Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Trent Elmore: YAM Finance 🍠 – The Rise, Fall, and Rise Again of the OG Foodcoin

Episode Date: January 19, 2021

During the DeFi Summer of 2020, YAM Finance launched with a bang, and had its share of ups and downs within its first couple of days. It started out as an experiment to bring together some of the more innovative ideas in the space. It sparked a movement which brought massive attention to yield farming, and started the food token craze. After a bug was discovered in the v1 contract, many thought the project was dead. But no, the team and community have been working diligently to bring the protocol back to life and it's now a community-run DAO innovating at the intersection of decentralized governance and programmable finance.Trent Elmore is one of the creators of YAM. He joins us to talk about the incredibly swift birth of the project, the rebase mechanism, the treasury, the infamous bug and how they saved the project. He also shares some of the new upcoming products on the YAM Roadmap, and how a truly decentralized community is rebuilding its brand.Topics covered in this episode:Trent's background and how he got into crypto and DeFiHow YAM and food tokens were bornThe team behind YAMWhat was the vision of the project at the beginning?The proposed utility of the protocolHow the treasury funding works in the context of the rebasing mechanismThe Game Theory for YAM holdersHow they built their communities and choose tokensYAM's connection between their governance and SnapshotThe infamous bug in V1 and how they recovered from itWhat plans do they have for the treasury and products going forward, including the recent UMA collaborationEpisode links:YAM on TwitterYAM FinanceDiscordYAM on MediumTrent on TwitterSponsors:1inch: Discover the best rates and most efficient swapping routes across leading DEXes. Optimize on gas cost and execute DeFi trades faster with 1inch V2 - https://epicenter.rocks/1inchThis episode is hosted by Sunny Aggarwal & Friederike Ernst. Show notes and listening options: epicenter.tv/375

This is Epicenter, episode 375 with guest, Trent Elmore. Hi, I'm Sebastian Guicchio and you're listening to Epicenter, the podcast where we interview crypto founders, builders, and thought leaders. On this show, we dive deep to learn how things work at a technical level, and we fly high to understand visionary concepts and long-term trends. If you like Epicenter, the best way to support us is to leave a review in Apple podcast. And if you're on a Mac or iOS device, the easiest way to do that is to go to Epicenter.rocks slash Apple. And if you're new to the podcast, be sure to subscribe on Apple Podcasts, Spotify, or wherever you listen. Today our guest is Trent Elmore. He is one of the founders of the Yam Project. It took off

last summer and it sparked a massive movement and cultural phenomenon in the crypto world. I'm talking, of course, about food tokens. So as Trent explains it, Yam was created as an experiment and it brought together some of the most far out and innovative ideas in Defi. It borrows from existing concepts, so the fair launch mechanism in Wi-Fi and the rebased mechanism in Amplforth. Stick them together and you get Yams. Trent shares the details about the early days of the project, how it came together. He talks about the rebased mechanism and how that works. He discusses the YAM treasury and what those funds are being used for today. Talks about the governance protocol and takes us through the hours and days which followed the bug discovery, which of course

brick the protocol and led to the launch of the V2 contract. And finally, shares his learnings from this entire experiment, which are really fascinating. Now, you might be wondering why we chose to do this episode almost six months after the whole Foo token frenzy started. Well, in true epicenter fashion, I think having these conversations later affords us the advantage of hindsight and we're able to learn more about the lessons learned from these experiments. And that was certainly the case here. So if you're holding yams, you may have noticed that the price has gone up these last couple weeks, and maybe you want to swap them for some Eth or die or something else. Well, if you're going to do that, you should go to one inch. It's my go-to-dex aggregator, and I know that

when I use one-inch, I'm getting the best price across dexes and amms. And a couple of weeks ago, they did an air drop. And so if you've been using one-inch these last couple months, maybe you've got some one-inch tokens there waiting for you. And I discovered I had some, and it was a nice little chunk of change. So to swap your yams or discover if you have some one inch tokens waiting for you, go to epicenter.rocks slash one inch. And with that, here's our conversation with Trent Elmore. We're here today with Trent Elmore. He is one of the launchers of Yam Finance, one of the hottest projects of the 2020 and like really, you know, I'd say like one of the people. pivotal moments in the like defy evolution over the course of the last couple of months.

And so, you know, we're excited to have Trent on to help talk with us about like yams and like, you know, especially a lot of the craziness that happened when it first launched, but then also about like, you know, what's the future of the project and where it's going today? Because, you know, it is not a dead project as many may think. And so we're trying to see what's the plans here. And so Trent, if I still have you on, before we get started, Can you, yeah, can you just tell us a little bit about your background? How did you get involved with crypto and DFI.

And I know you have another project called Topo Finance. And can you tell us all about it? Yeah, hi, guys. Thanks for having me on. So I guess my journey in crypto and DFI, well, crypto started, you know, I'm part of the 2017 cohort that kind of rode that initial first wave and then just totally got hooked on it. My background is originally in art history and school and then advertising after school. So I just really love kind of like, I've always loved the multidisciplinary nature of kind of

those disciplines, particularly this intersection of like art and culture, visual culture, and then commerce and economics. And so that obviously plays really well into the crypto space. So I really started working in Defi with my brother Brock in the beginning of 2019, really when kind of DFI first started to emerge as a real thing when you had compound and DYDX showing, you know, 20, 40 percent interest rates and kind of that initial infrastructure starting to get built out. So our first project in the space was called Topo Finance, which originally was a yield bouncer that optimize your interest rates across DYDX compound and fulcrum.

