--- rpcCalls: - name: 'dYFI Redemption' chain: '1' address: '0x7dC3A74F0684fc026f9163C6D5c3C99fda2cf60a' abiName: 'dyfiRedemptionABI' methods: - 'discount' - 'get_latest_price' - name: 'eth_required' args: ['1000000000000000000'] --- # Comprehensive veYFI Guide :::warning Deprecated This page documents the legacy **veYFI + dYFI gauge** system. For the current governance staking UX, see [stYFI](/contributing/governance/styfi). If you have a legacy veYFI lock, see [Migrate from veYFI](/contributing/governance/migrating-from-veyfi). ::: Yearn has implemented a sophisticated governance and rewards system centered around **veYFI** and **dYFI** tokens. This system is designed to empower active community members, incentivize long-term participation, and align the interests of YFI holders with the protocol's success. This document provides a comprehensive synthesis of the veYFI and dYFI mechanisms, incorporating detailed specifications and complexities for a thorough understanding. --- ## Table of Contents 1. [Introduction to veYFI](#introduction-to-veyfi) 2. [Locking YFI for veYFI](#locking-yfi-for-veyfi) - [Lock Duration and veYFI Balance](#lock-duration-and-veyfi-balance) - [veYFI Decay Over Time](#veyfi-decay-over-time) - [Early Exit Penalties](#early-exit-penalties) 3. [Benefits of veYFI](#benefits-of-veyfi) - [Governance Participation](#governance-participation) - [Yield Boosts on Vault Deposits](#yield-boosts-on-vault-deposits) - [Calculating Boost Levels](#calculating-boost-levels) - [Protocol Incentives](#protocol-incentives) 4. [Understanding dYFI](#understanding-dyfi) - [dYFI Redemption Mechanism](#dyfi-redemption-mechanism) - [Emission of dYFI Rewards](#emission-of-dyfi-rewards) - [Discount Calculation Formula](#discount-calculation-formula) 5. [Epochs and Voting](#epochs-and-voting) - [Epoch Timeline](#epoch-timeline) - [Gauge Emission Voting](#gauge-emission-voting) - [Governance Proposals](#governance-proposals) 6. [System Parameters and Governance Adjustments](#system-parameters-and-governance-adjustments) - [Adjustable Parameters](#adjustable-parameters) 7. [Liquid Lockers: An Alternative Option](#liquid-lockers-an-alternative-option) 8. [References](#references) --- ## Introduction to veYFI **veYFI** (vote-escrowed YFI) is a time-locked version of Yearn's native governance token, **YFI**. By locking YFI tokens into veYFI, users gain enhanced governance power, yield boosts on their vault deposits, and access to additional protocol incentives. This system aligns users' interests with the long-term success of Yearn Finance by encouraging prolonged participation and active governance. --- ## Locking YFI for veYFI ### Lock Duration and veYFI Balance - **Lock Period**: Users can lock their YFI tokens for any duration up to **4 years** (208 weeks). While it's technically possible to lock for longer (up to 10 years), any period beyond 4 years is purely for the convenience of not having to re-lock and does not confer additional veYFI or benefits. If you set the lock time to longer than 4 years, you can always reset it to 4 years so it starts decaying. - **veYFI Calculation**: The amount of veYFI received is proportional to the lock duration: $$ \text{veYFI} = \text{YFI} \times \left( \frac{\text{Lock Duration}}{4 \text{ years}} \right) $$ - **Examples**: - Lock 1 YFI for 4 years → Receive 1 veYFI. - Lock 1 YFI for 2 years → Receive 0.5 veYFI. - Lock 1 YFI for 1 year → Receive 0.25 veYFI. ### veYFI Decay Over Time - **Linear Decay**: From the moment YFI is locked, the veYFI balance begins to decay linearly to zero by the end of the lock period. - **Impact on Benefits**: As veYFI balance decreases, so do the associated benefits: - **Voting Power**: Reduced influence in governance decisions. - **Yield Boosts**: Decreased boost levels on vault deposits. - **Rewards Rates**: Lower share of protocol incentives. - **Counteracting Decay**: Users can extend their lock duration (re-lock) to maintain or increase their veYFI balance. ### Early Exit Penalties - **Penalty Structure**: Exiting a lock before its expiry incurs a penalty, which is redistributed to remaining veYFI holders. - **Penalty Calculation**: $$ \text{Penalty} = \min\left( 75\% \times \text{Locked Amount}, \left( \frac{\text{Time Remaining}}{4 \text{ years}} \right) \times \text{Locked Amount} \right) $$ - **Examples**: - 3 years remaining → Penalty: 75% of locked amount. - 2 years remaining → Penalty: 50% of locked amount. - 1 year