than than gas costs. But the people that bought it, they feel they bought it for a reason, and that reason is future revenue from the protocol, versus the ones that farmed it that were most likely already using the protocol. And that's why I did pool one as the Y curve token, because that means you're already using the protocol, and I want people using the protocol to be governing the protocol

as a logical sort of next step. They're the stronger supporters. But again, like I, the best way I see this playing out, and kind of what I was expecting, but I guess it's, I don't know, maybe it'll still for full or not for full, but the price has to decline to the point where it's again only in the hands of the people that actually want to govern the protocol and not in the hands of the people that bought it with the idea of future revenue. So I think it's a lot about the intent with which people gained access to the token. And you can see it in the voting structure as well, because the votes are more often than not, either not quorum or last minute flips. And it's often quite a big difference between, you know, the original miners, let's call them, liquidity providers and the token purchasers.

So there's a definite conflict between those two. And I actually last year or the year before, I need to go check. But I published a few articles about this specifically, where you have this conflict between a token's purpose and an investor's value. So even if we look at Ethereum, right? If we look at Ethereum, Ethereum's, there's a lot of ideologies, so I'm not going to go into all of them, Ethereum as money, etc. At its base, Ethereum is gas. And it's meant to be paid for computational execution. Now, there's a certain equilibrium there between how much does it cost the network as a collective of miners in the amount of electricity they're spending to execute that instruction and thus secure it? And how much are they being rewarded in financial value for that? Now, at equilibrium, it should be, it should, the value of the token should be slightly more than the cost of their electricity. But now if you add speculators into the equation, they're not using the token.

So it's not cycling between these two. So all of a sudden you're removing supply out of the equation. And at the same time, this, this band keeps increasing because it's not circulating. You're moving more and more and more. Supply demand, supply side crisis. And you end up with a token that increases to the point where the users who are supposed to be for this execution, no longer want to pay for these execution because it's too expensive. Miners are still happy. They're walking away with extra profits, but the users don't want to use it anymore.

So as soon as you add speculative value to a lot of these tokens, you end up destroying the reason they exist. And that only cycles back to its equilibrium point when its value normally decreases. But now at the same time, we're in a market where it's predominantly investors. And your product is only as good as your green candles or your red candles. So if your token is going up in value, you're a wonderful product. And you have the most amazing leadership and everything is wonderful. If that thing starts going down, you're a scam and you lied and this, this, you know, insert any random fud you can possibly think of.

And the second it switches to green again, all of a sudden you're the most wonderful project ever. So I'm very worried about that because on the one hand, I need that value to significantly decrease for it to have its effective value in the ecosystem. But when that happens, people start saying the protocol is shit and the platform is shit, and it doesn't work as intended. And I'm curious to see how it plays out. I have no ideas how this is going to turn out. In none of my models that I expected to turn out the way it did.

But right now there is a definite conflict between governance and speculators. That much I can see in the forums. This has been so helpful to understand sort of how you think about things. And I've got some other questions. We want to dig into your background a little bit later. but you mentioned so much there. One of your points was about speculators versus sort of the users and they're being sort of an inherent mismatch there in terms of alignment.

Part of that I wonder maybe we could dig into later is, like, is there a difference in your mind between the short-term speculator investor and the long-term investor, right? So that's something we could talk about. But let's put that aside for a minute. because I'm not sure that everyone listening is actually familiar with some of the things that you just said and sort of the story of YERN and the story of YFI. So we want to set some context for them, for folks who might be new to it, new to what's

been going on. Can we start with maybe the Y-Earn protocol? What is the Y-Earned protocol? Can you do and explain it like I'm five for what the protocol actually does? Yeah. The very original first iteration, I'm just going to start there of WIREN back when it was I Earn, which by the way, the name swap, Nodar from Zapper actually recommended the Y because then it's you earn instead of I earn, which had a much nicer collective idea, which I enjoyed. But very simplistically, back then, there's a longer background that we can dig into if we want, but I'm just going to start from, I was at X point where I was managing a lot of friends and families money. And I'm not a trader.

I'm not a speculator. I don't understand any of these things. I think TA is flipping a coin and good luck which side it's going to land on. So I had moved almost everything into stable coins. but I still wanted to offer people a certain amount of returns because they had entrusted their money with me. So I started looking at options of putting stable coins to work. And at the time, there was Ave, there was Fulcrum, there was compound, there was DYDX, there was a bunch of different services. And I would wake up in the morning and I would see which one's the highest APR and I'd move my funds around.

and I did this for probably a few days until I finally got annoyed at one moving it around and two having to pay gas fees the whole time. So I started thinking, look, I can automate all of this. So the first thing I did was just write a few normalization smart contracts that reads in the different APR numbers from the different systems and that gives me standardized output, which I can compare, so that at least I don't have to compare them individually and I can just look at the script and the script smart contract will. tell me where to send it. So that was sort of step one. And then step two, I started with this

concept of having the tokens do it themselves. So I wrote the first iteration of the Y tokens, which Y-D-Y-D-Y-U-S-D-T and Y-T-U-S-D. And very simplistically, they read this normalized APR output and then they see which one it's supposed to be and then they have integrations into all of the downstream sources. And dependent on what that response is where they're supposed to go, they move between one of those. And I used that as my baseline for quite a while until I got to the point where I started realizing, number one, there's no net loss to me opening this up to other people, which is fantastic. Number two, the more people that interact with the protocol, the more effective it gets. So what I mean by that is every time someone deposits or withdraws, it sees if it should rebalance.

So the higher the frequency of interaction, the more it shifts between protocols to maximize its own heel. return. So by opening it up and allowing other people to pull into the protocol, they're getting the highest yield from any of these aggregate sources because it's moving. And because there's more people interacting with it, it's moving more frequently, which means in aggregate, it gets a higher API return than any of the downstream sources. And that was the original, that was the original iron now yearn. So a really simplistic concept and a simplistic idea. It's what it's what lenders do nowadays as well. You know, you move your capital to where you get the highest returns, just automated them with smart controls. I don't know if you want to stop there or you want to

now continue digging into how the rest of the platform continued expanding. A few quick questions there as to the technical details. So you said that the tokens move in order to find the best yield. Can you just go into the details as to how the tokens know where the best yield is? and then who pays for that, who or what pays for that gas for those tokens to move. So gas is paid during interaction. So when I deposit or I withdraw, then it checks. If it moves, that gas is added onto that deposit or that withdrawal. So it's basically an unlucky lottery.

