On The Brink with Castle Island - Trent and Brock Elmore on Building Yam Finance (EP.132)

Episode Date: September 30, 2020

Trent and Brock Elmore, two of the five creators of Yam Finance, a decentralized finance protocol, join the show. In this episode we discuss: The inspiration for starting Yam Finance The story behind the launch, the initial bug and the subsequent re-launch Contextualizing DeFi – what is a fad and what is enduring The future for Yam Finance and the long term sustainability of fair launch platforms   To learn more about Yam Finance visit: https://yam.finance/

Today on the podcast, I sat down with Trent and Brock Elmore, two of the five founding members of YAM finance, a decentralized finance project that launched a few weeks ago. I wanted to have Trent and Brock on the podcast to discuss Yams as well as discussing D5 more broadly. So this is clearly a space that's moving very quickly. There's technical innovation happening here across a range of protocols, but there's still big open questions in my mind as it relates to how widespread some of these platforms can be just by the very nature of them and the fact that there's no K-WRourke. I see. There's no anti-money laundering procedures. So they're quite different from traditional borrowing and lending platforms with that respect. Yams in particular is a fascinating case study to me. So the founding team launched the platform a few weeks ago. And within 24 hours, $500 million in assets were deposited to the protocol. And as you'll hear, it wasn't necessarily all smooth

sailing from there. What's fascinating to me here is that this is a product that was put into the wild without a corporate wrapper. So these guys didn't sell tokens to the public. They didn't pre-mine and allocation. So it's really a unique in novel governance experiment, and it's one that I'm intrigued by. So I hope you like this one. Without further ado, here's my conversation with Trent and Brock Elmore. Brought down by bad mortgage investments, Lehman, which has 25,000 employees will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened

by the housing crisis. The bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. And print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called a Bitcoin. Bitcoin. All right, guys, well, I'm really excited to have a brother duo on the podcast today. We have Trent and Brock Elmore on the show. Guys, thanks for joining on the Brink. Yeah, thanks for having us. Yeah, thanks so much, man. I would love to kind of start off with the background story. So either Trent or Brock would love to kind of hear your career trajectory here, how you got into the industry.

And how did two brothers end up collaborating together here? Yeah, thanks. This is Brock Elmore. And I got into the crypto space in 2014. I was at UPenn undergrad at the time. And I was mining Bitcoin in my dorm on its electricity, just exploring the technology, super interested in Bitcoin at the time. time. I was also teaching myself machine learning and going down that path. And so I got more into the crypto space in 2016, late 2016, early 2017, really caught the ICAO craze. And late 2017,

early 2018, started a small fund based on trading Bitcoin using machine learning tactics. Really picked up the D-5 bug in early 2019 when I was an early user of DYDX, which is a derivatives platform, you could earn really good yields. And so comparing the YDX to compound, which we can touch on later, we saw that there's a disparity and people would want to be able to move their funds between these platforms to earn the best yield. So that led to the creation of Topo, which was Trent and I's company. And then we evolved into more of a prop shop type thing. After deciding consumer facing wasn't the path we wanted to go down. I'll let Trent jump in and fill in some of the details that I left out.

Again, thanks for having us, Matt, excited to be here. My name's Trent. Yeah, my college experience with Bitcoin was a little less above board than mining, but that was kind of my first introduction. And then along with Brock in 2017, right as things we're starting to pick up, really started to get involved and dive in. And it's one of these interesting things where, like, you don't necessarily have a bunch of friends that are going to always geek out with you

about the crypto space, especially kind of back then when it comes to like the deep tech of it. So that was kind of where Brock and I started collaborating and sharing. We were kind of our weighing crypto points of contact. So then in late 2018, early 2019, time frame when these D5 protocols started popping up like peroxide compound and DYDX, we saw some really interesting potential there. And so with this yield optimization product that we were looking at, essentially bouncing where you're lending your cryptocurrency to achieve the highest yield, we started to see some really interesting potential for defy aggregators. Ultimately, as Brock alluded to, the yields and the interest rate markets started to really compress. And so we started to begin leveraging this

