A 3-Minute Complete Guide to YAM protocol

YAM protocol is an experimental protocol presenting some of the most interesting innovations in programmable money and governance.

Moreover, it’s an elastic supply cryptocurrency which expands and contracts supply in response to market conditions, initially targeting 1 USD per YAM.

This stability mechanism is supplemented by one key addition to existing elastic supply models such as Ampleforth: a portion of each supply expansion is used to buy yCRV (a high-yield USD-denominated stable coin) and add it to the Yam treasury, which is controlled via the Yam community governance. 

YAM protocol has been built to provide monetary experiments and at launch, there will be zero value in the YAM token.

After deployment, it is entirely dependent upon YAM holders to determine its value and future development. 

Features of YAM protocol

• It is an elastic supply that provides eventual price stability.
• Governable treasury to further support stability.
• On-chain governance which enables decentralized control and evolution from day 1.
• Fair distribution mechanism that incentivizes key community members to actively take the reins of governance.

Audits

None.

Contributors have given their best efforts to ensure the security of these contracts, but make no guarantees.

It has been spot-checked by just a few pairs of eyes.

It is a probability – not just a possibility – that there are bugs.

That said, minimal changes were made to the staking/distribution contracts that have seen hundreds of millions flow through them via SNX, YFI, and YFI derivatives. 

The token itself is largely based on COMP and Ampleforth which have undergone audits – but we made non-trivial changes.

The rebase may also have bugs – but has been tested in multiple scenarios.

It is restricted to Externally Owned Accounts (EOAs) calling the rebase function for added security.

SafeMath is used everywhere.

The launch of the token and its distribution

When YAM protocol was initially launched, due to its decentralized nature it had allowed users to stake various virtual currencies in order to earn Yam tokens.

The staking model lets the YAM protocol hand out its native tokens in a transparent manner, its developers claim.

The initial distribution of YAM protocol will be evenly distributed across eight staking pools: COMP, Aave’s LEND, LINK, MKR, SNX, WETH, YFI, and ETH/AMPL Uniswap v2 LP tokens.

These pools were chosen intentionally to reach a broad swath of the overall Defi community, as well as specific communities with a proven commitment to active governance and an understanding of complex tokenomics.

Following the launch of the initial distribution pools, a second distribution wave will be incentivized through a YAM/yCRV Uniswap pool.

This pool will allow Uniswap’s TWAP-based oracle to provide necessary input as the basis for rebasing calculations, as well as provide liquidity for the rebase to purchase yCurve for the treasury.

Bugs faced: YAM protocol bug leads to $750,000 loss

Most of the Defi market tokens went through a price correction after the Yam developers acknowledged that the protocol had a bug, which resulted in the Defi index perpetual swap contract on FTX to fall sharply, leading to a crash of the Defi market.

YAM protocol has been built to provide monetary experiments and at launch, there will be zero value in the YAM token.

After deployment, it is entirely dependent upon YAM holders to determine its value and future development.  

The majority of Yam tokens being held by users were supplied via staking, however, there were some users who bought them from Uniswap or other non-custodial exchanges. 

Contributors have given their best efforts to ensure the security of these contracts, but make no guarantees.

It has been spot-checked by just a few pairs of eyes.

It is a probability – not just a possibility – that there are bugs.

That said, minimal changes were made to the staking/distribution contracts that have seen hundreds of millions flow through them via SNX, YFI, and YFI derivatives.

The reserve contract is excessively simple as well.

The original devs encourage governance to fund a bug bounty/security audit.

The token itself is largely based on COMP and Ampleforth which have undergone audits but there were no trivial changes made. 

The future

The future will be entirely controlled by the community of YAM holders.

Yam Version 2.0 is now being developed.

Yam’s development team has published a migration plan that recommends migrating existing tokens to a properly functioning and upgraded platform. 

YAM protocol holds zero value, any value which might be secure would be an entirely budding property of the community that takes control.

Yam holders would update the functionality of the protocol, which includes oracle usage, rebase functionality, inflation, incentive design, the Yam treasury, and more.

While the treasury begins empty with potential growth configured to be denominated in yCRV, any future capital allocation can ultimately be controlled by YAM token holders, as can any yield that it might generate.

In theory, it is possible that such a treasury could add robustness and security to the protocol if properly cultivated by YAM holders.

Governance

Governance is entirely dictated by YAM holders from the start.

Upon deployment, ownership of all YAM protocol contracts was relinquished to the time-locked Governance contract or removed entirely.

At the very least, this can be seen as a reference implementation for a truly decentralized protocol.

Conclusion

The Aave protocol relies on a lending pool model to offer high liquidity.

Loans are backed up by collateral and represented by aTokens, derivative tokens which secure the interests. 

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