Yearn Finance Proposes Major Governance Reforms
Yearn Finance, a prominent decentralized finance (DeFi) yield aggregator, is embarking on a significant governance reform initiative, termed YIP-XX. Introduced by an anonymous contributor known as 0xPickles on September 28, 2025, this proposal aims to better align the interests of stakeholders and stimulate growth within the protocol.
Reviving Past Glory
Once a dominant player in the DeFi space, Yearn Finance has seen a decline in its influence, with its total deposits plummeting to just under $7 billion in December 2021. The new three-part initiative is designed to help the protocol regain its former stature by prioritizing profitability while fostering accountability and rewarding token holders who have remained loyal during a period of decreased participation and a total value locked (TVL) that has fallen by over 90% from its peak.
Revenue Distribution for Token Holders
Among the key components of the proposal is a significant revenue-sharing model that would direct a substantial portion of the protocol’s earnings to those who have maintained their YFI tokens despite the protocol’s underwhelming performance. “This proposal creates a new deal,” explained 0xPickles, noting that “90% of future revenue goes to stYFI holders, empowering them.” Although Yearn’s monthly income was less than $200,000 in August, as per DefiLlama data, the renewed focus on profitability and accountability is anticipated to set the stage for sustainable growth, ultimately enhancing the value of the YFI token.
Seizing New Opportunities in DeFi
The timing of this proposal coincides with a resurgence of liquidity in the DeFi sector, which has led to record-high deposits this year. For Yearn, which once peaked at nearly $7 billion in deposits, this influx of liquidity represents a chance to reclaim its former success. However, the outcome hinges on favorable developments, as Yearn has previously attempted similar overhauls without success. A vote in October 2023 proposed an escrow token model, similar to those utilized by other protocols like Curve Finance and Balancer; however, despite some support among YFI holders, it failed to gain traction.
Lack of Engagement in Current Models
0xPickles pointed out that only 3.8% of the YFI supply is currently locked, a number that is on the decline, indicating a general disinterest in the existing model. To address this, the new proposal suggests replacing the vote escrow model with a more straightforward staking approach. This would allow YFI holders to lock their tokens through staking in exchange for a share of the protocol’s revenue.
Reforming the DAO Structure
Additionally, the proposal includes plans to restructure the decentralized autonomous organization (DAO) to enhance its focus on profit generation and to require on-chain financial reporting to substantiate budget requests from contributors. The need for these changes stems from issues related to organizational misalignment and inefficiencies in coordination.
Final Proposal for Contributor Incentives
A final component of the proposal aims to formalize a strategy for distributing 1,700 YFI tokens as part of a contributor incentive program, establish a performance bonus system, and create a retention pool for long-term contributors. Currently, these proposals are under discussion on the Yearn governance forum and will be presented as an “all-or-nothing” package, meaning that all elements must pass collectively in a DAO vote for implementation.