Whoever is going to hit the contract when it's time to rebalance is going to be paying that extra amount. But they were going to be paying some amount of gas anyways, right? It's kind of just like they're also the move. of the tokens are kind of just free writing on that transaction. Correct. And I mean, back then, you know, gas was what, six, why? So it wasn't, you'd be paying two bucks instead of, you know, 1.5 bucks. Now it's a little bit more significant, but the system also works very differently now.

So the tokens themselves are, the Y token is really just a, think of it as a pool. And in this pool, you have a bunch of, let's take die and you have a bunch of dye. So when I deposit, I deposit a bunch of dye. When I deposit or withdrawal, then it asks the APR smart contract. For practical purposes, I think it's an Oracle. I don't like using the terminology Oracle specifically because it's not using any off-chain sources. It's just normalizing on-chain information. For practical purposes, let's call it an APR Oracle.

It asks the Oracle, where is the highest APR currently? And the Oracle tells it Ave. And if it says Ave, then it goes, okay, so now I take all of this dye I have, and I deposit it into Aves. Now I have A tokens and Aver has my die. And now I'm sitting with that and I'm earning interest. Now next depositor comes along on deposits. It checks that again.

It sees, oh, okay, I should be going to compound. So it withdraws the die from Aver and by returning its A tokens, deposits into compound and now I have C tokens. And that's all it does. So every time someone interacts, it asks the question, where should I go? And then it simply withdraws from where it is and it goes to where it's supposed to be. So it's like a robot that's like a robot that finds the highest yield. Okay, so I think that's pretty simple for folks to understand. I have one question on that. So when we talk about reward, right, like putting on an investor cap,

we think about risk-adjusted reward, risk-adjusted returns, right? So it seems like the money robot, the wired money robot, is basically, you know, showing you the highest yield protocols and investing in that, but it can't quantify risk. Is that sort of a blind? spot of the protocol? In the V1 version, yeah. So in the V1 version, I remember we were at about 2 million dye, and that was just when BZX had their, whatever you want to call it, Black Thursday event or however. And we managed to pull that out. I told the script to no longer use fulcrum, and then it removed fulcrum as an option, and then it pulled everything out, and we were very lucky at that point.

But after that, we started looking at things like how much tokens is at the downstream source. In other words, how liquid is the source I'm putting cash into now? And it would check how much of that liquidity has moved in X amount of time. With a V3, I also wanted to include Defy score, I believe it's called, what Jordan and them are working on. but I never ended up getting to that V3 because V2 ended up integrating with curve, and it's not going to get much better in terms of its yield than where it's currently sitting at. So it started adding a few smarter things, like it would start looking at how big is the pool that I'm moving to, and will I affect its APR?

Because when I first started, you know, there's $10,000, $20,000 in there, and that doesn't affect APR when it moves. Within a few months, there was two to five million in there. So now when it moves to one of these downstream sources, it actually changes the APR from 10% to 5%. So now I have to start calculating in, okay, what is the APR going to be if I move and only move if it is a net benefit with move plus that?

And then it would look at how much liquidity has the downstream source. In other words, is it safe? Can I still get out? and it would do smaller adjustments, so it would see, okay, I can move half of it year and get this amount of yield and the other half of that side and get that amount of yield and an aggregate, that's more. But in terms of intelligent risk, no such thing exists as data on chain currently. So it was largely my own perceived perspective of these protocols, risks, and their dangers. I'm not sure where DefyScore is at in terms of their on-chain codification. I think they have done it as an Oracle stream already, but I haven't touched it recently,

unfortunately. Yeah, and so for folks that aren't totally familiar with some of the things you talked about, so just so I can kind of understand, so what you're talking about is obviously annualized returns, right? That's when you were saying APR, that's annualized returns. and the risk modeling that why urn is taking into account is from two places right now or in the future versions will be maybe in v2 it is, which is the liquidity of the underlying protocol,

which is certainly one measure of risk, not necessarily an intelligent measure of risk, but it does help somewhat. And then also there is this, I don't know, agency, I don't know what you'd call them, but a project called DFI score, which is a consensus project that is actually trying to quantify risk, almost like a morning star, I suppose, or something in the traditional finance world where there's sort of a risk quantification

of an underlying asset. And they're trying to score each of these protocols and possibly you could integrate that. But even those two, I guess, sources are fairly primitive, I suppose. Now, I don't know if this is a This is a problem for finance, right? How do we, it's not just a problem for defy. It's a problem for finance. It's like, how do we quantify risk? Like, humans are really bad at quantifying risk. But do you think we can start getting better in defy about quantifying the risk across

various protocols? And if so, how? I mean, like, like as a baseline, what do humans consider as low risk versus high risk when it comes to financial things? you'll go to the bank that's been around for longer because they've got the track record, and you'll go to the bank that has more capital because they have less chances of going over. So, you know, those are sort of the normal human psyche things we quantify. So I think for a large part, that's still very much true in defy as well.

Because even in defy, in which product do you rather put your capital? You know, the one that's the SF-backed, VC-backed, funded $100 million protocol, or the non-user that no one knows who they are, but they deployed a bunch of smart contracts onto chain. I mean, right off the bat, I can tell you which one I'd feel safer with my money, even if that is completely, you know, just based off of human perception. So, I don't know. I mean, I mean, if, so my general rule with anything I code is if I can quantify the steps in a logical way, then I can codify the steps in a logical way.

I can't, I can't in an analytical way tell you how I measure risk. So I'm not sure how that would be codified other than a certain member of a certain level of perception based. So, Andre, let's pick up the thread with the development of the urine protocol. We left off with talking about how stable coins move around in order to get the best yield in the various defy protocols. But the urine protocol didn't stop there. What's the next step in the composition of urine and Wi-Fi? So after we, after I now had this thing where these tokens moved between lenders, about the same time curve came out. with their stable swap system, which now is the curve protocol. And the very first pool they launched was the C-D-I, which is the compound die and C-U-S-D-C,

which is the compound U-S-D-C. And I started speaking to Mitch, and we started discussing this idea, but, okay, if you can do these swaps with these healed tokens, could you do them with the yield-profit-switching tokens? And we ended up deploying the Y pool, which is pulled off of the four base layer urine tokens, the Y-D-C, the Y-D-S-D-T-T-T-T and the Y-T-U-S-D. And we also later launched the B-U-S-D pool, which is Y-D-Y-D-Y-U-S-D-C, and Y-B-U-S-D, yeah, a Binance-U-S-D-D-1. So this offered another layer on top, because we knew that if you're a in curve, there's a certain level of stability based on the tokens as long as