inter-proticle technology that we had that would let us really efficiently create atomic transactions across these various defy protocols towards more prop shop keeper and liquidation, Tras type strategies. And to get a little bit more power on that, like atomic transactions essentially are being able to include multiple steps of a transaction within one single transaction, such that if one fails, the entire transaction reverts, which is one of DFI's really cool potential benefits, as it allows some pretty interesting new functionality. So guys, thanks for that introduction. We'd love to maybe just start broad and then start to zone in and spend some time. talking about Yam. Defi writ large. I mean, obviously this has become kind of a household name at this

point, but I would say probably outside of the crypto circles, not a lot of people are aware of this. So how do you guys think about describing what is going on here just with the category of defy? And how do you explain to a person that might not be living and breathing this every day, just why this is exciting and why people ought to pay attention to it? To answer this question of kind of fundamental question of what is defy, DFI is really programmable and permissionless finance that instead of relying on centralized institutions is relying on smart contract code to execute financial transactions. And so what this means is that we're seeing this really cohesive ecosystem evolve that

enables lending, borrowing, margin, trading, synthetic assets, all accessible via an internet connection. And so I think it's really this accessibility. the permissionless of it, the decentralized, specifically non-gatekeeping nature of it that makes it really attractive for a really broad population. I think the other really interesting thing to us is the way in which these protocols can be combined and built on top of and in between that really allows for this seamless experience across the whole financial ecosystem, as well as emergent properties in terms of the financial functionality that you achieve on top of it. Yeah, that makes sense.

I mean, one of the things I really kind of wrestle with when I'm asked to explain Defi is just where is it going? And kind of without predicting the future, sort of how will it engage with the traditional financial services world? Because I think there's probably a pessimistic way to view this and an optimistic way. And so probably the optimistic way would be we're seeing innovation in the types of financial products that people can introduce really in an open source capacity for the very first time ever. And so previously, these types of innovations only happened in big banks behind kind of closed doors.

Now, there's probably a less optimistic way that is to look at this and say the way it's designed right now is not very conducive to large pools of capital participating. And primarily because that's the regulatory side of it, right? Like a lot of these platforms aren't KYC. They would not pass compliance tests for big banks. So, I mean, how do you guys think about that, just kind of the tradeoffs between this is a super exciting technology and then some of the kind of structural impediments to its scaling? I guess does it matter? I would say the way I envision where this is going is there will be bridges.

So there will be an ecosystem that exists that can be entirely self-contained, right? And that's what we've built up. It's entirely self-contained. And I think we're starting to see the bridges being. bill. So AVE, which is a lending protocol, they recently received some licensing to allow them to start to bring in mortgages into their system. And they have credit delegation so you can do under collateralized borrowing in their system. So you pair those two and all of a sudden you're able to effectively get mortgages via AVE. That's down the line, right? It's not today, but there are a few

hops away from it. And so I think there are going to be more of these bridges where fundamentally we have this massive ecosystem, this financial system in place, and it's not like this system is going to entirely replace that. There are certain things that just the way our world operates, we can't fully switch over to this decentralized world. It can live by itself. It can be parallel. It can have traction, but there will be places where there are bridges between the two. And I think that's how I see this going forward. Are these very specific points at which these ecosystems interact. Yeah, I think that's really interesting. On kind of the other side of that, we're also seeing some centralized exchanges start to adopt some of the innovation that's been going

on in defy. So one good example is per finance, which has started to take over a lot of the stable coin swap volume, offering better rates and prices than OTC desks. And so I think a couple weeks ago, I believe it was Binance started to announce that they're actually going to essentially use a similar constant function market maker, automated market maker, to kind of replicate the functionality of curve finance within their system. So there are some really interesting innovations that are happening in DFI that are also getting ported over. Now, will a CFI institution trying to adopt DFI primitives really end up being able to compete? I personally don't think so, but I am a defy native. So my bullishness on the space is quite high. Yeah. It's interesting

kind of hear you guys run through that logic. You know, I think from my perspective, most of the successful kind of implementations and adoptions of this technology to date over the past 10 years have really been when things that are complicated become just really easy to use. And so Coinbase, I guess, would be the perfect example there. Just came across and made it really easy to kind of buy Bitcoin. What needs to happen in Defi in order to open up this aperture so that my parents could use a defy platform? It just seems like right now it's a little bit too early for kind of the mainstream. Yeah. I mean, I think one of the kind of inescapable elements of transacting on the blockchain is that it can be unforgiving. I think everybody in this has some serious experience

