Yam, a monetary experiment protocol, integrated some of the most intriguing ideas in programmable money and governance, including an elastic supply, on-chain governance, a governable treasury, and a fair distribution mechanism.
YAM, a Yam protocol cryptocurrency, was designed to function similarly to Ampleforth, reacting to market conditions by increasing or decreasing the supply of YAM with a goal price of 1 USD per YAM. If you need a refresher on how this process works, my Amplefoth post has a thorough description.
The fact that Yam was supposed to spend a portion of each supply expansion to acquire yCRV, a high-yield USD-denominated stablecoin, was one of the key differences between Ampleforth and Yam. yCRV was meant to be put to the Yam treasury once purchased. Through community voting, YAM holders were able to select how to utilize these money for future development and protocol modifications fully on-chain.
Yam was introduced on August 11th, 2020, after only 10 days of development. Instead of assigning a percentage of the supply to the founding team, YAM was distributed in the spirit of the YFI token: no pre-mine, no founder shares, no VC interest, just equal-opportunity for everyone who participated in their liquidity mining program. Cfirst YAM tokens to be distributed evenly among eight staking pools: COMP, LEND, LINK, MKR, SNX, WETH, YFI, and ETH/AMPL Uniswap v2 LP tokens.
Money started flowing in immediately after YAM was established, with $1 million, $10 million, $100 million, and $150 million in locked value. Insane APYs began to draw a growing number of yield farmers. Despite the fact that the YAM contracts were not subject to a formal audit, community members began auditing the project on their own. The staking contracts appeared to be in good shape, and no big red flags were discovered.
Following the original distribution pools' introduction, a YAM/yCRV Uniswap pool was created to encourage a second wave of distribution. This pool was required to supply liquidity for the treasuries rebase operation to acquire yCRV. The Uniswap's price oracle was also required to provide crucial input for rebase calculations.
The buzz continued the next day, August 12th. Despite the extremely high Ethereum gas prices, Yam was reaching $500 million in the protocol. Before the initial rebase, the price of YAM had risen to $160. On the same day, a significant flaw in the rebase process was discovered, affecting all rebases save the first one. The flaw would allow the rebase process to mint considerably more YAM than intended, preventing quorum formation owing to the governance model. This meant that no governance actions could be taken, and the treasury's cash would be frozen indefinitely.
To alter the rebase process, a governance proposal was prepared. It took 160 thousand votes to pass the plan, and it all had to be done before the next rebase (13th August). The YAM community rallied, and a steady stream of YAMs poured into the delegation contract. At the same time, the yCRV/-YAM pool's liquidity providers were requested to withdraw their cash in order to prevent losing part of their yCRV tokens. To encourage users to withdraw their assets from the Uniswap pool, staking of yCRV-YAM LP tokens was disabled.
On the 13th of August, the proposal received the requisite amount of votes shortly before the next rebase, thanks to a great overnight effort by the YAM community. It appeared like the protocol might be preserved at this point. Unfortunately, when the request was being submitted, a new issue was identified that prevented the proposal from being executed. The Yam price plummeted to under $1 in a matter of minutes after a massive rebase with no chance of the government gaining quorum in the near future. Before the rebase, 75 percent of the liquidity in yCRV-YAM was retrieved, and efforts were made to retrieve the remaining liquidity. The first pools' stowed cash remained secure and accessible for withdrawal.
A few hours later, the Yam protocol's creators revealed the possibility of developing Yam 2.0, this time with well-audited contracts and a community-funded audit. Furthermore, despite the fact that the protocol's governance is now impossible, the protocol will survive on the Ethereum blockchain, demonstrating the real power of unstoppable code.
Regardless of the eventual conclusion, the Yam protocol's ability to raise $600 million in funding and rally the whole world to help save the protocol is quite remarkable. All of this happened in less than 48 hours. On the downside, some users lost money by investing in YAM tokens or failing to withdraw their liquidity from the yCRV-YAM pool in a safe basis.
