Yearn Finance Proposes Significant Governance Overhaul
Yearn Finance, a prominent decentralized finance (DeFi) yield aggregator, is embarking on a comprehensive governance reform initiative known as YIP-XX. This proposal, put forth by the anonymous contributor 0xPickles on September 28, 2025, aims to unify stakeholders and foster growth within the protocol. Once a dominant player in the DeFi landscape, Yearn Finance has seen a decline in its influence; its total value locked (TVL) has plummeted by over 90% since reaching an all-time high of nearly $7 billion in December 2021. The new three-part strategy is designed not only to prioritize profitability but also to instill accountability and reward loyal token holders who have remained committed during challenging times.
Key Changes Proposed for Yearn Finance
One of the most significant modifications proposed involves directing a substantial portion of the protocol’s revenue to those who have maintained their investment by locking up YFI tokens despite the current downturn. As stated by 0xPickles, “This proposal creates a new deal,” offering that 90% of future earnings will be allocated to stYFI holders, effectively empowering these investors. Although Yearn’s recent monthly revenue was less than $200,000, the emphasis on profitability and accountability is anticipated to pave the way for sustainable growth, ultimately enhancing the value of the YFI token.
Amidst a Resurgence in DeFi Liquidity
The proposal arrives at a time when the DeFi sector is witnessing a significant influx of liquidity, leading to record deposit levels this year. For Yearn Finance, which once boasted a peak of nearly $7 billion in deposits, this newfound liquidity presents a chance to recapture its former success. However, the realization of this potential is contingent on favorable outcomes, particularly since this is not the first time Yearn has attempted to implement a major overhaul. A previous voting initiative in October 2023 introduced an escrow token model similar to those utilized by other DeFi protocols like Curve Finance, Balancer, and Velodrome. Despite some backing from YFI token holders, the model failed to gain widespread acceptance, with only 3.8% of the YFI supply currently locked, a number that continues to decline, as noted by 0xPickles.
A Shift to a Simpler Staking Model
To address the lack of interest in the previous model, 0xPickles has proposed a more straightforward staking approach. This new model would enable YFI holders to lock their tokens through staking, allowing them to receive a share of the protocol’s revenue. Additionally, another proposal seeks to restructure the decentralized autonomous organization (DAO) to enhance its profit-oriented focus while requiring on-chain financial reporting to substantiate budget requests from contributors. The driving forces behind these changes include issues related to organizational misalignment and inefficiencies in coordination.
Finalizing the Proposal Package
Moreover, the proposal outlines a plan to distribute 1,700 YFI tokens as part of strategic incentives for contributors, establish a capped performance bonus program, and form a long-term contributor retention pool. Currently, these three proposals are under discussion on the Yearn governance forum in anticipation of a vote. They are being presented as an “all-or-nothing” package, meaning that for the changes to be implemented, the entire proposal must pass in its entirety through a DAO vote.