in Defi has at least one kind of horror story of pasting the wrong. address in and somehow messing up a transaction that once it's sent, same way with Bitcoin, once it's sent, you're done. And so mounting that kind of user experience hurdle is, I think, really quite difficult and requires some interesting innovation that we are seeing in terms of, for instance, a wallet like Argent, that if you lose your private key or send a transaction, there are ways in which you have guardians on your wallet that can help you retrieve your private key, can be used as a kind of a multi-sig if you're sending over a certain amount from your wallet,

that it has to be approved via more than one individual. And so there are kind of these solutions that are emerging to help with that, but it is a really difficult problem and kind of fundamental to the blockchain. So it's going to be interesting to see exactly how that piece develops. I will say this as well. You think about traditional finance. How much of the traditional finance system does your mom or grandparents actually touch? They touch their bank account primarily and maybe their stock portfolio. They're not going to be interacting with complex derivatives and trying to understand payoff structures. So the financial institution uses those in different ways to help give a better UX and a better rate and those sorts of things. But you have to have those primitives in place. and then it's like, okay, now we can have a really good UX by leveraging these underlying platforms that give a competitive rate that's way better than my traditional bank account. And we slap a clean user interface over that and you probably have to go through some

regulation to actually get it to the end user in a comfortable experience that your mom could use. That's kind of how I feel right now. I could be totally wrong and I would be happy to be wrong. Yeah, that's kind of an interesting way to think about it because when you, you think about what is out there now and working in defy, I guess this sort of is like taking out a loan from a protocol or putting your savings into a protocol as opposed to a bank. And so at some point, you might see that intermediated by a company that might have a defy protocol on the back end, but it also might have a centralized option on the back end as well. So I guess it is possible that

we would have a merging of those two worlds. That is also somewhat like we see with Dharma, which also has a fairly complex, but from a user experience, really simple way to ensure against some of these these uh-oh transactions where you really screw yourself. It's also a very different user base than I think people like Brock and I typically interact with and who we are, where we see so much value in the fact that within the span of, really, with some of our smart contract deployments, within the span of a single transaction, we can interact with four different protocols that span exchange, lending, and kind of asset management. And so there's the degree to which, while there's a large U.S. barrier for your mom,

for those who are really wanting to manage their financial experience personally, the U.S. is incredible. If I wanted to go from my bank to my Robin Hood account, it would take me, it does take me, like three to five days at minimum, where if I want to go from a lending protocol in the defy ecosystem to trading on uniswap, it's three to five minutes. There are just fundamentally a lot of tradeoffs that are going on here, but I don't think any problem is really unsolvable at this point.

Yeah, that makes sense. So let's talk about Yam. I am going to ask some very elementary questions here. I want to hear from you guys. And I think our listeners, there might be quite a few listeners actually that have not heard of Yam. So why don't we just set this up and let's talk about what was the idea behind starting the project? What is the project? What's the goal?

Yeah. So Gam is really fundamentally an experiment and it's an experiment in a couple different directions. So kind of the core protocol functionality is as an elastic cryptocurrency that seeks to reach a price target of $1. And so if it's above a dollar or below a dollar, it's going to either inflate or defraud, its supply in order to reach that price target. This is very similar to a cryptocurrency called Ampleforth, who kind of pioneered this rebasing. It's called mechanism of inflating and deflating. But we had one key innovation on top of that, which is that on every positive rebase that inflates the supply, we take 10% of that supply and use it to purchase a high-yield stable

coin on the open market. And so that then goes into the protocol's treasury. This is all controlled by the protocol itself. The smart contracts are fully functional on their own. And as we saw in V1, they cannot be stopped, which brings us to kind of the second component of the experiment, which is decentralized governance from day one. So we launched the protocol and immediately abdicated all admin privileges, such that the only way the protocol can be modified or controlled in any way is via tokenholder vote implemented through the compound governance module. So bootstrapping decentralized governance from day one was an interesting experience. And so the kind of final piece of the experiment and the natural question is where do we get

our token holders? And so the token holders really come from this idea of the fair launch, which is that users deposit funds into these staking contracts and then receive a pro rata share of yam on a block by block basis in accordance with their share of that staking contract. This was really pioneered by a cryptocurrency called Wi-Fi, Y-earned protocol, and it was really amazing and cool in the way in which it just totally got this decentralized distribution. So the Yam protocol currently no one has over 4% of the network. The launch team themselves, all combined, all five of us combined have less than 1%. That's been a really interesting

distribution mechanism, which after Yam launched about six weeks ago, there has been a kind of Cambrian explosion of these D5 food coins that has been really interesting to see emerge in the wake of the initial Yam launch. Yeah. So there's a lot to unpack there. I guess one One thing I'd love to just kind of dive into at the outset is just what the fundamental base currency is really aiming to be. So when you think about what that base money level that you're describing, the fundamental asset, so to speak, what is that kind of competing for? Is that competing to be a non-sovereign value store?