remaining → Penalty: 25% of locked amount. --- ## Benefits of veYFI ### Governance Participation - **Voting Rights**: veYFI is the sole governance token of Yearn Finance. Holders can vote on: - **Gauge Emission Allocations**: Deciding how dYFI rewards are distributed among vault gauges. - **Governance Proposals**: Submitting and voting on proposals affecting protocol parameters, adding/removing gauges, and other significant changes. - **Epochs**: Governance operates in 14-day cycles called **epochs**, synchronized with Curve's veCRV epochs. - **Voting Decay**: To prevent last-minute voting swings, voting power decays linearly during the last 24 hours of the voting period, reaching zero at epoch's end. ### Yield Boosts on Vault Deposits - **Vault Gauges**: Specialized contracts where users can stake their Yearn vault tokens to earn dYFI rewards. - **Boost Mechanism**: - **Boost Range**: From 1x (base level) to a maximum of 10x. - **Determined By**: - **User's veYFI Share**: Proportion of total veYFI supply held. - **User's Gauge Deposit Share**: Proportion of total deposits in a specific gauge. - **Maximizing Boost**: Achieved when a user's share of veYFI equals or exceeds their share of the gauge deposits. - **Example**: - User holds 2% of veYFI supply and has 1% of total gauge deposits → Max boost achievable. #### Calculating Boost Levels ```python title="Boost Calc" # determine user share of veYFI UserVeYFIShare = VeYFIBalance / VeYFITotalSupply # Determine boostable balance above 10% of deposit BoostableBalance = (AmountDepositedInGauge /10) + (TotalDepositedInTheGauge * UserVeYFIShare * 0.9) # take the less of amount deposited in gauge and boostable balance BoostedBalance = min(AmountDeposited, BoostableBalance) # get the boost by multiplying by 10 and dividing by amount deposited in gauge. Boost = 10 * BoostedBalance / AmountDepositedInGauge ``` - **Interpretation**: - Users with higher veYFI holdings relative to their gauge deposits achieve higher boosts, up to 10x. - Users without veYFI receive the base boost of 1x (10% of potential rewards). #### Forfeited Rewards and Redistribution - **Unused Boosts**: The difference between the maximum possible boost and the user's actual boost results in forfeited dYFI rewards. - **Redistribution**: Forfeited rewards are proportionally allocated to veYFI holders, incentivizing governance participation. ### Protocol Incentives - **Early Exit Penalties**: YFI paid to exit early is distributed among veYFI holders, providing an incentive to maintain locks. - **Forfeited dYFI Rewards**: Users not achieving max boost forfeit a portion of their dYFI rewards, which are redistributed to veYFI holders. --- ## Understanding dYFI **dYFI** is a reward token emitted by vault gauges. It provides a mechanism to redistribute bought-back YFI to active protocol participants while encouraging long-term engagement. ### dYFI Redemption Mechanism - **Redemption for YFI**: dYFI holders can exchange their tokens for YFI at a discounted rate, paying in ETH. - **Burning Mechanism**: dYFI is burned upon redemption, ensuring the circulating supply doesn't exceed available YFI for redemption. - **ETH Proceeds**: ETH used in redemption is directed to automated YFI buybacks, enhancing the sustainability of the tokenomics program. ### Emission of dYFI Rewards - **Emission Rate**: The amount of dYFI emitted per epoch is calculated using the formula: $$ \text{Annual dYFI Emission} = c \times \sqrt{\text{veYFI Supply}} $$ - **c**: Configurable scaling factor (default is 12). - **Distribution**: dYFI is allocated to gauges based on veYFI holders' votes during the governance process. ### Discount Calculation Formula - **Discount Rate**: The discount at which dYFI can be redeemed for YFI depends on the ratio of veYFI supply to total YFI supply. $$ \text{Discount} = \frac{c}{1 + a \times e^{k(sx - 1)}} $$ - **Variables**: - **c**: Constant (1). - **a**: Constant (approx. 10). - **k**: Constant (approx. 4.7). - **s**: Configurable scaling factor (default is 10). - **x**: Ratio of veYFI supply to total YFI supply $$\frac{\text{veYFI Supply}}{\text{YFI Supply}}$$. ![image](/img/charts/dyfi-redemption-chart.png) - **Implications**: - **High veYFI Supply**: Lower discount, as more YFI is locked, indicating strong commitment. - **Low veYFI Supply**: Higher discount, incentivizing users to lock more YFI.