And so essentially we got that to a beta stage towards the end of 2019. And then as the yields were starting to compress, and we didn't exactly foresee the yield farming craze that would happen three to four months later. And we started to leverage our kind of inter-proticle transaction capabilities and expertise to start to go into liquidation and arbitrage strategies. So we started to play a more trading prop shop type role in the ecosystem. And so we were doing that full time until, you know, we, along with Will, Dan, and Clinton, came upon the Great Yam side quest that was originally meant to be just a fun side project

that we put together in two weeks. it is now, of course, the main quest and what we're both working on full-time. So that's a brief background on me. As you just said, there's five people who actually launched Yam Finance at the time. So it was you and your brother Brock and then Clinton Bambray, then Eliza and Will Price. How did you guys meet? Did you come together to launch this specifically? Or is something that kind of was created, you know, goofing around together?

Yeah, so will Dan Brock and I have, you know, been in contact with each other for, you know, the last couple years at various, you know, Skype calls and telegram channels and, you know, conferences and all of all of that stuff? And Dan was familiar with Clinton and kind of brought him in. But, yeah, I mean, the original assembly of the launchers was really just kind of us kicking around at. ideas and really kind of in the wake of Ample's recent decline in market cap and kind of what's known as the death spiral. And so we were just, you know, chatting about those dynamics and how one might prevent that death spiral. And the idea was brought up of instituting a treasury that essentially took some of the positive inflation and created a treasury to start to establish a growing price floor. And so then, you know,

know, it seemed like a pretty, pretty interesting idea. We started kicking it around more and more. And next thing, you know, we just were like, we could actually just go build this and launch this. And I think we were some of the first in the defy space to recognize this fact that, oh yeah, you can just go build a protocol and launch it. And, you know, it can be that easy, that difficult. as of course is actually the case. But I think it really started a bit of a paradigm shift in that way. And we'll go into the comparison to Ampleforth and the exact mechanism of the rebase and so on later.

But before we actually dive in, you were actually the first of the food coins. So Yam was the first of the food coins that kind of launched the food coin craze. How did you guys come up with the name? The name was just a wonderful confluence of that. I think. So obviously we had this rebasing token similar to Ample and we wanted to do it in a fair launch mechanism like Wi-Fi. So we just basically took like the Y in Wi-Fi and the AM and Am and Ampl forth matched it together to make Yam. And then it had all of these really nice kind of

benefits associated with that, you know, three-name ticker, the emoji, having that that ownable brand asset directly in the keyboard. It was catchy. Obviously, the yield farming was already a big meme. So it was just a kind of perfect confluence of factors. There's just like a web show I used to watch called Jake in a Mirror. And in that, Yams was also this like weird meme that they had in that. And so I don't know if anyone, did any of you watch that show or okay, just completely independent? I don't think so. but I'll check it out because that's pretty funny. Nice. Cool.

And so what was sort of like the role of each of the people on the team? Like who was sort of the coder, who was the mechanism designer, or was sort of the work sort of split sort of like evenly amongst you guys? Yeah. So Brock was the one who did all of the engineering and just did this 10-day engineering sprint. Clinton was all of the front end development. Dan was kind of the one who assembled and organized us all. And then Will and I were largely involved in kind of the to economics, the strategy, just general kind of everything that didn't involve like the actual code, including sometimes some data analysis and things of that nature.

And not all of you are still involved, right? So who's still with them the project? Yeah, so most of the original launchers have kind of gone on to their own new endeavors in whatever capacity those may be. Clinton's on Slinghot, which is a new decks aggregator. Dan has a new fund called Nacent. I think Will is hopping around a bunch of different projects and still providing some guidance to Yam here and there. And then it's really just Brock and I who have decided. decided to keep really grinding on on yam and steering the ship with a really fantastic group

of kind of core contributors who have assembled in the yam community as well as kind of the general yam community so yeah let's get into then like the design of yams what would you say is the proposed like utility of yam and like you know was the goal of the goal of the goal of goal, is it meant to be this like, you know, the first thing that obviously pops out at someone when they look at it is this whole rebasing mechanism. Is that, was that meant to be like sort of the flagship feature of this experimental project? Or was that just something that was, you know, how should we look at what was the point of this entire thing? Yeah. You know, I think it's important to remember that this was an interesting

idea and experiment that we wanted to put out into the community, and there's a reason that it was fully decentralized governance from day one. There are so many ways you can take this kind of fundamental mechanism of the rebase used essentially as kind of a programmatic fundraising mechanism for this treasury. There's a world in which Yam actually goes and tries to be legitimate money and, you know, is similar to Ampleforth in that way. I think the way that it ended up playing out was much more like traditional revenue generating style protocol. At least that's what the community has morphed it into. So like whatever the concepts were at day one, and I think it's 100% the case that each of the five of us kind of had different.

conceptions of how Yam might evolve and what its purpose is. It's a constantly evolving concept that I think over the past few months of being in kind of the fully operational protocol and having this community working on it and ideating around it. We've now isolated the kind of path that we're wanting to go down, which is essentially this fair launch DAO that seeks to really innovate at the intersection of decentralized governance and programmable finance and loves this idea of trying new things, building new things in a way that kind of ties all of our financial incentives together and the Yam community prospers and grows as that ecosystem grows.

That's really interesting that you're saying, at least how I understood. your answer right now is that there wasn't really a mission to start with, or at least not a unified one between the five of you guys. So how do you see the mission of Ampleforth? Because basically, Sunny and I did an interview with Evan Kuo a couple of months back before Ampleforth kind of embarked on the death spiral. And he said that their intention was never actually to create a new form of money or a new stable coin. their creation had always been from the get-go to create an uncorrelated asset. How do you feel about that statement?