as die can manage to keep peg. And that allows you to have the yield maximization with trading fees on top. And when it started, it was fantastic because the volume far outseeded the liquidity. So we would have 100% plus days, which was phenomenal. As liquidity increased, you know, we're at less than 10% utilization now. So fees don't make up as much as they used to. but that was basically the pinnacle of yield at that time. There was nothing other than centralized services

where you could get higher healed than you could in the Y pool. And that sort of stayed for quite a while. So there was a bit of a lack of new yield opportunities. So to stimulate yield opportunities, I started looking for things to build that improves healed. So one of the first things I started looking at was how do I get people to trade more on curve? Because the more you trade, the higher of the fees, the higher of the fees, the better the healed. So I started building things like why trade and why leverage. We both were just

leveraged stable coin trades. Why leverage was based off of flash loaning USDC from, yeah, flash loading USDC from DYDX. putting that into Maker as collateral. This is just when they release their USDC A vaults, minting dye off of that, selling the dye to USDC because die was trading above PEG at about 1.02, returning the flash loan USDC, and you get the difference in profit,

and then when you want to close the vault again, it just does the inverse. So in other words, borrow the die, close the vault, take the USDC, sell back to die, and then return that. If you close it out of, profit, you have to add in the rest. If you close it in profit, you get profit on both sides. Why trade is the leverage system. I can go up to a thousand X leverage. On the UI, we limit it

to a maximum of 250. You can go higher, but then we want you to interact with the smart contracts because any higher than 250 and you're liquidated in less than a day. So, so that's for a lot more experienced people. And for the basic website, we only allowed up until 5x, because then at least you have a few weeks and months before you get liquidated because of your borrowed position. And that simplistically, LPs could provide their Y-curve token. When a trader comes in, it unwinds the Y-C curve token into one of the native assets, die-USDC, T-U-S-D-T, and then it sells it into curve for the opposing asset, whichever you want to do, so you'll do die-2-USDC. and now you have a short die position and you have a USDC amount on the books. So this just allowed people to do higher frequency trading.

I had closed that down, I think, around either early June, maybe late just before that, because I wanted to rework the whole way I did, design that and everything. While I was busy with that rework, I started looking at Y-Swap, which is the single, single-sided AMM solution. That's a lot more technical. So I don't know if we want to go into that because there's quite a lot of detail to unpack around that. But it's just a way to do uniswap, basically,

with just providing a single asset on the one side and having healed-aware systems. But everything I build and everything I designed and the whole yearn ecosystem and even the vaults that I have now and the vaults I had to design because the healed world just became, massively complex in the last two months. So it needed a whole new solution.

But everything has a singular goal. Maximize yield for LPs that provide liquidity into the ecosystem. But I have two very fixed rules when it comes to this. Number one, I don't swap what you put in. So if you put in dye, I'm not going to swap that to TUSD and put that into M-Stable because it's going to get a higher yield. I'm going to keep it and die. So you might not get the highest possible APR strategy, but you will get the highest one for die.

And the reason for that is I did have a solution back in the day that swapped between the stable coins for the highest one. But I've noticed that most LPs aren't long-term LPs. They're LPs for a few days. So they ended up losing more because of slippage than they would actually make in interest gain. So for purposes of keeping it more simplistic for them, I decided I'm always going to keep it token to token. And then the other rule is no experimental systems, but that, again, is based on my own perceived level of risk, which, you know, I try and do as much due diligence on these platforms where the money goes as possible because any of my solutions, my money will be the first one in. So I expose myself to the risk of wherever that goes. So I'm very apprehensive about that.

So it might also not always be the absolute maximum APR you could get in Defy, but it is what I consider to be the safest APR without having any losses on the original asset you put in. Hey guys, going bankless is a journey and you don't have to do it alone. So we're going to pause the interview with Andre. So we can talk about some of our fantastic bankless sponsors that offer you tools to help you in your journey westward. As we all go westward, we need to get our values into the crypto world, but hopefully escape the tyranny of centralized rent-seeking institutions. And that's where Monolith can help you get your value into the crypto world while skipping over the crypto banks. Coming soon to Monolith is an on-ramp directly from your old world bank account into your smart contract wallet on Ethereum.

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curve gets introduced, which has the curved tokens, a curve stable tokens, which kind of do this in a more or less automated way. And then you started to stitch that into the urine protocol as well, kind of like as a layer two on top of it. And so, and then you created these products from the urine system that are useful products, useful building blocks and defy, useful money legos,

and that they also encourage activity in the curve system, because the curve system and the urine system, are very, are like siblings, right? They're like stitched together very, very tightly. And, and we're not done yet, right? Like, we still have like another layer to, perhaps even two layers to go before we're really finished off with the all-encompassing urine system. However, at this point in time, how would you describe, in a concise way as possible, how would you describe the urine protocol up to this point? Like, what is it, what does it do for people at, at this stage in the game? It automates healed.

That's the most apt description I've managed. I sometimes refer to it as a smart savings account, which I'm not a huge fan of, because you know, your money is always spendable. Like, you're like, you never lock it up. But it's a yield optimizer. That's its entire purpose. Okay. Now, where's the next stack?

Because at some point in time, yield farming with governance tokens comes into play here. Are we at that point yet? this this is now when comp launched yeah so so when comp launched they they they they were very kind to to both destroy and recreate the whole game which was very exciting because it it gave me a lot of reinvigoration to to engage and and so so technically this isn't actually completely true so in after ypool at that time the synthetics team were looking for for something to help their their sUSD keep stronger to peg. So started working the YERN protocol, the curve protocol, and SUSD, and we launched a new pool, which was a meta pool between the Y tokens and the SUSD token. And the output token of this,

the LP token you get for depositing into this pool, you could stake in the rewards contract. And it's that same rewards contract I used for my Wi-Fi distribution. And that's how I knew about it. Because back then you would stake the LP token and you would get SNX every week. And it was, it was by far the most profitable strategy of all of the yield strategies. So, so technically, I stand corrected in saying that, like, the cycle definitely started because of that hype. But liquidity incentives or liquidity mining started there. Like that mentor rewards pool from SNX was the first of its kind. And I think everyone else is just playing off of their playbook.

But what did happen with the comp token, it added a new option. So now it was a question of which one is higher heel. And the intricacies of the comp token made it also more interesting, because for the first few weeks, you ended up borrowing as much bat as possible and then winding a leverage position so that you could earn as much comp. And that's because of the comp distribution model at the time, which was based on the size of the debt that is accrued on the market. And then they changed that model and it changed to a leverage position and die. So you would again wind your position like that. And that had the best ratio.