:::yearnData - The current redemption discount is: - Current Spot Price of YFI/ETH: - ETH required to redeem 1 dYFI: ::: --- ## Epochs and Voting Governance and reward distribution operate on a structured timeline. ### Epoch Timeline - **Duration**: Each epoch lasts **14 days**. - **Phases**: - **Week 1**: Proposal submission period. - **Week 2**: Voting period for gauge emissions and governance proposals. - **Voting Decay**: Voting power decays linearly during the last 24 hours of the voting period to prevent manipulation. ### Gauge Emission Voting - **Allocation of dYFI**: - **Total Emission**: Determined by the emission formula. - **Reserved Allocations**: - **5%** to YFI/ETH liquidity gauge. - **5%** to dYFI/ETH liquidity gauge. - **Remaining 90%**: Allocated based on veYFI holders' votes. - **Blank Votes**: - **Option to Conserve Emission**: Voters can cast "blank" votes to reduce current epoch's emission. - **Outcome of Blank Votes**: - **Burned dYFI**: Permanently removes dYFI from circulation, extending the program's runway. - **Deferred Emission**: Carries over dYFI to the next epoch's allocation. - **Configurable Split**: The proportion of burned vs. deferred dYFI is adjustable through governance. ### Governance Proposals - **Submission**: - Any address holding at least **1 veYFI** can submit proposals during the first week of an epoch. - Proposals are posted in the dedicated governance forum section. - **Voting and Approval**: - Simple majority (>50% of votes) required for approval. - **Quorum Requirement**: A minimum amount of veYFI must participate in the vote for it to be valid. The default quorum is **10 veYFI** but is configurable. - **Types of Proposals**: - Adding or removing gauges. - Adjusting system parameters. - Implementing significant protocol changes. --- ## System Parameters and Governance Adjustments Certain aspects of the veYFI and dYFI system can be modified through governance to adapt to evolving needs. ### Adjustable Parameters - **Quorum**: Minimum veYFI required for proposal approval (default: 10 veYFI). - **Blank Vote Burn Percentage**: Proportion of dYFI from blank votes that is burned (default: 50%). - **Scaling Factors**: - **s (Discount Scaling)**: Affects the dYFI discount curve (default: 10). - **c (Emission Scaling)**: Adjusts the emission rate of dYFI (default: 12). - **Liquidity Gauges**: - Addresses of the YFI/ETH and dYFI/ETH liquidity gauges receiving reserved emissions. --- ## Liquid Lockers: An Alternative Option For users who prefer not to manage individual locks and veYFI decay, **liquid lockers** offer a convenient alternative. - **How They Work**: - Third-party services lock YFI on behalf of users and issue a transferable receipt token. - These tokens represent a claim on the locked YFI and can be traded or used to earn rewards. - **Available Services**: - **1up**: [1up.tokyo/stake](https://1up.tokyo/stake) - **Cove**: [app.cove.finance/yfi/stake-yfi](https://boosties.cove.finance/yfi/stake-yfi) - **StakeDAO**: [stakedao.org/lockers/yfi](https://www.stakedao.org/lockers/yfi) - **Considerations**: - Liquid locker tokens may not always maintain parity with YFI's value. - Users should evaluate the risks and benefits of using third-party services. --- ## References ### Relevant Governance Proposals - **[YIP-56: Buyback and Build](https://gov.yearn.fi/t/yip-56-buyback-and-build/8929)** - **[YIP-61: Governance 2.0](https://gov.yearn.fi/t/yip-61-governance-2-0/10460)** - **[YIP-65: Evolving YFI Tokenomics](https://gov.yearn.fi/t/yip-65-evolving-yfi-tokenomics/11994)** - **[YIP-73: Activate veYFI Rewards](https://gov.yearn.fi/t/yip-73-activate-veyfi-rewards-with-oyfi-gauges/13414)** ### Snapshot Voting - **[veYFI Snapshot Page](https://snapshot.org/#/veyfi.eth)** ### Contract Addresses - **[Yearn veYFI Contract Addresses](/developers/addresses/veyfi-contracts)** ### Audits - **[veYFI StateMind Audit](https://github.com/yearn/yearn-security/blob/master/audits/202208_yAcademy_yearn-veyfi/yAcademy_-_yearn_veyfi_review.pdf)** - **[veYFI yAcademy Audit](https://github.com/yearn/yearn-security/blob/master/audits/202208_yAcademy_yearn-veyfi/yAcademy_-_yearn_veyfi_review.pdf)** - **[dYFI ChainSecurity Audit](https://old.chainsecurity.com/wp-content/uploads/2023/03/Yearn-Smart-Contract-Audit-oYfi-ChainSecurity.pdf)** --- *This document is intended to provide a detailed understanding of the veYFI and dYFI mechanisms within Yearn Finance. Users are encouraged to participate actively in governance and stay informed about ongoing developments.*