That's interesting. I didn't know that that was kind of their initial vision. I don't think it was. So basically, I think it morphed during, for whatever reason, regulatory or legal law, economic. I don't know. Yeah. I mean, that's the nature of startups in a lot of ways, right? Like these things that we're trying to do and kind of the things that we're trying to do and kind of the thing

that's going to find an interesting product market fit and be attractive to people is, of course, going to morph. I think in our case specifically, it is largely a product of the fact that this was from concept to launch was 10 days. So it's hard to really rally around and get super aligned on exactly one specific mission, especially in something that's so kind of open ended at, as cryptocurrency that rebases and raises a treasury. You know, there's so many ways in which you can take that. One inch is a decentralized exchange aggregator that sources liquidity from the top dexes and AMMs to save you money and time on swaps.

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Just use one inch. And you can let them know that we sent you by going to epicenter.rocks slash one inch. That's one i nCH. We'd like to thank one inch for their support of the podcast. Let's talk about the proposed utility of yam, the coin. So basically, why would anyone interact with this protocol? I mean, I understand that there's, that there wasn't a mission to start with, or not a unified mission to start with, but what would have enticed me to actually interact with your protocol? Yeah, I mean, the, the value of Yam is really in the fact that it has the governance rights and control over the Treasury. And associated with that, you know, any increased revenue that the Treasury can generate,

new kind of governance tokens that come into the Treasury being able to participate in that governance, it really is all fundamentally based around the value that the Treasury can create. And where does that value come from, Trent? Well, I mean, if you wanted to do some sort of traditional valuation, you could in some ways do a, the fundamental of value of Yam comes from the value of the current treasury and its future discounted cash flows. I think that's one of the ways in which the community today has really started to look at. at how we want to develop and the types of things we want to do is how can we leverage those funds that are currently in the treasury in order to generate additional revenue in the future. So whether that's providing liquidity in products that we build, in products that other people

build, whether that's actively managing that treasury, the protocol ends up being, the EM protocol ends up being quite a complex piece in which you've got. got this essentially kind of $3 million fund currently that needs some sort of management in terms of both investments and expenses. You've got the Yam protocol itself, which is this rebasing protocol with a number of tunable parameters and some interesting game theory and kind of different incentives going on there. You've got a 5,000, I think maybe 4,000 token holder. that you've got to rally decentralized governance around.

And then you're looking at various additional products and protocols that you can build that can leverage that and grow that treasury. So it's really a quite expansive protocol and community that we've created. And it's a lot of work, but a lot of fun. So let's talk about a bit about how the treasury works. and especially in the V1 design, it was very sort of integrated in with how the rebasing mechanism works.

And so, you know, when I asked Will about it, the way he sort of pitched it was that, like, you know, the point of this thing is that, like, we're trying to exploiting human psychology in the sense that, like, you know, the rebasing just causes all this, like, wild speculatory like gambling game. But we're exploiting this by taking a percentage of the speculative value and putting it

into this treasury that can then be used for public goods funding. So could you maybe like first, I guess to start off, could you walk us through like a little in more detail about how this sort of treasury funding works with the, in the context of the rebasing mechanism? Yeah, totally. And I obviously don't agree with all of Will's assessments there. But essentially, there's the standard rebase mechanism, which is that, of course, when the price of the asset is above the peg, it will inflate the currency that is meant to decrease the price towards that peg. And on the other side, if it's below the peg, it will deflate to increase that price.

And so essentially what the Yam rebasing does is it looks at the uniswap, Twap, and currently we're, our main Twap is actually two hop Twop that goes ETH USDC, the M-Eth, ETH USDC to get that $1 price target. So we're doing some some very fun T-wop hopping. But essentially, it looks at the, on a positive rebase, the change in supply, that is going to occur according to the rebase calculation. And it takes 90% of that change in supply and distributes it to all of the holders, utilizing essentially scaling factor within the token. So all that really changes is the scaling factor number, which automatically adjust the number of VMs you have in your wallet. And then it takes the, in the V1 protocol, takes the other 10% of the support, mince that supply and then sells it into the uniswap pool programmatically to then raise funds for the treasury.

So, you know, one of the ways that I've always looked at it is we're using rebasing, not so much in this way to, to like get this price stability like Ampleforth wants to go for. We're specifically using the rebased mechanism to measure demand and then operationalize that demand to raise funds for the treasury. I see. And so every time there's a increase in demand, you take a portion of that increased demand and basically capture that for the treasury. Yeah, exactly.

And we've heard a variety of pushbacks to this mechanism. you know, both outside and inside the community. And it's kind of an ongoing discussion of exactly, you know, how this rebase mechanism should kind of operate going forward. What are some of the most interesting pushbacks? A lot of the community basically looks at it as attacks on holders. I think part of the negativity around the existing function is, you know, what we saw when we went,

from V2 to V3, which was in V2, Yam has this $100 million market cap. And we go into V3 and we have these really high prices, you know, $5, $10 that then start to get rebased. And if you're in the pool at that time, essentially you end up giving your stable coins up in return for Yams from the Treasury. And so ultimately what we saw was just a pretty

significant collapse in the market cap, a death spiral, if you will. So I think, I think there's still a lot of negativity from that. The way I really look at the treasury funding rebase is not that similar to, or not dissimilar to essentially for the whole YAM protocol, a bank that issue shares of equity in order to raise capital. It then deploys that capital. to generate revenue for the equity holders. And then when it wants and it, you know, trades in a multiple of its book value. And if it wants to raise more capital to, you know,