And then I think next it was Valencer that came out with MTA. And I mean, shortly after that, it was, Ah, Balancer with Bell, and then it was M-Stable with MTA, and we're still waiting on the curve token to come out. There was another one that I'm missing. Oh, Uma with their Y-USD. So all of a sudden, all of a sudden, my yield system was insufficient because it no longer was aware of what the best yield strategy was,

because what the best healed was, the definition thereof had now changed. A few months before that, it was, it was, it was which lender provided the highest interest rates. And in aggregate, which of those could I get while depositing into synthetics to be a liquidity provider there and get the liquidity incentives? But now all of a sudden you started having to do calculations about, okay, but what is my, what is my wound up that position? and how much debt am I accruing and what is the token value? So what is the financial dollar value of that debt versus the amount of comp I'm getting and the comps dollar value, which offsets this interest. So now there's so many data points that all of a sudden becomes a lot more tricky to manage.

And one thing we know is that price data on chain is a very dangerous thing to use. That's a very easy way to get attacked. And that's why we need secure oracles. The available secure oracles, though, don't have data. for all of the things I just mentioned. So yield farming now all of a sudden was at a point where Robo advisors could no longer do their job because they could not get sufficient data to do their job and they could no longer predict how to do this

job. So I started thinking about, okay, but now I need a model how to crowdsource this information because there's a bunch of us that are constantly in defy and we're constantly hooked in and we all have sleeping problems and none of us get more than half an hour sleep every other four hours. So we know what's going on and we know where to be. So a large inspiration of why the token needed to become into existence is to have a protocol to help these yield farmers be able to make decisions,

such as what is the best strategy? So objectively speaking, what is the best yield strategy at this time? And then based over this decision, they needed to be able to update which strategy we go to. But now I have this problem where on the one side, you've got people that know that's the best strategy, but they can't necessarily codify the strategies. And I need someone who can codify these strategies as well. And I needed a way to incentivize them to actually codify these strategies. And then, of course, on the other side, there's the LPs that still need to provide the liquidity for the strategy and then get their rewards.

So that's where the V2 came out, and that's my new YVolt system, where strategy writers can codify these strategies, and if approved and voted in by governance, that becomes the de facto strategy for the current LP Vault. And as I mentioned before, you'll have one for USDC, one for die, one for Y curve, etc. Strategy writers are incentivized because they get a percentage of additional profit. So what I mean by additional profit, and this is where the system generates its reward, as well. There's based interest that the users get, and that's to LPs and nothing else. That's not touched. Then there is additional things. You know, there's there's comp, there's MTA, there's Bell, there's S&X, there's all of these other things in this ecosystem that has additional value. And off of that additional value, that's where their rewards come from. So the strategy writer,

for argument's sake, gets 5% of all of those liquidated rewards that go back to the LBOR. P's and the governance decision makers they get, let's say, 10% or whatever. Governance needs to decide on those numbers. The ones I've been using have just been, I think, no, I'm going to lie to you now. It is 801010. So I needed to create this new ecosystem to be able to move fast enough to keep up with what is now happening in this market. Now, I don't necessarily think it's going to last this way.

very long because I do think liquidity mining is a negative game and we shouldn't try and incentivize it for too long. But while it lasts, I need this ecosystem that can manage these heel choices and do it in a way that is not based purely out of analytical data it can get on chain. And that is the current, that's the first iteration of a YVolt side did, which was things like the YUSDC and the Y Curve Vault. And then as a little bit of a sideline, I was doing this delegated vault work with AVE where they want to do delegated credit. So they want to be able to say, okay, well, I'm a depositor in Ave and I have $10,000 worth of a credit line. And I'm going to assign $1,000 of that to my buddy. So he can then borrow from my vault.

He can borrow his credit line. So the delegated vaults were actually a continuation of that idea, where I use the original capital and then deploy the underlying best asset for the highest yield strategy. And then it ends up being this whole buyback strategy that benefits the vault. And I'm actually really happy with how that turned out. It actually turned out much better than I had originally expected. And that's sort of the current iteration where we're at. So it's gone from everything happens on chain to I need collective information off chain to be able to to manage and dictate the system. Okay. So this is brilliant. And I hope people are starting to understand the brilliance of what Wieners put together, what Wynne has put together and what Andre has put together.

But let me just recap for folks that are getting lost in some of the asset names and that sort of thing. like, here's the through line. So we've been talking on bankless about yield, right, ever since inception. The first chapter of yield has been lending and borrowing yield in Defi. And then the second chapter, which opened up, we had a Dan Ellitzer on the podcast. We'll add a link in the show notes, but that chapter started with the comp token. And then yield was supercharged with these governance tokens, right? And I've often joked that, like, I'm in the space. 24 hours a day. So is David. And we can't keep up with all of the yield farming opportunities. I've joked that I need to hire somebody to go deploy my capital to keep up with all of the

yield farming opportunities and optimize that. So this is the beauty of WIREN in Andre's system is that rather than hiring someone in a fund, you can hire the WIRE and money robots. Andre's money robots. That's why people love this because the money robots are really finding the highest, most optimized yield farming opportunities in both lending and borrowing, and now these governance tokens. And what Andre just said is the first phase of all of that has been money robots that he wires up and programs himself for his own use, but then he makes available to the public. But now the next stage of that is to get strategy writers to tweak the money robots and create these new money robots and then sent them with YFI tokens, WIFI tokens.

That's what this is. That's really what we're talking about, guys. I hope you see the through line. This is sort of a way instead of hiring the guy to go find all the yield farming opportunities, you just hire the robot and everyone kind of crowdsources the most optimal way to do it. It's really genius. Andre, I want to ask a question here before we get to the Wi-Fi tokens themselves and talk a bit more about the crowdsourced yield farming strategy. Can you just do a quick recap of what some of the risks are here, just like high level? So if I'm depositing my funds into Y Earn, what are the risks? Like, I could lose it all, but how would I lose it? Like one of the protocols that are dependent, that urine is dependent on that are critical to its function? I mean, highly dependent on the strategy. So, so I, I, in, if you look at the protocol top level,

and you look at what it operates on top of, I'd say everything. There's nothing in DeFi that, there's nothing in Ethereum that it doesn't touch us. If you look at a specific vault and a specific strategy, then it's more isolated. So, you know, then it's, then it's, it might be a balancer pool, or it might be a bank or V2 pool, or it might be lending in compound. So, so, so, so, so then it's slightly more isolated. I mean, your, your, your, your number's, what, your number is, you know, your number one biggest risk is always I always start at where where is the money. So if the money is sitting

