Yearn
https://gov.optimism.io/t/ready-gf-phase-1-proposal-yearn/3509/
Recommendation
We view Yearn as a key DeFi building block that Optimism would greatly benefit from. However, 1M OP over 40 weeks seems excessive, and we believe reducing the duration and size of this proposal to 500k OP over 20 weeks is more appropriate. This should be sufficient time for Yearn to show some positive traction and integrations, and the opportunity would be there to present a second proposal for another wave of incentives.
Background
Yearn Finance is a suite of products in Decentralized Finance (DeFi) that provides yield generation, lending aggregation, and more on the blockchain. The protocol is maintained by various independent developers and is governed by YFI holders.
Yearn has demonstrated strong product-market fit on Ethereum without the use of incentives. They are used by many other protocols, and the presence of Yearn on Optimism is likely to attract more builders and innovation.
One of the biggest questions we get from partners and users is “When is Yearn coming?” — the demand really is there; they’re a valuable presence on Optimism. And the team are second to none.
Asks
1M OP for vault incentives over 40 weeks
Given that many protocols on Optimism are offering OP incentives, there should be no shortage of promising yield strategies for Yearn to tap into. Even without OP, it’s likely Yearn would see strong traction on Optimism - however, it is valuable to accelerate this growth due to the second-order effects of Yearn’s presence (see: all the partners asking for Yearn to show up). Other projects will build on top of Yearn, and this will stimulate additional usage of the network beyond the TVL that Yearn gains from printing extra OP yield.
That said, we must balance this against the likelihood of attracting primarily mercenary capital that comes for the extra OP yield and leaves when it ends. This is why our recommendation of reducing the ask is important - it gives Yearn the ability to jump-start their vaults on Optimism and get those second-order effects going while limiting unnecessary OP distributions. Even if some integrations cannot be online in 20 weeks, we should at least see some evidence that integrations are occurring and dedicated development being done on Optimism - in which case a second proposal for another 20 weeks of incentives can be proposed with clear evidence that the extra spend is justified.
What this does for Optimism
Yearn has a stellar reputation in the Ethereum community as one of the original DeFi projects. Optimism stands to gain tremendously by helping Yearn grow a foothold here—not just from the TVL their vaults will bring but from the integrations that Yearn enables with other protocols. Other projects are likely to follow Yearn here to build on top of them. This is a great multiplier effect on this proposal that we don’t see very often.