deploy more and generate more revenue, it will then issue shares again. Rather than that process being something that, you know, a corporate board is deciding and, you know, whatever, whatever that exactly looks like. In Yam, it's the exact same process, but the protocol itself is measuring that demand and issuing those tokens. But ultimately, what ends up occurring is that everyone not in the liquidity pool receives a small amount of dilution, and everybody in the pool receives a greater share of the network, which in general,

is I don't think anything super novel in terms of how many protocols distribute new tokens into the market. The only thing that's really revolutionary here is the fact that it's done programmatically. And there's then, of course, associated with that less predictability in terms of like that total number. And exactly it's a little bit harder for, I think, many people to understand. exactly what's going on. It's more predictable in the case that you know exactly the factors that are going to lead to that event occurring. But yeah, it's a complex thing. But this could have been implemented in such a way that once, let's say, some price target of yams has hit, then it mince new yams and sends them to the pool and sends them to unswap and like

clutch adds to the treasury. Why was it beneficial to combine this process with the process of like what would be like a stock split? You know, why not just mint the minimum amount of yams needed in order to add to the treasury each time that some price target was hit? Yeah. I, you know, I think that's a, that's a great question. And I think, you know, that's one of the kind of rebase replacers that has been discussed it at various times in the protocol. You know, I think there's a large degree to which we're in many ways just dealing with what was conceptualized as an interesting experiment that was mashing up a number of kind of mechanism.

I think there is a degree to which part of it is just the fun, the speculative fun around rebases and how. that does play into, you know, the psychology of the space. I personally wouldn't recommend anyone listening to go launch a rebasing protocol because the hassle of it, I think, is far, far beyond the fun of it. But, you know, we also launched at a time in which rebasing was still a very poorly understood mechanism. I think I remember kind of around VM seeing all of the takes on rebasing, rebasing assets in which people just clearly did not understand what this mechanism was and how it worked, even like people I would consider fairly smart in the space.

I think now we've seen so many at this point that people mostly have a handle on it and that it is essentially a stock split. So, Trent, can you shed some light on the game theory behind this? So basically in a rational world, how would I behave? I mean, if you look at the rebasing, your yam becomes worth less, right? So basically the optimal strategy would be, you know, in like, in a very naive view, the optimal strategy would be to sell your yam before the rebase and rebuy them afterwards. But then basically everyone could do that and even those people who do that could be front run.

So basically, is there an equilibrium? What's the game theoretically optimal way to behave in these settings? Yeah, so there are kind of a number of factors and roles to consider. And Will Price does on our GM finance, medium publication, have a great article on exactly what his view of the game theoretical optimum is. in general, it's just about understanding how these supply changes and how essentially the price impact of the rebase sell are actually impacting various holders. So you're saying the optimal strategies to sell before the rebase and then buy back right after. Oh, no, no, I'm asking.

So I'm asking basically very naively on a first level. interpretation, that would be the good strategy, right? Oh, well, no, in general not, because you're not just paying attention to price, right? You're also actually having a percentage ownership of the essentially market cap and network in total, which after a rebase is going to be, you know, for one yam, after a positive rebase that inflates the supply, that one yam before the rebase is going to be a higher percentage of the supply than that one yam after the rebase. So in general, you actually would want to keep your yams through that rebase. That's for a negative rebase, right?

So the positive rebase increases the supply. But then 10% of the yams go into the reserve, right? So basically then I'd be better off selling before. before the rebates and then rebuying just after the rebase. With that same dollar amount, yes, there is, if you can time that price slippage correctly, you actually can get yams at a slight discount in that scenario. Yeah, correct. But then that's public knowledge, so anyone can use that hack. And then basically you have to front run the people who are using that hack to sell before them

and buy before before them, right? So basically, I mean, it's kind of like a recursive problem. So is there an equilibrium? I would imagine that there is some sort of equilibrium that would emerge. What do you see happening in practice? So in general, we do see a lot of people, not so much the front running. sell, but we do see a fairly quick, as can be expected, a fairly quick buyback up of whatever that rebased sell has impacted the price. So originally that in V1, that price impact

as much as 10%. It's now lowered to 5%. But we do see that there are many people who are actively monitoring for that specific arbitrage. opportunity that does exist, especially in comparison to what the actual kind of inflationary event was. There is a very specific amount of price impact that should have occurred based on the amount of new supply that's minted that's closer to like one-tenth of whatever the actual market impact is on the cell. So we see people reading that pretty accurately. Do you have any, so you said earlier that at the time when you launched Yam finance protocol, people weren't as familiar with the rebase mechanism as they are now. Do you have any qualms

about having launched that time? Because obviously, I mean, someone's footing the bill, right? So if you look at where the money comes from and who actually ends up profiting from YAM finance as a protocol, someone's actually paying for that, right? And as with many governance tokens, it's often the retail user who then buys the YAM token on the secondary market. How do you feel about that? Yeah, it goes into some of my general thoughts about these community launches. and kind of what the best way to approach them is. I mean, I think the kind of astronomical market caps

that the EM achieved ended up being really detrimental to a lot of people. And I think a lot of people end up blaming the rebase for their losses in these cases. Maybe at some sort of technical level, that's true, but more generally based on the market, I don't know that, it is. In general, the people who really got, who suffered really heavy losses were those who

were LPing throughout that kind of market cap price collapse from, you know, 100 million to 10 million. In general, as with any LPN situation, if you're bullish on the, I'm kind of both tokens in your, in your pair, this is just kind of a general pool too. If you're bullish on your pool two tokens, then in general, it's not necessarily super detrimental for some price impact to occur and you to accrue more of those tokens. So, you know, if we're looking at Yam at its current market cap, I think being an LP is a really positive EV play because on those positive rebases, you're actually earning, if you're actually purchasing a higher percentage of the market cap than those who are not LPN.