in a balancer pool, then that is your highest risk point because that's where people see the money and that's where they attack it. Now, luckily, and this is why I also only like to use protocols that have stood a little bit of a test of time or are so simplistic that it is only a smart contract and nothing else can happen. So that's normally your number one point, but that's normally also a little bit safer because these are normally large corporations and lots of audits and lots of eyes looking at it and lots of scrutiny, which is good. Your next layer is always my code. There, as much as I try and make sure, as I said, my money goes in, which means I need that for my livelihood. But at the same time, that's your technical biggest risk, because it's one guy that

wrote it while he was sleep deprived. It's not a good combination. That's not where you should be putting your money. And since that can be the entry and the exit point, which means it does the calculations on how much of the underlying asset you get. So that's a very high danger point, because that can be manipulated, and I've seen it be manipulated. So definitely a high risk there. You start talking about lower risk, but probability risk stuff. So like if USDT now, for example, were to add a fee to their token transfer, which they can do because it's in their smart contract,

a lot of my systems would break. And when you deposit, you'd actually get back less than what you put in. if there's a compiler bug in the version I use which I'm normally I have a leniency towards 5.17 then then that can be exploited in all of my contract systems

if there is a liquidity crisis in one of the downstream sources and this can happen a lot because remember you're you're often in a lending position which means there's a borrower on the other side. And if something horrible happens and there's a price collapse, that's when you want your money out. But that's also when most people are borrowing the money and the utilization rate is high,

which means you can't actually get access to it. So that's definitely a systematic risk. I like to call it impermanent locks because, you know, based on the time, it can be locked, but in its entire position, you will always have access to it unless it's drained from the underlying position. I've mentioned code vulnerabilities. I've mentioned the asset. The composability is always dangerous. I mean, any system, each time you add a building block,

you're exponentially increasing potential risk and mismanagement. So with regards to the various defy protocols that are an option to receive yield in urine, like there's compound balancer M stable, like all these different DFI protocols. And each one is a risk. but with regards to where the funds are currently deposited by yearn, there's a chance that like something breaks that doesn't actually impact the current way that urine is receiving yield, right? So like urine could be depositing most of the funds into a combination of like Mstable and balancer and compound breaks. And compound breaking doesn't actually impact

urine at that present moment because the funds haven't been deposited there. But your in governance needs to remove compound from the algorithm before something does happen. Is that right? That is 100% accurate. So I've been manually managing that since Jan Fed. But again, it's based purely on my perception, which is a lot nicer if it's a crowd-based source decision. But 100% correct. If there is all of a sudden a scare that there is high vulnerability somewhere, so there's

some rumors that something bad is happening at X, and it's up to governance to pull those funds as quickly as possible. So one other primitive that possibly could be incorporated in this is if we had some sort of defy insurance primitive, right? Yes. We could use the composability of defy to our advantage. Nexus Mutual, anything popping in mind for that, because I'm sure you'd love to incorporate some insurance if it was available and if you could. Yeah. I actually spoke to you from Nexus Mutual in this week. They're going to roll it out either I think this week or next, that it has a base layer staking system, which allows me to take a percentage of deposits at the user's opt-in choice, and then it takes that percentage as a base layer stake in Nexus Mutual, which then

gives them cover on the other side. Very cool. And that would cover them for smart contract technical style hacks. Is that correct? Technically no, because the way the way Nexus Mutual works, it's like, I always like to say it's not actually insurance. It's more like a binary option. So the people that are, the people that are staking funds against a smart contract, they're saying they have confidence it's not going to fail. The people taking insurance are saying, I have confidence it's going to fail. But it's actually just a hedged binary bet. But it's up to, it's up to the people staking on that contract to actually decide what they pay out for. So Nexus Mutual has paid out for things that were not smart contract tax because they felt

it was good to pay those risks out. So they, it's a lot more about perceived about what happened. So from the payouts I've seen, basically Nexus Mutual pays out when they feel there was nothing the user could have done to prevent it. But if there was something the user could have done to prevent it, then they don't pay out. So it's less technical and more what do those stakers vote for when someone submits a claim. So, Andre, we've gone through what happens when you deposit stable coins, crypto dollars, into the yearn protocol. We've gone through how you've developed this yield maximizing system.

Then we went through how you integrated the yield farming and liquidity mining revolution of defy so that the value of the governance tokens being earned or is also integrated into the profit maximizing system. Now we're at the last layer, the YFI token, the Y-F-F-I token. This is the capstone to the whole thing. And in my mind, I kind of view this thing as like a, it's a structure, right? And it's building itself. And then at the very top of the structure is the YFI token. Can you explain the role and reason of the YFI token in the urine protocol. So as mentioned with this new vault structure, there needs to be certain off-chain decisions that need to occur in terms of what is the highest yielding strategy. And at its highest level, that is its pure function. It is to make those decisions. But if you drill it

down, there's a lot of minutiae. You know, there's what percentage goes to the contract creator, What percentage goes to the original yearn protocol and the people using that system? If a new token were to be airdrop for whatever reason, what goes to LPs and what goes to whomever? So there's a lot of unknown, I want to say, and a lot of known, which are protocol decisions that need to occur. And for the longest time, I've been making these decisions my whole time. but it's also getting to a point like like you mentioned you need to hire someone that's that's capable of of watching this the whole time and being aware of this the whole time and then I'm I'm in that same position so I need to crowdsource that information I I would like to have a solid eight hours sleep not having to wake up every two hours because there's a new yield farm that popped up and it's only going to last for the next 40 minutes so in those cases it's good to have this ecosystem and and and Like I said, and it wasn't tongue-in-cheek, it was sincere, the original reason I distributed this token, and I also want to emphasize that, it was a token distribution, it wasn't a

liquidity incentive. But the original reason why I distributed this token was to be able to hand off some of these responsibilities. So it's not just me taking care of it. It's not just me making these decisions. It's not just me implementing these strategies and deciding where the capital should go. That's how you're scaling it, basically. That's how I get to scale the system.

That's how I also get to take a little bit of time off. And I know it's in the hands of people that are also as healed obsessed as I am. And that's why I distributed to the three protocols I considered to be where the healed farmers are farming the most healed. Because I wanted to get it into the hands of people that are as intimately familiar with everything that's going on as I am. So as a mental model for our listeners, this is not unlike MKR and MKR governance, where, you know, we call Maker Dow a Dow, and in the name Dow, it's a decentralized autonomous organization, right? And so the important thing is like autonomous is a little bit nebulous because Maker Dow needs concrete like proposals for the Dow to vote into the protocol, right? And so at the end

of the day, humans with MKR vote in governance proposals, you know, what collateral to accept, what risk parameters to provide them, they manually vote in. those parameters. And that's the same thing that's going on with the YFI, the Wi-Fi token and the urine protocol where somebody is proposing a strategy and then YFI holders are accepting or denying that contract, right? That's exactly it. So at its highest level, that is, that is its primary function and purpose. It is to enable people to be able to make those collective decisions on the system and the protocol for for their own greed and the greed of the LPs. And with the the Wi-Fi token, it means those two are aligned.

