YAMpocalypse: How Extreme Hubris and Speculation Smashed the Latest DeFi Token
But it's not over; BASED is the new YAM.
Hello Defiers! Crazy (and risky) days in decentralized finance,
- YAM came, conquered, and fell. A complete recount of the YAMpocalypse
- BASED is the latest experiment for degen farmers
- Gas tokens are surging along with record Ethereum gas prices
and more :)
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YAM is Dead. Long Live YAM
Yam Finance TVL went from $0 to as high as $500M, now to $280. YAM token jumped over $150 and is now trading at just below $1. The team discovered a bug in the code, which the community organized to fix, but ultimately made governance impossible.
And all of that happened in less than 48hrs.
Yam Finance aggregated more than $400M worth of DeFi tokens from traders seeking to farm YAM in the hours after its launch, while its token soared many times over its $1 peg to as high as $157.
Then, the project underwent its first rebase as programmed, in which the supply inflated by roughly 10x to bring the token to its target peg of $1. Note that similar to AMPL, the number of tokens in holders’ wallets changes with each rebase, so while the price of YAM drops, the amount of YAM held by each investor increases.
Bug Found
It was at this time that a bug was found in the unaudited code where the YAM reserve inflated by 10x more than what was originally anticipated. The reserve is designed to purchase funds from Uniswap’s YAM/yCRV pool, but the inflated supply meant it would be impossible to reach quorum as the new YAM doesn’t have voting rights. Governance would be blocked, and so would funds in the treasury.
“There will be so much YAM printed that quorum will be impossible,” the team said in a blog post.
The community of YAM holders rallied to pass a governance vote in which rebases are paused and governance is migrated to a new contract. YAM token holders were called to delegate their voting power in exchange for added rewards so that the team could submit the bug fix, and while the vote count was low at first, the YAM count quickly picked up, culminating in a nail-biting event which came down to the wire.
Yam Finance @YamFinanceWe have been contacted by various benevolent YAM whales. Many are farming the Uniswap Pool until 7am UTC to accrue extra YAM to delegate. Progress toward our 160k goal will appear slow but then speed up rapidly as we approach 7am UTC. Help us. We are all in this together #DeFi2:03 AM ∙ Aug 13, 2020462Likes87Retweets
Smashed YAM
Ultimately, not even the fix could save Yam governance.
“We concluded that the rebaser bug would interact with the governance module and prevent this proposal from succeeding,” the team wrote in a blog post.
So where does YAM go from here? The token will continue to exist, with its supply expanding and contracting to keep its $1 peg, and YAM can still be farmed from staked tokens, but there will be no governance possible. The YAM/yCRV Uniswap pool, which now holds $1.4M in liquidity, remains unsafe and traders should withdraw their funds.
The hardest hit by the YAM collapse were Uniswap LPs. For those in the YAM/ETH pool, they did not receive the rebase and therefore had their supplied ETH drained as farmers rushed to squeeze every last drop of liquidity out of the project.
Holding Bags
There remains just north of $230M of assets staked in YAM, many of which are likely small farmers who are stuck holding the bag with cost averaging $30 to withdraw from any given pool. The return on these staked assets has dropped by 99%.
The Yam team will look to relaunch following a community-funded audit.“If the funding goal is reached, upon the completion of the audit, we plan to support the launch of YAM 2.0 via migration contract from YAM.”
Power of the Token
While unsuccessful, the experiment shows the power that token incentives and an open, global ecosystem have to create active communities. YAM holders didn’t exist three days ago, yet they were able to quickly coordinate to try to save the project they had rallied behind.
But let’s not shrug off the risks. Yam Finance issued YAM tokens with no pre-mine, no VC investments, distributing them completely among users to ensure decentralized governance —but also with no audits or value proposition other than accumulating YAM. Still, hordes of yield-hungry traders jumped in, while others looked on with dread. It turns out the latter now have good reason to say I told you so.
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BASED is Latest Experiment for Degen Farmers
As if the hype around YAM wasn’t far enough down the rabbit hole, a new project called BASED is taking experimentation and risk a step further.
Gas Tokens Soar Amid Transaction-Fee Mania
With gas prices at new all-time highs, tokenized gas prices are also thriving.
1inch’s Chi gas token (CHI) is up 1903% in the past 30 days while Gastoken (GST2) is up 683%.
MyEtherWallet adds support for DeFi protocols Ren and Aave: Decrypt
MyEtherWallet, the open-source client for generating non-custodial Ethereum wallets, today announced integrations with DeFi lending protocol Aave and Ren, a protocol that lets Bitcoin interact with the Ethereum blockchain, Decrypt reported.
Aave Takes Step Towards Decentralized Governance
Aave’s launched its governance module on the Ropsten testnet. Community members can vote on the first Aave Improvement Proposals, or AIPs, and provide feedback without incurring high gas costs. Decisions on the testnet will not be considered valid for the mainnet.
Coinbase to Enable Users to Borrow Cash Against Bitcoin
Coinbase’s US customers in eligible states can join a waitlist for the option to borrow up to 30% of their Bitcoin holdings.
“With portfolio-backed loans on Coinbase, customers can borrow cash quickly from their Coinbase accounts. No need to fill out a long application or go through a credit check. Customers can simply sign up with a few taps and get the cash in their accounts within 2–3 days,” according to the blog post.
CoinMetrics.io @coinmetricsETH fees are going absolutely insane. This is hourly total fees in USD:
9:19 PM ∙ Aug 12, 2020230Likes83Retweets
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.
About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.
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