So the long-term bullishness is, you know, of benefit there. But at the time, you actually incentivized LPing, right? So basically, you dropped YAM on people who provided liquidity in the YAM uniswap pool, no? Yes, I mean, the protocol, the protocol did that as was always its extremely explicit functionality. You know, as I was saying earlier, I think one of the things that we've seen, especially lately from some of these community projects, is that if you build up really large, really diverse community extremely fast, I think almost all of the time it ends up backfiring in

some way, shape, or form. I think one of the smartest things that a kind of, decentralized, potentially anonymous community-based protocol can do is to kind of begin by building quietly with a really strong product. I think that's something that like empty set dollar did, ESD, and I think they've achieved some really fantastic things because of that mechanism by which you can, with a small group of, you know, committed, interested participants kind of grow in a more sustainable way. Right. So speaking of this, like, community and, like, growing it very quickly, you know, we talked

about the ample for the, the fourth-y side of yam. But let's talk about the journey side of yams, which is one of the things that you guys did, which was very interesting, was this staking of, you. other defy tokens. And maybe it's not the first one to do something like this. I'd think maybe like edgeware was maybe one of the first ones to do this idea of a lock drop. But you guys like took it to the next level where like you allowed eight different tokens to be locked essentially in order to earn, to import the community. And so how did you guys come about doing this mechanism?

How were these eight tokens chosen? Yeah, it's funny. I mean, when we were building this, we were just like kids in a candy shop being like, oh, this is cool. This is cool. Let's throw this in there. And, you know, obviously when we brought in the fair launch and the decentralized governance, we knew that if we had this decentralized governance, we needed a really strong community to be able to operate and participate in that. And so essentially what we looked at was, okay.

I, Yeran did this, you know, stablecoin farming. We don't actually want the big stablecoin whales to be the ones that are helping govern this weird decentralized protocol. We want the people who have participated in governance before and who know how to operate, you know, defy on hard mode. And so that's really what we started to look for in terms of tokens that would be included in our in our farm, these really strong, really strong communities that could get the word out, could participate in governance, could understand the rebasing mechanism. And so we really just thought about how we could build the community that we wanted to see.

I think what ended up happening was that anybody in crypto at all, anybody in defy at all, all of a sudden had a way in which to earn and participate in the Yam protocol, which in some ways is a really exciting, amazing thing. I don't think that was entirely our intention, and I think that was part of the reason it gained such, like, just astronomical heights in such a short period of time. And so when you guys did as this like fair launch, you know, I guess, yeah, obviously this was meant to be sort of a side project for you guys. Can you help me understand like, you know, after you and you guys has been way more fair launches, how does the like founding team, you know, fund themselves to do these kind of things? Like you guys, it wasn't a full-time thing. But like when Andre launched Wi-Fi, like, how did he like profit off of it and like, you know, make, you know, make. it worth his time to do it? And is this something you guys thought about as well when launching it?

It's a great question and it's a, you know, kind of difficult problem to solve in some cases. We were doing it as a side thing, so again, wasn't entirely necessary to fund ourselves through it in the beginning. The EM Protocol builds up a treasury which can be used to pay contributors. And I think we've seen a lot of kind of protocols after us implement some sort of dev fund that can be used to fund the protocols development. But, you know, in terms of like pre-launch funding, I think it's, you know, quite difficult. You've got now things like Fair and Launch Capital and you've got like the Molly and Andre or Molly and Alpha fund that they've got going for some of that.

But, I mean, it's quite difficult to find the 50 to 75K that you need for a, for a major audit of a new protocol that you want to launch fairly. So, yeah, it's kind of a constant problem to navigate and try and find creative solutions for. Can I kind of change gears and ask you about the governance of the Yamdao? So you guys use Snapshot, which is a product. built by Balence and Ergen. It's a fantastic project. A lot of DFI Daos use it now. You were one of the first, right?

We were indeed. We were the first. You were the first. How did you get connected to the snapshot guys? And basically, how did you hear about this? What was your thought process in moving to Snapchat? And just for the listeners, so basically, snapshot is a tool where you signal by, you need some sort of token.

the governance token and then kind of sign it at a particular point in time. And then basically there's a snapshot taken as to which vote came out higher yes or no, or proposal one or two or whatever. Yeah. So we really use snapshot as our consensus gaining mechanism prior to an on-chain proposal. You know, we're fully committed to fully decentralized governance. So really nothing in the in the Yam ecosystem can. can get done at a protocol level without it going fully on-chain.

But Snapchat's a great solution in that we can just write some words on a web page and then have people vote on that prior to fully developing all of the necessary code and doing all of that, that work without knowing what that community consensus is. And so, you know, I think part of it in the early days was just a timing and exposure issue in which I think everybody knew Yam had had some governance that needed to take place. We were very much in the spotlight and we were actively looking for something that would allow us to get direct token holder consensus. And so the balancer guys reached out and then got connected with snapshot. and we were very happy to be kind of the testing ground for their tool, which now is like used by, it seems like, hundreds of various DAs.