How do you think about that? We're obviously inspired by Ampleforth and they really want to be a base money similar to Bitcoin. While we take a lot of cues from their rebasing, I personally view the project in a very different fundamental way. But it should be noted that my opinion doesn't necessarily matter that much. The community of YAM holders who are in control of the protocol fundamentally, they decide what YAM is trying to be and what it will be. But I will give my perspective in which my mental model for YAM is much less trying to be a base money and more trying to be analogous to an actual

business, kind of a decentralized bank. The way you can think of it is that the rebasing mechanism, which seeks this price secretive one, it essentially is programmatically measuring demand for YAM and access and governance of the underlying treasury. It is programmatically measuring demand for Yam on a daily basis and then operationalizing that demand to raise funds for the Treasury. And so this is kind of like a traditional bank issue shares to raise funds and then deploys that capital, manages that capital to earn revenue for its shareholders. Yam is doing a similar thing, but in a fully decentralized way in which it's raising this treasury. And then ideally we'll go out and deploy and manage that treasury to increase its yield.

increases revenue and increase the value of the protocol for token holders. Got it. So one thing that was confusing to me is just how did the rebases work in terms of, you have to look somewhere for an external price, presumably, to make sure that this is pegged to a dollar. How does that process work? I'll hop in here. So uniswap is a dex, a decentralized exchange.

And it just, it facilitates being able to trade any two tokens against each other. And so the way it's set up is you can actually do what. it's called a time-weighted average price. And so our protocol reads, and that's stored in their smart contracts. So all we have to do is we just have to go and read basically the exchange history for this time-weighted average price to get a sense of, okay, here's how Yam has been trading over the past 12 hours. We don't have to do this.

This happens in our smart contracts that handles this rebasing. So our contract sees that, okay, Yam has been trading at $2. therefore we're going to mince this amount. We're going to increase supply this amount and sell this amount onto Uniswap itself. It's all decentralized based on Uniswap. No central party just uses Uniswap essentially. I see. And so what was that thought process around just forming this team to go after this problem? What was the backstory there of how you all got together? So the original team, Brock, myself, Dan Ellitzer, Will Price, Clinton. and memory, have all known each other for the most part for a little while.

And so we were really originally just kind of jamming on the idea of Ampleforth, which had kind of this atmospheric rise and then this kind of death spiral collapse in its market cap, largely as a result of when you're in positive rebased territory, it's really fun. And everybody feels like they're making money. And when it's in negative rebased territory, it's like you're below the price you bought at, you're having less ample in your wallet each day. And this is kind of fundamental to how a rebasing currency works. And it's also helpful maybe to have a little sidebar here that as a mental model

for exactly what this rebasing thing is, it's extremely similar to a stock split. It just happens on a daily basis. There's a big mental block there for a lot of people. And so the stock split analogy can be quite helpful. But so when these negative rebases start happening and there's this death spiral, we were basically thinking around the idea of like, okay, how could you, Ample really has something interesting going on here. How could you stop that death spiral process? The idea originally was just like, what if you took a little piece of each positive rebase, put it in a treasury, and that will generate a price floor, the protocol. And so we got pretty excited about that idea and started thinking about, okay, well, like all of this code, all of this open source code is out there.

we could launch this thing and do it in a totally decentralized, trustless manner and have it be community owned from day one. And as we worked on it over the course of really 10 days from idea to launch, we started to understand that, wait a second, there's actually an entirely different kind of financial function that a protocol like this can have. And it can actually be a long-term value-generative protocol for people to interact with. with. It started off kind of just as a kind of money game type thing. And that's what a lot of people initially conceptualized it as. But there is actually the potential for it to supersede that money game, that money game idea and become something that really generates some value.