So unlike how MKR was distributed and unlike how any other DFI token has been distributed, Wi-Fi token was distributed in this very unique way. Can you kind of go through your thought process and your decision-making with how you enable the Wi-Fi token to be distributed among Ethereum? I wanted to distribute. I needed to distribute a mechanism whereby people have a voting right to these decisions. Thanks to, as mentioned previously, the yield farm with the SUSD, I had intimately worked with the SNX rewards contract, which was developed by Anton from 1-inch, along with Kane from

synthetics. And it was a very elegant distribution mechanism. So simplistically, every week, they would transfer tokens into the contract and then they would notify the contract that they have transferred tokens into it. And then over that week, the tokens are distributed to the LPs, to the people that provide liquidity to the SUSD pool. So I thought this is the perfect mechanism, because the people using my system are using Y-Curve, because Y-Curve is built on top of year. So these are the people that are the healed hunters. And that is why I launched the pool one. And that is why I distributed to there the first time. Now, now people always want to know why, what decisions and what rationale. And I, like, I think people want to believe I'm smarter than I am when the most logical answer is

usually the correct one. I'm a very strong believer in Occam's Razor. And the reason I chose 10,000, wasn't some meme. It wasn't for any purpose. It was just I wanted some low number that can represent voting shares. I didn't want someone to have 1.3 billion voting shares. And I also didn't want someone to have, you know, 0.04. So it was just a nice round number that I could use that when it comes to voting is sufficient. And originally I wanted to do, I wanted to do four pools because I actually wanted to incentivize my other products as well, why swap and why trade. But after the first two pools blew up, I didn't want to incentivize those two because they were, they, I consider them higher risk than the rest of the protocols because they haven't withstood the test of time yet. And they

haven't had had much AUM and as much, much eyes on them. So I decided not to incentivize those two, because I was worried that the capital goes in is going to attract the wrong type of attention. So I switched that instead to things like Balancer and the curve pool again. But really, there was no master plan. There was no thought-out solution. It was an accidental and somewhat lucky sequence of events with a positive outcome, but it was really as simplistic as that. It was, I needed a distribution mechanism for people that use my system and here's 10,000

tokens to make decisions on. So some people in Defi would argue that this is the fairest launch of any token ever. There was no pre-mine, no Founders' reward, no VC. Some people are even comparing you, Andre, to the Satoshi of Defi, which is kind of funny. But when you launched this in your opening post, you emphasized you couldn't have made it more clear. You said, we don't, we didn't stress it enough. This token, Wi-Fi has zero value. Don't buy it. Earn it. And yet, when I look at the charts, it's like, Wi-Fi is one of the most explosive price charts I've ever seen in crypto. So it started at $3, you know, kind of at launch.

And then a week later was up 100%. So people don't believe you, Andre. People think, think it does have value. Can you explain why a rational actor would pay for wifie tokens? No. Okay. Why are they doing? So, so I think what you're saying in that is that these are not rational actors. So, so, so, so, so the one thing I really like, um, and the Vance, um, the framework, as he was the first one to pick it up, which, which I, I, I had it in the back of my mind. but I never really thought about it. And it was very interesting because I had always thought about the yearn system from an LP perspective, because that's what I am. You know, I want to put in a hundred bucks and I want to see 10% whatever growth over the year.

And then when I pull that out, I want to see 110 bucks. And then I'm happy. But at the same time, you know, now this thing was sitting with 100 million plus in capital. I mean, at its peak, I think it was just over the $600 million, which, by the way, terrified me to no end. It's far too much money to put in my contracts. Don't do that. 600 million. I mean, that was got to be the top five in the total value lock charts, right?

That's a different discussion. I mean, TVL, I think, is such an absolutely pointless metric for us to use in the space. It is insanity. Sure. Because, like, you can have a billion TVL, but no fees. it's it's it's a much less than the guy with a thousand bucks but 50% fees but anyway that's that's a different conversation in terms of like p.e ratios on systems but but a lot of these a lot of these vCs and trading firms and things they they started looking at from the perspective of being the

controller of this ecosystem because now if you're the controller of this ecosystem all of a sudden you're you're not just this degenerate yield farmer that just wants to maximize your own gains because you're an LP but but but but but but you're a capital deployer you you have a hundred million dollars of capital now that you choose where it gets deployed to and that is also an incredibly powerful leverage tool because now all of a sudden you can start having a very different conversation with you know a a a alpha or a compound or whatever and you tell them okay but i can deploy this capital to you um can you give us extra incentives so so so so so all of a sudden being able to make those choices is basically being able to make the choices of, you know, one of one of the biggest funds in the decentralized space.

Because that's what Yerun has ended up becoming, one of the biggest funds of deployable capital. And it was this amazing like lightbulb moment when he tweeted about it and I read his tweet and I was just like, holy hell, this guy gets it. So I sort of understand it from that perspective. And I get it from the LP because, you know, his money is in that system. And so he wants to have a vote in where it goes because he wants to maximize it. Otherwise, he's going to move it out. But there isn't really an alternative to move it to other than you need to do it yourself. Because a lot of the guys I speak to on a daily basis, even they, when they want to go away for the weekend,

they take their funds and they throw it in my vaults. Because they know they know how to farm themselves, but when they just want to take a little bit of a break, I'd rather have the vaults to it because they know that then they don't have to worry about it. So from the LP, there's a reason why I want some say in it. From the capital deployment, there's a reason I'd want to say in it.

So I guess that is my most logical explanation for why someone would attach a financial value to that kind of control. I still don't get it, but as mentioned, like, fairly early in the start, I don't understand the speculative side. I've never understood why a token really goes up or really goes down other than something to do with green frogs and something with 4chan. So I can't fully understand the why. And I'm not someone that bought tokens for speculative reasons other than if I was going to use it.