So, yeah, really, really fun to kind of play a part in their story as well. So what are your takeaways from community governance with off-chain voting, or off-chain governance in a way? Again, it's an extremely useful tool for us as a step in our governance process. Our governance process really starts in Discord with just chatting about various ideas, proposals. It then goes to the Yam forum where a more fleshed out proposal is submitted and people can kind of discuss, poke holes in it. We have a kind of signaling vote on the forum. And then it goes to snapshot governance, at which point, it's not just like if you click the button on the forum page.

It's actually how many tokens do you have? What is your actual stake and governance power? And then we can use that to go on chain and kind of do a variety of batching of proposals on chain for kind of to help lighten the weight of that governance overhead and process. But it's a, it's a super important tool in the, the arsenal of, of EM governance for sure. How was the, like, you know, one of the parts of the, you know, Yam origin story and myth is that, like, you know, it, it was, went from idea to deployment in, like, 10 days. And so, like, what was that process like, especially when it comes to, like, writing the code and stuff? You know, normally projects take, obviously something

like Cosmos is like a completely different thing. But like, you know, in our head, it's like, oh, just going to take like eight months and ended up taking us like 24 months. How did you guys manage to like actually execute and deploy so quickly? It's a great, it's a great question. I mean, Brock is really a very fantastic engineer with a great kind of already built in understanding of deep knowledge of compounds protocol in general. So there was some synergies in terms of adding that governance module.

The staking contracts from SNX and Wi-Fi are pretty straightforward. And then a lot of it came down to the rebasing and treasury components. Basically, he just code sprinted for 10 days. There were a number of – there was extensive testing, but I think Brock's recently not recently, recently as in four months ago after this issue, kind of revamped his entire testing suite and has built a lot of kind of custom stuff for that. And by the issue, you're referring to the big bug, right? The big bug. That is, that is correct. Can you walk us through the big bug? I mean, that was the one of the, one of my darker, darker moments, I think for a lot of us.

So basically, shortly before the first rebase, basically kind of, you know, an hour or so before, we actually forked mainnet and ran the rebase essentially in production as it was operating and then began to notice the issues. So we then started to, obviously, communicated that to the community and, you know, started to, you know, started to. to look at various solutions. And so we were at that point in conversation with a number of different people trying to think if there was gonna be a solution to this issue. And essentially, it seemed like there was going to be time to get a governance vote in.

What was unrealized at the time was that the execution portion of compounds governance module right at the time of the time of, The last step in the execution governance process actually does one more check as to whether quorum has been hit. And so, you know, one of the lessons of this whole thing is just how complex these systems are and the interactions between them. I think especially in a situation like this, in which once this bug is introduced, it's no longer the system that Brock designed. And so it becomes a totally different thing with kind of new emergent properties. And so it was, yeah, it was a total, total nightmare.

I thought we could save Yam. I don't think I've ever or will ever see global coordination effort like that again in my lifetime in, you know, under 12 hours. It was insane, insane to see. And then it got quite dark again after that. that's when it was discovered that we could not actually fix the bug and the protocol was bricked. Even though it ended up not working, I thought like the recovery effort was like super cool to watch because like, you know, we're all like watching that over that that that recovery bar

and then like at some point it like overflowed the web page itself. And I think that was like something really cool to watch. What are like some of the other highlights of the process? Like, what do you think did go really well in the recovery process and allowed you guys to do this sort of like global coordination? I think it was just a combination of how exciting it all was. And I mean, I think we've seen this kind of all throughout DFI summer, how drama filled and exciting this space can be. And people love to participate in that and feel a part of it. I mean, it's, it's people have called it like a massive MMO.

It's like, yeah, we're all playing a co-op video game that's co-op PVP. Depends on the day and the person, I suppose. So, you know, I think that's a huge, a huge part of it was that it was a moment in which we can all kind of play and do this thing together. And it was truly very special to see. You know, I think after that, it really was just a kind of somewhat grueling process. of, okay, how are we going to make this right with people? How are we going to allow this experiment to take form if people want it to take form? So obviously, like, when it happened, we essentially said, okay, if the community funds an audit,

we will get the protocol audited and redeploy, and, you know, within two hours that that audit had been funded. And then, you know, I think for Brock and I especially, it felt like it was our responsibility to essentially clean up the mess. And so we felt that that was really important for the community and the people that had been involved and had done work to make this thing happen. It felt like it was our turn to put in the work to make it happen. And so that's what we did. We went through this V2 governance process of, you know, this migration and this kind of voting period on what V3 was going to look like and then the final V3 migration. And we've really just been focusing on building a community of contributors that are aligned with the vision that exists and that has

emerged. And he really just want to build cool things in DFI and kind of explore what these these bounds are. And so it's, it's been really fascinating and fun to see kind of that emergent community come about. So if you were in your own shoes six months ago, would you do this again? And if you would do it again, would you still put your name to it? Well, I would certainly not do it exactly the way we did it. You know, I, I, you know, I, I think we kind of, we obviously massively, massively underestimated the amount of attention and excitement that this thing was going to generate. Maybe that was a little bit naive of us at the time, but it certainly looks naive now based on how some of these things operate. But at the time,

we had no idea that this is how it was, that it was going to go. So would certainly get an audit, I think the anonymous aspect is quite interesting. I think one of the reason that it did blow up in the way that it did was because Brock, me, Will, and Dan, and Clinton kind of all have been in the space for a long time. And there was some kind of reputational legitimacy that we gave the project, despite the fact that it was this 10-day thing. Going back again to this idea of, you know, a little bit more slower, sustainable growth in a community launch project, I think if we had done it under pseudonyms that that would have been more the case and things would have gone more aligned with our expectations. But, you know, we didn't want, obviously some people knew what we were doing and that we were working on something and people were going to know who we were. we didn't want it to be weird thing, whereas like, oh, the insiders are building something and, like, the other insiders know about this thing. And, like, we really wanted it to be a true