I remember kind of reading some of the initial comments on Twitter as this was happening. And at least in some of the people I follow, maybe there's a perception that the team behind Yam was doing this because it was just to show there are some big deficiencies in Ample 4. and the fact that some of the early investors had a big chunk of the protocol. Was that part of the motivation to put something in the wild that would be very different from that? Was that part of the calculus? No, absolutely not. To be honest, we were not even really thinking about Ampleforth that much when we were actually launching this thing.

They were kind of an inspiration in terms of their mechanism and some of their code. But there was definitely no, let's go stick it to Ampleforth. let's go get something out there, community owned. I think Ampleforth is really doing a lot of interesting things to kind of push the bounds of this idea of elastic finance. And so I think their team is great, and they're doing some very interesting things. One thing that's interesting about a lot of these protocols

is there's a notion of having a way to pay the developers that work on the protocols. You've said a couple of times that this is really kind of a fair launch. You didn't launch it with a way to pay yourselves. So how do you think about making it sustainable? Is that something you care about? How do you just generally think about paying developers to work on this? I'm in a little bit of a conflict of just espousing how I think I should be paid on this.

I will say it's, right, it's entirely up to the community. But we have lives, we have bills. And I think it's reasonable that we can commit only a certain amount of time of our lives to something that doesn't pay our bills. We are committed to at least helping as much as we can. but at some point we do need to, whether that's through other work or through community fund, have a way to pay the bills. We're not pushing that right now.

We probably never will. It'll be up to the community, I think, to really push that over the edge. We are just one example of how contributors to Yam should in some way receive compensation, right? We've done a lot of work, but there are also like a lot of other people who have been contributing to the repo, that have been building ecosystem tools that have been helping us manage the community. There's a really strong core group of community members who have been dedicating a lot of time and effort to this protocol. And talking about sustainability in your initial question, it's like, yeah, there must be a way to align individuals long-term

incentives. So much of this decentralized governance, these decentralized protocols, they're fundamentally, this whole space fundamentally about how do you align incentives correctly. And so I think the contributions to the Yam protocol and really any decentralized protocol, people need to think really carefully about how to properly compensate and incentivize in the future of people making those types of contributions. Because without that compensation, as Brock says, you can only expect an individual to give so much of their time for free. Yeah, it's an interesting thing that I think about a lot is just what is the equilibrium of what is an appropriate amount to pay developers and a team that's working on these protocols because they're all open source.

And so they can all be forked at any moment. And so an interesting question is just how do you form a network effect around something that can be forked so easily. And I don't know if you guys have thought about that or have an answer to what makes these things sticky, just given how that works. We've given this a good amount of thought. And for YAM specifically, it's about the treasury. liquidity is what they call super fluid in defy. It bounces from on protocol to the other, depending on the incentives, pretty much instantly. One thing that can't bounce around is liquidity that is owned by the protocol itself. And this differentiates EM from pretty much every other protocol out there, where part of our stickiness is that we own the liquid.

The protocol owns the liquidity, the capital. This ties in with the previous question as well, is making it sustainable, is that treasury can be used for whatever government. deems is useful for the protocol. So if that is incentivizing community members to contribute code, those sorts of works, it can be used for that. But to go back to the sticky and forkiness, corgability, the treasury ultimately is what this all evolves around and gives us a very strong moat, I think. And I would just add real quickly regards to outside of Yam and the defy ecosystem more generally, it's like in the past month, we've seen a ton of Forks that are taking the code of really established DFI protocols and launching it in a fair

way that gives community members ownership of that protocol, which is a fascinating development that's really testing a lot of kind of the core assumptions of this space for a long time. This was always on the table. It's just happening now. And so what we've seen, though, is that decentralized governance, especially bootstrapping it from day one, is a really difficult endeavor. And so we've seen a lot of nist steps along the way. And it's not a hot take and it's not going to be surprising.

But even within fork and non-fork land, the teams that are going to be successful are the ones that have been working on the problem for a really long time, understand it really well, have, again, these long-term aligned incentives and have communities that have formed around them outside of hearing about a new fair launch farming opportunity two hours ago. Yeah, that's a good perspective. I want to go back to kind of when you launched this thing and what those 48 hours kind of looked like. I mean, I remember this thing was launched and people were trying to figure out, is this for real? Like, this is kind of a cute thing? And then all of a sudden, just more and more money was being put into the protocol. And I think if I'm not mistaken, there's something like $500 million within 24 hours. It really kind of reminded me of the feeling when the Dow was getting funded to that crazy level. And so, So I guess my first question is, I believe it was an unodited kind of contract. And so what were you guys kind of thinking as this all was happening and people were putting a lot of money into something.

