YFI Issuance Controversy: The Economic Model Debate of Decentralized Finance's Perpetual Development

The Yearn.finance (YFI) community recently proposed a plan to increase the supply, which has sparked widespread discussion. The proposal suggests to mint 6,666 YFI, with one-third allocated to incentivize core contributors, while the remaining portion will be deposited into the treasury to support future development.

The YFI protocol has been known for its strong decentralized governance characteristics since its inception. Its fair and transparent governance mechanism has attracted a large number of high-quality community proposals, and its token distribution method is also considered one of the fairest in the DeFi space.

Currently, the total circulation of YFI is 30,000 coins. The proposed increase accounts for approximately 22% of the existing total. Based on the current market price of about $30,000 per coin, the total value of the increase will reach around $200 million.

The proposal initiator pointed out that, compared to other mainstream DeFi protocols, YFI is at a disadvantage in talent retention. Some well-known projects have maintained strong development momentum by allocating 20% to 30% of tokens as incentives to their development teams. In contrast, due to insufficient funding, YFI has already seen some developers leave for other projects.

The YFI protocol completed the distribution of all tokens in just two weeks. This rapid distribution model, while attracting a group of influential talents to join the community, has also laid hidden dangers for the current issuance proposal.

For distributed systems, setting a high or unlimited total token supply and adopting a long-term release mechanism has deep reasons behind it. The purpose of this approach is to continuously expand network consensus, which requires ongoing incentive mechanisms to support it. A fixed token cap or distributing tokens in a short time may benefit participants who have joined in the short term, but it is difficult to maintain the long-term development of the network unless the developers never leave, which is clearly unrealistic.

The current state of the YFI community confirms this. For distributed systems, if there are no new consensus participants continuously joining to provide new ideas and value, the protocol itself may become stagnant. In the highly competitive blockchain industry, once the system stagnates, a decline in token prices is almost an inevitable result, which may lead to the loss of existing participants, creating a vicious cycle.

In the midst of the DeFi boom, the YFI protocol is undoubtedly one of the leaders, capturing a significant amount of on-chain value in a short period of time. This is largely attributed to a group of intelligent minds bringing valuable information and ideas to the protocol. In fact, every breakthrough in the blockchain industry stems from the introduction of new information, leading to more possibilities.

However, the short consensus building cycle of the YFI protocol has led to a loss of competitiveness and value creation ability when core participants leave. The discussions sparked by this issuance proposal are worthy of deep reflection by the entire industry: what kind of economic model should a truly sustainable distributed system adopt? The answer to this question may have far-reaching implications for the design of future DeFi projects.