fair launch, decentralized protocol. And, you know, in many ways, that is indeed what we got. Do you think sushi swap would have gone even faster if the identity of Tavnomie had been known? That's a good question. I think, uh, probably. but it also, it also depends. I think ours would have gone slower, but sushi swap coming right after us, it was so clear what was going to happen. Maybe it would have been a little bit,

a little bit faster if it wasn't in a non-founder, but I think the wave had kind of started at that point. What do you think about like, you know, your role in this, like Yams's role in the creation of this like whole food coin movement. And do you think this was a, what do you think about its like impact on like the course of defy? Yeah, it's super weird. I've obviously have some mixed feelings about it. But there have been a lot of great things that have come out of it. I mean, I think, I think sushi swap is is probably the best example and what we're seeing with kind of the, the why, the wire.

an alliance has been a really cool emergence that's kind of come about from all of this. But my general thought is that in a space like this, all of this does seem inevitable at some point. There's nothing stopping someone from deploying code and forking projects. And for so long, there was no real monetary incentive to actually do that. we kind of hit this, it started this bull market and all of a sudden there's monetary incentive, oftentimes really large monetary incentive to fork a protocol and start doing this. It's like, did Yam kick it off or like was it pretty obvious that like this type of thing was possible and

all of a sudden the incentives align to actually motivate people to do it? It feels like we may have been on the front end of the zeitgeist in that moment, but it was all going to play out something like this anyways. Do you think that the food coin meme had, you guys created such a good meme? So what I'm thinking of, like, you know, if you ever seen those like YouTube videos where people like pull like these like really like mean pranks and stuff and they're like, oh, no, just a joke, bro, just a joke. Like, do you think it's like this whole food coin meme?

And like, oh, no, just an experiment, bro. Like, you know, just a food coin. But that really, like, you know, maybe there's something more malicious going. Not in the case of yams, but like in, you know, yams on, if you look at the GitHub repo, it has 251 forks, one of which is mine. Do you think that was like, do you think your meme got perverted into something that you didn't like? In a lot of cases, yeah, absolutely.

It's also, you know, I've never seen front end. interface forked like that, it was really quite something to see that just like become a standard. I've never seen a front end interface become an absolute standard. So, you know, definitely hats off to Clinton for for that work. It was really, really cool to see. Yeah, I mean, it of course got perverted and a lot of it is similar to kind of my early argument that as soon as these incentives align to motivate this behavior, like the scammers come out of the woodwork. And I don't like having been a part of providing them an interface for doing that and providing them a highly marketable meme for doing that. But it's also the nature of the

space to latch on to memes and riff on them. Definitely didn't quite predict how much this one was going to take off. I think one of my favorite moments in all of this was the web page that came up that was, you know, every single food emoji.finance available for purchase. And there's the little thing like, we'll take like ETH, BTC, and then YAM, and then like they crossed out YAM. I just thought that was really, I thought that was really funny. And so let's talk about like what's the looking forward for yams now you know one of i think the main shifts i see is that like up until or at least you know previously the most of the treasury accumulation was coming from intended to be coming from the speculative value of of yams and like you know as the demand increases that adds more to the treasury but now there's

now there's like a large push in the community towards creating more cash flow like other sources of cash flow generation for the treasury. And so could you talk a little bit about, like, what are some of the projects that are happening in this regard? Yeah. And so this was kind of always how I, again, imagined the treasury would work and how the protocol would work. If we're just amassing this treasury and not doing anything with it, it's like, that's not

exactly a great deal for investors. So it's like, what can we do with that, those treasury funds that we accrue that actually return value for Yam holders? And so over the past, you know, a couple months, we've really been working on a variety of ways in which we can take this. So some of it has just been pure investment. So we've built out some custom OTC contracts that we've executed large purchases of ETH and DPI. So that's a cool contract that uses TWAP bounds to ensure fair pricing and allows

a Dow to actually make an OTC trade, which is quite interesting. And then we took that ETH and DPI and we're farming index with it. So we're generating some index revenue. We've also got, we're incentivizing YAMETH liquidity on sushi swap. And so when people deposit into the YAM incentivizer, we actually then take that SLP and put it into the sushi bar and actually earn sushi for the treasury. And so there are a number of kind of treasury management type things we've been working on. Our kind of upcoming one is the Yam Dow set in which we're working with set to use their V2 contracts to have a more active treasury management system that still retains full trustlessness. So we're essentially hiring a set manager who is going to be Krugman.

on Twitter, who's actually currently the second largest AUM on set protocols. So essentially targeting some correlation numbers and just general allocations that then can be rebalance and managed in a more active way. That also will have a management fee that other DAOs or investors can actually participate in the management strategy that we're following. So we've got that kind of treasury side of things. When it comes through the treasury side of things, how do you make sure that, like, the governance of this is, like, nimble enough to make decisions in timely manners? And, like, also, how do you make sure, like, you know, because all of these decisions now are public and have to be voted on?