So I'm also probably not the most informed to answer that question. But if I had to look at it from a very governance control perspective, I'd, I mean, I want some of the tokens so that I can at least ensure that it doesn't go to a place that I don't trust. Right. So I think so, Vance, you mentioned from Framework, right, they're a fund, basically. and I believe they announced this week or maybe it's last that they purchased a bunch of WIFI tokens. And the bankless thesis for some of these governance tokens is basically sort of along the lines of what you said, but it's sort of a next step too. So once you have tokens, once you have governance over the protocol, that gives you voting rights.

That gives you the ability to vote in cash flows potentially and convert a mere governance token to a capital asset, essentially. I think that's along the lines, possibly, of what VC groups like investors like Vance are thinking. Does that sound plausible to you? I do not have enough knowledge or information about like that world. So I can't make an informed decision there, unfortunately. So I'm going to hammer on this one more time and see, to see if I can get something out of you, Andre. The way I evaluate with the Wi-Fi token is that it, It's a great way to earn interest on your crypto dollars, on your stable coins. And at the same time, it's also a great way to responsibly earn governance protocols.

And so why earn is not only a crypto dollar yield farmer, but it's also a governance token yield farmer. And so it seems to me that it kind of fits like this barbell strategy of investing, where like you have your non-speculative stable coins. and you earn an interest on that. But at the same time, yearn is also earning the governance tokens of other protocols, right? And so the Wi-Fi value capture system has baked into it, like two upsides. It's the interest, it's the earnings on the stable coins.

And then it's also the earnings on the governance protocols. So like it's a, the YFI is a governance token that earns you governance tokens over any defy protocol ecosystems governance token. And so like, you know, insert your next defy protocol here, compound, balancer, metastable, curve, anybody that has like a governance token that governs over the cash flows, the yearn and YFI token is a system for accruing those tokens. And so it's like a meta governance token accrual system. Does that, did I go wrong with that? Is there something wrong with that analysis or is that generally on the right track? So I don't want to admit that that's on the right track because then there is a definable financial value you can attach to it.

And I really don't want people to do that. Like stop attaching financial value to the dumb token. Just use it for governance. Just make protocol decisions, people. We'll see. But yes, your summary is correct in that by virtue of having that token, you make those capital deployment decisions. and by virtue of those decisions, you end up choosing which of those. I don't know if we can call them governance or liquidity tokens,

but whichever it is, you indirectly can make the choice of which ones you actually farm up. The funny thing about markets is that they are so unpredictable, and who would have predicted that such value would be assigned to the Wi-Fi tokens? Certainly, it's hard to predict even for folks who, are in the space every day. But let's talk more about the governance itself. So there is a thriving why earn governance community. It's one of the most, I would say, organic communities I've seen in DFI. And I think Yerrin and yourself, Andre, should be really proud of that. Can you talk about some of the decisions that governance has made already? Maybe one that comes to mind for me is actually a

a fixed cap for the token itself, like an issuant schedule for the token itself. Maybe talk about that or some of the other governance decisions that have already been made. I don't really think there has been an impactful decision made yet. The first vote I thought was going to cap issuance, and I was kind of happy with that. And then that got overturned at the end. And now we've got this open-ended issuance, which was interesting. and then Substrate had done his synthetics-based proposal, which I really liked. But I'm also glad that it didn't pass, specifically because, you know, there's, there's no reason yet to mint more token.

And I like to do it the need first way around. So I'm a very strong advocate of let's identify an expense and then let's vote on that expense. You know, instead of let's have capital and then decide where we deploy it. There's definitely a lack of quorum on that one and which way it's going to go. So I find it very entertaining watching. I was annoyed with the proposal 30 because that was the issuance of the SNX style system, which I had then coded those contracts, and then an hour before, and I mean, four was winning by a resounding mention, and then Andrew Kang went on the whole campaign on Twitter,

and he ended up getting a bunch of the big holders to swap their vote. I think it was like an hour or two before closing, and then I was saying, sleeping then. So I wake up and I see the vote failed and that means I wasted all of that time building the smart contract. So I'm annoyed about that. But that's fine. I would have preferred spending that time on my vaults. But anyway, the the witch vaults get voted in next was quite a cool one because that that allows other communities to rally around it as well. That was vote 33. and the link Marines managed to overgrow that one quite easily. Me being on this podcast, another good example.

Maybe the best. We'll put that right at the top. But it kind of makes sense because we're still early days, but for now I'm still seeing a lot of indecisiveness when it comes to the way forward. And I understand that as well because I, I think a large part of it is a knowledge gap. Because a lot of people, a lot of people bought into this and they want to get strongly involved, but I am just a div.

Like I build, I deploy. So I don't have a bunch of marketing materials. I don't have executive summaries. There aren't, you know, extensive pages of documentation. So a large part of it, I think, is this knowledge gap between what I've built and what they know about it and like catching up to it. and then understanding where are all of the points of control and all of the decisions. So I think the indecisiveness is good from that perspective because it's indicating to me that people need to learn more first.

But I can also see the engagement is decreasing because of the indecisiveness. Because a lot of people feel, okay, but if no decisions are going to be made, there's no point in me participating in the decision. So I do like to sort of flip it between more serious decisions and then smaller decisions, just to keep it a little bit more engaged. But it's interesting to see how it involves. And it's very interesting to see the very distinct different communities, you know, the people that are looking at from a purely token governance perspective. Because there's definitely a group that doesn't really care about governing yearn, but instead care about governing the token itself.

And I do attribute a large part of the token success. And when I say success, I mean, it's acceptance, it's distribution, because I'm very happy with the distribution percentage and, you know, how little is centralized to a single entity or group. I, damn it, I lost my train of thought there because I went into a different thought from the first one. What did I say just before that? You know, so I have a question for you. So, you know, I was mistaken why fee issuance hasn't been decided yet by the governance process.

But you have the platform today on bankless. What would you like to see, like personally? What would be your choice for Wi-Fi issuance? I don't see any reason to issue more. I don't see value in incentivizing liquidity providers because they're just going to move their liquidity as soon as it's no longer there. The rewards and the fees generated by the system, if so chosen, can cover the current operational expenses, which, you know, are small because that's the beauty of deploying stuff on Ethereum. There's almost no OPEX other than the website, and you know that cost me a few hundred dollars a month. So, depending on how you want to scale this thing up, there isn't a requirement for additional capital.

Now, the one reason why I originally wanted a longer distribution schedule was how I had pictured this play out was the first week goes by and probably no one gives a damn about it. And it's just me sitting there with the little bit of money I have in the reward system earning this tokens. and I end up having the majority of them. And then I use those tokens I earned as the next week incentive. And then hopefully someone else comes in and, you know, takes 5% of it. And then the next week I use the ones I got again. So I had originally considered a much longer issue in systems because I thought it was going to take a much longer time to get it to a level of distribution where it wasn't just, you know, two or three guys that have all of the tokens in their wallets. but first week cleared that without any issues.

