Yearn Finance Proposes Comprehensive Governance Overhaul
Yearn Finance, a prominent player in the decentralized finance (DeFi) yield aggregation space, is embarking on a significant governance reform initiative known as YIP-XX. This proposal, introduced by the anonymous contributor 0xPickles on September 28, 2025, aims to realign stakeholder interests and foster growth for the protocol. Once a dominant force in DeFi with peak deposits nearing $7 billion in December 2021, Yearn Finance has seen a decline in influence and engagement. The proposed three-pronged strategy is designed not only to prioritize profitability but also to enhance accountability and reward loyal token holders who have remained committed despite a staggering 90% drop in total value locked (TVL) from its previous highs.
Changes Ahead for Yearn Finance’s Revenue Distribution
Among the key changes proposed is a shift in revenue allocation, where a significant portion of the protocol’s earnings could be directly funneled to those who maintain their stakes in YFI tokens. This initiative aims to incentivize holders who have persisted through challenging times. “This proposal creates a new deal,” stated 0xPickles, highlighting that 90% of future profits would benefit stYFI holders, thereby empowering them. Although current revenue figures are modest—under $200,000 in profit for August, according to DefiLlama—this renewed emphasis on profitability and accountability is anticipated to set the stage for sustainable growth, potentially increasing revenues and enhancing the value of the YFI token over time.
Yearn Finance’s Opportunity Amidst DeFi Liquidity Surge
The proposal arrives at a time when the DeFi sector is experiencing a surge in liquidity, leading to record highs in deposits this year. For Yearn, which enjoyed significant success in the past, this influx of liquidity presents a chance to regain its former prominence. However, the success of this overhaul is contingent on favorable developments, as Yearn has previously attempted similar reforms without lasting results. In October 2023, a vote was held to introduce an escrow token model used by other protocols like Curve Finance and Balancer, but despite some support from YFI holders, the model failed to gain traction, with only 3.8% of the YFI supply locked—a declining trend noted by 0xPickles.
A Shift Towards Simplicity in Token Locking
In response to the lack of interest in the prior model, 0xPickles has proposed replacing the complex escrow model with a more straightforward staking system. This new approach would allow YFI holders to lock their tokens through staking, thereby qualifying them for a share of the protocol’s revenue. Additionally, there is a recommendation to restructure the decentralized autonomous organization (DAO) to focus more on profitability and to implement on-chain financial reporting to validate budget requests from contributors. The need for these changes stems from issues of organizational misalignment and coordination inefficiency, as highlighted by the proposal’s author.
Proposals Under Governance Review
Furthermore, the initiative includes a plan to allocate 1,700 YFI tokens via strategic incentives for contributors, set up a capped performance bonus program, and create a retention pool for long-term contributors. These three proposals are currently under discussion within the Yearn governance forum and are being presented as an “all-or-nothing” package. This means that in order for the proposals to be enacted, they must all be approved in a single DAO vote.