And there were obviously kind of dovetail this please in your answer until like what happened. But what was that thought process? Yeah. So it was unaudited. If I could go back and change that, I would. But thankfully, one of the things we did, what became very popular was and Wi-Fi pioneered this. synthetics, they created a contract that was very good for essentially doing this fair distribution

where you put up one token and out as a reward comes this other token. And so that worked very well for Wi-Fi and that's what we used as well. And that is audited. That contract was. So where that $500 plus million were sitting was pretty much in an audited contract. What was not audited was the actual token that was kicked out from where these people were putting their money. That was the EM token. And so that's the issue with being one developer who creates this entire code base in less than 10 days and is unaudited. It's very easy to miss small things in a code base. It happens regularly. It was very unfortunate. It was a very difficult experience to have it happen to us. And I'm very glad we used an audited contract for the vast

majority of funds. I knew myself that, okay, pretty much the main risk points is the token itself, because that's where the most complexity was. The staking contracts was fairly confident in the previous audits and understood that system relatively well. Maybe for those of in the listenership aren't familiar with what happened. Can you just maybe give a overview of sort of what went wrong and how you fixed it? Effectively what happened is we had an inflation bug where too many Yams were printed, which would affect the next rebase. And what we had to do is we had to try and get a governance proposal through, which would change the protocol. This ultimately failed, resulting in this second rebase, locking down entire governance of the V1 protocol. So no more proposals,

no more changes to the governance process. The treasury was locked. So we had about $750,000 that the treasury had accumulated through this rebasing process. That was now permanently locked. because of this inflation bug. Mainly because, again, the protocol is entirely decentralized and controlled by YAM token holders. When we overprinted the YAM, anything that we don't sell into UNISWOP goes into the Treasury. The Treasury is only controlled by YAM token holders.

And so the amount of YAM in the Treasury meant that we could not reach Quorum to access the Treasury. So the governance module, was essentially bricked at that point. And so I guess one way that this would have been different is if you had some sort of an administrative privilege to intervene on this. You could see why you wouldn't want to do that, I guess, for many reasons, I suppose. But was it you didn't want to be a foul of securities laws?

Like what was the calculus around not giving yourselves the ability to intervene? I am a true defy decentralized believer. I think that's my main motivation is I really enjoy the. concept of no central authority being in full control. There are other benefits as well. To me, not having to trust an individual won't act erratically is very important to my sensibilities. I'll say that the regulatory environment was also definitely a major factor. Because of the amount of regulatory uncertainty that exists around all of this stuff, it's like it's a very gray area and we basically know two things that if you actually sell a token, then you're

potentially in a bad situation. And if you are sufficiently decentralized, then you are based on the guidance probably in a good situation. And so we decided, okay, we're not going to sell this token. It's going to be distributed given to specific communities of token holders that participate in this process and that we think are going to add value to the protocol. And we're going to make sure that it is totally decentralized in its operation and management, such that we don't have control or kind of regulatory liability. There's obviously a certain irony there in that it's specifically these regulations that are ideally meant to protect market participants that really ended up being the motivation to have a design

that meant in this particular situation, there was no central person developer who could go flip a switch to fix the situation. And so what's next for Yam? I mean, you migrated to presumably, is it now audited? Am I right and understanding? Yes. So we've deployed audited contracts and relaunched replanted yams on Friday. And so we've now gone through a couple of rebases. The protocol is function. as intended. We've executed a couple proposals to alter certain governance elements. And so the system is working as intended. So now it's really up to the community of VM holders to decide where we want to go from here. So how are we going to optimize some of the protocol parameters? How are we going to manage the treasury? How are we going to coordinate the community to build

the ecosystem tools, stats, trackers, all of that stuff that a successful project has. And to your question, how are we going to then kind of fund that development? What's your sense of what that community looks like? Obviously, it started with five people. So you had five people in the community on day one, presumably, but what's it look like now? And do you have a sense of who's participating? Yeah, I mean, we have a discord currently of over 7,000 members. And there's also a community-generated telegram out there with, I think, at least a few thousand members. So it's a really large group. Our token holders are also, I believe, over 8,000 token holders.