And I'm confident that a very large portion of the token holders are healed farmers, or at least involved in the healed space in some fashion so that they are the right people to make the protocol level decisions. So personally, I would like to see a little bit less focus on the token issue. And just touching on the previous point, I forgot to mention is I wanted to comment that I think a large part of the success of the token is because governance controls the token. Because I think that's something that definitely differentiates it from most other tokens out there. But that not being the point now, is that there's no, what benefit is there, what benefit is there, assuming non-financial requirements to issuing more? The only reason you would is if you wanted to add a new partner that you think could add value, and then you do a standard shared illusion, which I don't see happening anytime soon.

I don't see purpose in doing liquidity incentives. There isn't a capital requirement. It's distributed enough to the point where the correct people are making the governance decisions. So why add more? So I have a potential answer to that question, because at the beginning of this podcast, you came on and said that you're really tired. and that you don't sleep very much and that you're kind of overworked and and you kind of want to take a break. And I see that as a symptom of this super fair distribution that has gone on, which is

one unfortunate repercussion of that is that we don't have a way to fund development, right? And again, this goes back to why VCs exist in the first place. And so do you see a role for yearn governance to direct cash flows to a fund that pays for, you know, urine development. And that could even go to compensating you, Andre, if that's what you're interested in, or it could just go into hiring an assistant for you or just building out the development and formalizing the development of the urine system out of either YFI issuance or capital, you know, fees on the capital in the protocol being directed toward the team.

Are you interested in either of these two things playing out? Yeah, so the proposal I proposed on the forum currently, and I'm waiting for people to discuss before I open a new improvement protocol, is specifically let's redirect all of the current system rewards into a capital pool, and we take expenses from that. And then whether it's quarterly or annually or whatever it is, at that point in time pay out dividends to the token holders, but before then everything goes to to to OPEX expenditures. So that is the proposal I made, but it seems most token holders would

rather have the dividends than an operational company. So we'll see how that one plays up. I'm curious to see, but that is what I currently have suggested. And to add on to, I think a large part of my current fatigue is, is that informational gap, that knowledge gap, I spoke about a few minutes ago just now, is that, is that a lot of, a lot of my energy is being pulled from people trying to understand the system better. And that's a good thing, because they're trying to, to educate themselves to the point where, where they are then capable of autonomously doing it themselves, but they need that knowledge transfer first. And that knowledge transfer is, is, is tapping me out because that's where all of the engagement is happening. And like I've I've spent

pha until now, you know, I haven't really spoken to anyone. It's full lockdown year, so I haven't even left the house since then. So now having high social interaction is, is very draining. But I think it's to do with that knowledge transfer. And I think when that knowledge transfers has occurred and everyone knows all of the caveats of the system, then that picture will look better. And then I think there is enough operational cash flow to incentivize those people to do it in a more full-time or at least committed part-time perspective.

And just closing the loop, that's why, again, I don't think additional token issuance is required other than people that want to increase their own. own capital value and or increase their own rewards, which neither I think are healthy. So, Andre, with the urine system, the urine protocol, no one can really predict the future because it's up to the governance, right? Like, the governance decides what the future is. However, if you had to guess what urine would look like in two, three, four years, or maybe what you are hopeful it will look like in that time period, can you kind of paint us a picture of what

you are envisioning when you see a maximally successful urine protocol. So there's always this quote I love to give people. Because people always assume that I have a plan or they always assume I thought any of the stuff out. It was in the Heath Ledger Batman movie where he tells Harvey, do I look like a guy with a plan? I'm just a dog chasing cars. I wouldn't know what to do with one if I caught up to it. Summarizes me perfectly.

So I know what I want to build tomorrow. And after I've built that, I know what I want to build after that. But there is no way in hell I'm going to try and predict what this thing looks like a month from now, let alone two years from now. A month ago, I couldn't have told you we would be having this conversation now about what has happened. And when I started building it in Fab, definitely not. So I'm not even going to attempt to play that prediction game. If you want to know what I'm currently working on, I'll gladly share. But don't tell me, don't ask me further than that, because I'm as informed as everyone else's.

Yeah, okay. So what is actually concretely in the roadmap, or not even in the roadmap, but currently being worked on? What are the concrete things that are in development, quote unquote? Well, the delegated vaults, I'm very excited to finish off now. after I finish the delegated vaults and we've voted in a few more of the native vaults and we've added a few more strategies which probably the next two to three weeks

then I'm planning on going back to Y trade and finishing that off because those leverage trades is still very, very good in terms of healed on both the LP side and the additional volume on the pool side and now that we have so much capital sitting in those pools we can do much larger trades which is also very nice so I'd like to see that as a sort of

you know, stable coin trading platform. After that, I did want to go back to Y swap, my AMM, but at this point, you know, one inch is launching one, Black Hole Swap is coming out with their one. Bankrupte 2 is not really so. So I'm first going to see if one of these guys covers the bases the way I wanted to do it. And if they do, I'm just going to use their systems

because I also don't want to spread out my development capacity too thin. or over do one thing well than three things kind of shitty. So that I know I'm going to be busy with for like the next month. And then after that I'll reevaluate and see what's going on in this market. Andre, I want to thank you for coming on the bankless podcast, even though you didn't have a choice. You were voted into it. But we had fun and we hope you did. I'm hopeful that you get some rest in the coming days.

I know the Defi community and the Ethereum community is thankful for the work that you've contributed. And I love what you said at the ending. It can be a strategic advantage not to have a concrete plan that stretches far into the future and just be agile and flexible. Thank you so much for spending some time with us, Andre. Thank you for having me, guys. It's nice to have a little bit of a break and be able to talk so that there's a little bit of perspective coming back as well. So I really appreciate it. All right, bankless nation, some actions for you guys.

We will include a link to the urine protocol. And remember, this code is tested in prod. So if you put funds in, Andre would be the first to tell you. You could lose them all. We'll also send a link. We'll also drop a link to the urine governance form. And you can see all of the organic activity that is happening there. Lastly, last action item for you.

We have a State of the Nation, episode seven, where we talked with Daryl Lau, who is a governor of the Wi-Fi protocol. So catch that. If you haven't yet, that'll give you some more background on the insanity and the craziness and the fun that is going on with Wi-Fi right now. Lastly, and this is super important in an episode such as this, risk and disclaimers, none of this has been financial advice. Ethereum is risky. Defy is risky. We say it every single show. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot.