[YFI] - MIP6 Collateral Onboarding - yEarn


I wanted to address a misconception I’ve seen come up repeatedly.

It’s not the Foundation that decides (or even opines on) what potential collateral types to add. Instead, Domain Teams, those individuals elected by the community and granted a mandate to act, may discern the order of collateral types they want to work on. But they don’t decide what to work on; only you, the decentralized group of MKR holders who control the Protocol, do.

While the DAO continually looks for more external Domain Teams to take up the mantle, for now, there is an overlap between members of the Domain Teams and employees of the Foundation. Although that requires us, the mandated actors, to wear multiple hats, we endeavor to act without bias when ordering collateral types for domain review. Practically that means we isolate ourselves from non-Domain Team members when discussing the order of assets to review as part of the onboarding process. More importantly, it means that we do not engage with or take guidance from non-Domain Team Foundation members. And it means that we work to make the domain team meetings, explained more below, transparent to the community.

These meetings are attended by @LongForWisdom, the Governance Facilitator, and by @juanjuan, a community aid, who compiles and publishes summaries to the Maker Forum. Ultimately, the goal here is to inform the community about potential collateral types in the pipeline.

While there isn’t a fixed methodology, the Domain Teams incorporate the following matrix when coming to a consensus around collateral onboarding:

“Which potential collateral does the community want to see added (greenlight polls)?”

“Which potential collateral has the biggest potential to generate the most Dai?”

“Which potential collateral is the easiest to implement, thereby enabling more collateral to be onboarded?”

“Which potential collateral type would help diversify the collateral portfolio backing Dai? (e.g. gold, rwa)

“Which potential collateral type has unique properties that may help stabilize the peg (e.g. stablecoins)?

“Is there significant smart contract risk to onboarding a collateral due to how new it is?

These are all competing priorities, and coming up with collateral types that satisfy all of these goals is impossible.

The Domain Teams understand that the collateral onboarding process can seem frustrating at times when your favorite Defi token isn’t getting added with the urgency you think it deserves. That said, take a step back and do not overlook the forest for the trees. Onboarding a single token as collateral in +/- two months will not make or break the Maker Protocol. But it is critical to establish a regular and sustainable cadence for collateral onboarding, because future Domain Teams, mandated actors and community members will look to what we are doing today as a guide for how they will act tomorrow.


As an easy reference:
YFI (looking at coingecko):

Market Cap: 460 million
24h Trading Vol: 102m.

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I think we will definitely see more Dai being minted from YFI compared to KNC and ZRX.


Yfi has a good marketcap and liquidity
a real product
and significantly decentralized
It is better than a lot of other erc20 tokens


Great reply Nik. Great to hear about the behind the scenes methodology. We appreciate the transparency.


Thanks for the details @NikKunkel I think it is very much compatible with my post (but with added elements) which was only a summary of a @LongForWisdom post (below). The misconception you point is maybe on the influence the Foundation has on your work (item 2 and 3 below). Both ways (and everything between) are okay to me.

To be clear, while this is technically true (and was an input into the onboarding process), in practice I’ve not witnessed anything that makes me think the Foundation does attempt to control the current domain team members in their selection of collateral to onboard.


Can we fastrack this also through signals? @NikKunkel

Outside of emergencies, the domain teams follow a fairly rigid process in terms of onboarding collateral. Onboarding new collateral types isn’t as quick or easy as whitelisting a new address for one of the oracles.

Even if the community did signal to onboard YFI immediately, the domain teams would still need to do domain evaluations of the collateral before it could be onboarded.

In practice, we have not done this outside of emergency situations. I would strongly recommend against trying to onboard new collateral outside of the process, absent an emergency.


AAVE has onboarded YFI. Though should’ve been expected.

Alright. When you’re right, you’re right. We can wait.

Btw YFI got listed on Aave markets today and a proposal has also been submitted by ParaFi at Compound. Things moving in a good direction. I hope MakerDAO passes YFI for collateral :slight_smile:

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One advantage Maker has over Aave or other lending protocols is that in Maker, the asset can only be used for collateral, and isn’t lent out.

This makes it safer to deposit governance tokens as collateral in Maker than in Aave, Compound, etc.


I wonder if there’s a way for the vault holder to retain voting ability while their tokens are locked? Would be a cool edge for Maker.


For tokens like COMP that have the governance features baked in it would technically be possible to engineer a vault to be a proxy for this right? For something like MKR though it would need an iou token that the chief contract could read right?

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Staking to the YFI governance contract also earns yield, it would be really cool for vault users to be able to capture this in addition to voting.

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That would require tokenising maker vaults.

Well, it doesn’t need to be done on our side.

YFI could tokenize Maker Vaults that hold YFI. And allow that to be used for governance, since it doesn’t have the problem of double votes.

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If yYFI vault strategy is using Maker Vaults, minting Dai and yield farming, then yYFI becomes the tokenized version. Then yYFI could be whitelisted for voting in Yearn governance.

However, if someone who opens YFI vaults directly on Maker(not through yYFI vault), they won’t get any token that way.


For record, YFI’s volume on Binance just today is over 340 million.
Volume on Uniswap for last 24 hours is more than 47 million.

There are also 3 derivatives markets for now, I expect more soon. And YFI is listed on multiple exchanges in the spot markets and more will add in the future.

So liquidity isn’t an issue.


YFI has high volatility, a short track record, and tons of key man risk …

I agree but that’s why debt-ceilings start low and get increased over time.

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