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13 August 2020

The Current State of YAM

Three days after the launch of YAM, a bug in the rebasing contract has minted far more YAM than intended and has permanently disrupted the governance module. This bug flooded the protocol reserve during the second scheduled rebase, and given Yam’s governance model, it has made it impossible to reach a quorum necessary for any governance action. Meaning no governance action is now possible, and the funds in the treasury are now locked for good. Initially, when this bug was discovered, the team believed that it would be possible to save the project if they were able to achieve a quorum for a bug fix proposal before the bugged rebase was set to occur. However, shortly after the bug-fix was proposed, based on the consultation of security experts, it became apparent the rebase bug would interact with the governance model and prevent the proposed bug fix from succeeding. The treasury of $750k remains locked indefinitely as a result of this bug.

Yam will continue to run on Ethereum with support for the contract in its current state, but governance actions can longer modify the contract. It is highly recommended that any funds in the YAM/ yCRV Uniswap V2 pool be removed, as funds in the pool will remain unsafe in perpetuity. None of the assets staked on the smart contract outside of the YAM/ yCRV pool were at risk or lost due to this bug. The total value locked in the smart contract is currently at $250 million down from its high of 750 million.

The YAM team is already moving on to the next steps after officially calling it quits, announcing they will be setting up a Gitcoin grant to coordinate a community funded audit of the YAM contract. Contingent on the success of the Gitcoin grant funding, they plan to support the Launch of YAM 2.0 via a migration contract from YAM.

Why it matters - YAM was a 10-day old unaudited smart contract that was able to accrue $750 million in TVL (10% of DeFi’s market cap) in 36 hours before a fatal bug caused its fall. If the bug had put that TVL at risk it would’ve been extremely detrimental to DeFi and the Ethereum ecosystem on a similar scale to the DAO hack. - The sheer value that YAM was able to accrue in such a short time frame is yet another indicator of the level of excitement in the DeFi market. Investors are venturing far out on the risk spectrum, willing to put millions into an untested project to capture maximum returns.

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