Hey guys! The feedback we collected from my prior post, “PART-2,” was great and we have been thinking more about how we can fix yield farming to be more economically sustainable for DMG holders long term.
The first thing we looked more closely at is a withdrawal fee - whenever a withdrawal is processed, a fee of 0.5% is taken from the withdrawal to purchase DMG and burn it. For non-native pairs, a fee of 1.0% will be taken (more on what we consider to be non-native pairs are in the next paragraph). This design mechanism was influenced by yearn and also by a prominent member of the community. The need for a withdrawal fee is simple: the yield farming protocol should discourage people from actively withdrawing and depositing funds on a short term basis. So far, the implementation of a burn would have led to about ~2,475 DMG being removed from the supply, and ~3,300 DMG being added. Keep in mind, the current price of ~$0.33 has a 27% APR for stablecoins and a 13.5% APR for ETH-mETH. In most cases, it would take far less than a month to recover the withdrawal fee, not including the interest being accrued in the mTokens. Note, the burn numbers could change depending on a number of factors, like:
- The price of DMG at the time of the withdrawal - a lower price leads to more DMG being burned
- The composition of the deposit - more non-native pairs leads to a 1% withdrawal fee.
At the time of writing, there is about $510,000 locked up (not including DMG) in the yield farming contracts. As a team and a community, we think we can grow this number significantly by slightly re-configuring the protocol in two key areas - the DMG reward and the tokens that can be farmed. In the prior paragraph, I mentioned the idea of a non-native pair - an mToken pairing for yield farming whose base asset is not an underlying token. For example, USDC-mUSDC is considered to be native whereas LINK-mUSDC is not. Meaning, the LINK-mUSDC pairing would have a 1.0% withdrawal fee instead of the lower 0.5%.
We think the addition of other assets that users have an appetite to maintain exposure to could be productive for the ecosystem, or adding other farmable, yet safe, assets. However, this is where we would like the feedback from the community. Would something like LINK pairings be worthwhile to add (LINK-mUSDC, LINK-mETH, LINK-mDAI, etc.)? Are there any other pairings? What about something (potentially wacky) like yUSD-mUSDC so users can double-down on farming more than one protocol at a time?