And so it's a really global community that I think one of the things that we've seen over this V1 delegation and then V2 interim governance process and now into V3, that they're really committed and engaged, really focused on making decisions that are value accruing over the long term rather than prioritizing some sort of short-term profit. And so in general, I've been extremely impressed with the community that's this developed around Yam, and we have some incredible community members that are extremely thoughtful and engaged on what's going to be best for Yam in the future. And how do those community members voice other than in Discord and putting kind of comments in

there, how do changes to the protocol happen? What's that voting process like? The flow for making changes to the protocol is there's discussion in the Discord. Someone makes a forum post. That foreign post then turns into an off-chain vote. So token holders can signal with their current balances, how they would vote on-chain. That gives a very solid base to say, okay, here's how it should look. The on-chain proposal should look, whether that's putting a new contract up and updating the protocol to point to that contractor or whatnot. And then people vote on chain. So it's this flow from casual conversation to more and more structured to actual implementation on chain. Got it. With some of the on chain elements and just given the fee market over the past few weeks,

what's the outlook here? I mean, how do you see this? How does that slow you down? What do you think about the fee market, just scalability in general question? I'm very interested in layer two technologies. So optimistic roll-ups is a scaling technology that's coming in not too long that I'm starting to take a deeper look at and really see, okay, one of the things is we can build new protocols inside the Yam umbrella. And so that can add to the treasury. And so do those protocols live on a layer two solution?

Do they live on layer one? Because the fees situation is pretty crazy right now. I think it's going to cool down some, but it's not something we want to rely. Starting to look forward and say, okay, here are the legitimate layer two solutions we can use that minimize the trust needed. How can we use those to continue the operation entirely? And I think Uniswap V3 is going to be on a layer two as well. And so it's a constantly evolving ecosystem entirely.

There may be a case where all of Defi is on a particular layer two, in which case we would want to be in that ecosystem as well. So the short of it is basically it's an evolving system and we just have to watch and keep our ear to the ground. So you guys have been really clear that you don't control the platform. You guys are not the CEOs of Yam. But where do you want to see this go? I mean, just as individuals, you know, what do you want this to be? I think for me, it again kind of all goes back to the treasury management element and essentially how that treasury can generate revenue for the protocol and for EM holders. So there are kind of three

key areas in which you could deploy that capital in the current ecosystem. The first is what we're currently doing, which is high yield generating stable coin. So basically looking for yield generating opportunities that are extremely stable and low risk. There's also more of a kind of decentralized fund opportunity in which you could invest in a basket of other defy cryptocurrencies. You can imagine a venture model in which teams come to us say, hey, we would like money for an audit, we'll give you X amount of tokens for funds for that audit. And then finally, there's this kind of financial protocol out the back end idea in which the Treasury's liquidity would actually be seeding the initial liquidity for some sort of financial service

that could be offered to both EM users and non-EM users. So those are kind of the three general potential avenues for how I see the treasury being managed. But as I said earlier, there are kind of four areas where I think the protocol needs a lot of work. And it's going to be exciting to see how the community chooses to develop it. Yeah. And just add a little contrast, for me, the most valuable thing about Yam is its ability to build these financial protocols as opposed to all of these other things. I think the other things are very important. Don't get me wrong, but I really like the ability to leverage the Yam community and the Yam governance system now to have these near trust lists. There are certain things that do need governance. You don't want to have to spin up

governance for every new thing necessarily. And I think Yan could be this platform, where developers can come to and really view it as, okay, I can be a part of the AM community and I have this idea for this financial permitive and launch inside the AM ecosystem, which would be a really fun way for people to launch a project. It's a fascinating experiment. Where can we send people to learn more if they're interested? Obviously, join the Discord. The link is in our Twitter bio at Yam Finance.

You can also check out our website, Yam.finance. And so that's the best place to get in touch with EM specifically. And then you can also always reach out to me on Twitter, Trent E-L-M-E on Twitter. And you can follow me on Twitter, Brock J. Elmore, on pretty much just Twitter. And say hi in the Discord. All right, guys, well, this has been fun. This is a real deep dive into a topic that we haven't covered on this podcast. So thanks for joining. Fascinating stuff.

Yeah, thanks so much for having this season blast. Yeah, thank you. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island. Visit castle island.Vicc. Please go to On the brink dashpodcast.com or just click on the tab in our website. Thanks for listening.