How do you make sure they aren't, like, front run, basically? Yeah. I mean, that's a – how do we make sure we're not front run? It's – I don't know that there's a whole lot we can do there. The set collaboration is really our attempt to combat. the degree to which every single movement of treasury funds requires a one to two day forum discussion, two day snapshot, two and a half day governance process. So it's like there's a minimum five days to do anything with the treasury. Once we get it into the V2 set, we're going to be

able to make some of those changes on a much faster timeframe. We've orchestrated the treasury manager contract to have certain guardrails so like the set manager can't just like add a new token or out a new farm kind of willy-nilly to make sure that you know those those treasury assets are still really safe and secure and we don't have to trust that the kugman has has has yam's best interest in mind even though he does trying to really balance that being nimble and having that that active management side of things. But also, you know, we've got to be really careful in how we're doing these things. There's a lot of people's money at stake and decentralized governance moves slow. So we're thinking really actively about how we can always be more nimble, but also

still retain the trustlessness decentralization and security. And you're going to talk about a little bit about the, before I cut you off, you want to mention some of the other stuff that's being built. Yeah, a couple other of kind of our major product pushes are, I think by the time this episode comes out, we'll have announced our UMA collaboration on a product suite we're calling degenerative finance. So DGEN derivatives. So essentially these are going to be variety of derivatives built on top of OMA. Uma's infrastructure that will allow defy users to essentially speculate on a variety of kind of on-chain

defy metrics. So the contract we're taking over for Uma is the U-Gas contract, which is essentially a one-month gas future. We're looking at some impermanent loss hedging, some total value locked derivatives, volatility derivatives. So they're building out this general product suite on top of UMA contracts, which we're really excited about that collaboration, and they're obviously an excellent team to work with. So building on top of other protocols is something we're definitely interested in doing,

but we're also building currently a, you know, defy Lego insurance product called Umbrella that essentially takes a uniswap slash balancer approach to the creation of these insurance pools that an underwriter can come in and underwrite what we call a meta pool that consists of various contracts that it covers and then protection seekers can come in and get protection on a single contractor protocol specified by the metapool. And so I think one of the really cool things about that besides its kind of trustlessness and ability to build these different configurations and have different pricing models and things like that, I think one of the big differentiators is the degree to which you can get coverage on specific contracts. So you can imagine, for instance,

a urine metapool that has each vault included in it. And rather than having to purchase protection on just yearn in general, I can say, okay, I have my funds in the YUSD vault. That's the one that I actually want protection on. So I don't need to necessarily be paying. for all of these all of these other vaults that are that are included. There are a number of other kind of interesting things, but I think that's one that's going to be quite interesting and different from the existing protection protocols that we've seen pop up in the last couple months. And so who's doing like the building and designing of all these things?

So like is it still mostly you and Trent or are there? other community member. I think one of the most fascinating things about Yeran is how they successfully managed to grow the development team. How has that been going on within the YAM community? Yeah. You know, we've assembled a really cool group of contributors kind of across a number of disciplines.

So, you know, we have Brock and Nate Welch, who is a former total engineer, are really kind of leading our smart contract work. and doing a lot of that development. We've got full-stack developer called ZeroX that's handling a lot of our front end. We have a couple brand design marketing folks that are looking at both our marketing execution,

our interface design and branding, as well as like kind of these mission statement and brand pillars that we've been rallying the community around, as well as just a number. of people who are focused on, you know, operations, strategy, ideation, kind of general product and project management. So we've assembled a great crew and we're kind of currently in the process of onboarding some of them to be full-time contributors that receive monthly payments. And in terms of like the governance process with that, we've deployed actually a new, a new governor. So we have

a multi-governor model. And this, the compensation governor essentially, has a lower quorum requirement so it can be kind of managed by less people, but it's got a much longer time delay such that the kind of main Yam governance can always go and cancel any proposal that they don't agree with. So we've been doing a lot of this kind of organizational building, which has been an interesting experience outside of the framework of typical company structures. So, you know, we're a little less probably laissez-faire than yearn is in terms of their, like, you know, just come literally here's the GitHub, do whatever you want. We probably have a little bit more, more structure, but yeah. Cool.

Yeah, I mean, this is really exciting. Like, you know, that whole brand exercise thing you mentioned, I thought it was, you know, I read through it. I really liked that. I felt that it was like such a honest evaluation. of the entire, like, you know, current status of the public percent of the brand and, like, and where we want to go. I feel like more projects. Like, you know, I'd love to like, I actually shared it with a bunch of people at Cosmos

and being like, hey, we should like do this brand exercise for Cosmos as well because I just thought it was very well explained and done. Yeah. And that was like step one. That's contributor named Jim. He goes by designer. He is actually, you know, like a brand strategist guy. And so he came in and said.

okay, let's start with these brand perceptions. Where are we? Where do we want to go? And then kind of took it to these brand pillars of, okay, this is, I think, what Yam stands for based on its history and its current community and then kind of transform that finally into a cohesive mission statement that we got like kind of tagline, short form, long form of, you know, this is what the Yam community stands for believes in and is trying to do. in the world. And so we're currently ratifying that mission statement on snapshot right now. So it's, it's been really cool to see some of, some of that work happening. He's,

he's really excellent. Well, uh, thank you, Trent for coming on and like, you know, telling us about the story of Yam for past, present and future and as well as the, you know, legacy of Yam's. And so yeah, thank you. Is any, uh, anything else you want to share or anything where people can learn more about any of the new projects that are being built and how they can help out? Yeah, I mean, one of our best places to go learn about what we have going on is our Discord. You can find the link in our Twitter bio at Yam Finance. And, you know, if you're interested in building in Defi on some of the things we're working on, on some new things, like we are very interested in, you know, collaborating, seeing what we can do and work on together.

and yeah, it's an amazing community to be involved in. And thank you both for having me on here. It's been a lovely time chatting with you. Yeah, very much appreciate the time. Yeah, thank you for coming on. Thank you. Thank you for joining us on this week's episode. We release new episodes every week.

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