Yearn Finance Newsletter #4
Week Ending September 27th, 2020
Welcome to the 4th edition of the Yearn Finance Newsletter. We will cover ecosystem and governance updates.
Summary
Yearn State of the Vaults
A Vulnerability Patched Within 24 Minutes
1st AMA Conducted on Telegram
Governance Updates (YIPs)
Ecosystem News
Resources
Yearn State of the Vaults
We’ve heard concerns regarding the status of the yVaults, and to help consolidate information in a single place, we created State of the Vaults – a weekly update that will include yVault-related news, strategies, and upcoming changes which we will detail below.
1- and 3-day ROIs can be misleading
However, before we discuss specific strategies, we would like to preface by stating 1-day and 3-day ROIs for yVaults are misleading metrics that we will be moving away from. The majority of yVault profits are generated by executing the harvest() function. This function harvests the underlying asset being farmed and sells it for the base asset in the yVault.
For example, the yUSD vault (formerly referred to as the yCRV or yyCRV vault) harvests CRV and sells it for DAI, deposits DAI back into the y Pool on Curve.fi to obtain yCRV, and deposits yCRV back into the yVault. yUSD depositors have claims on this excess yCRV, and over time a depositor’s yUSD may be redeemed for an increasing amount of yCRV. The harvest() function is called periodically and in some cases (aLINK delegated yVault) only once or twice per week. Therefore, if the harvest() function has not been called recently, the 1-day and 3-day annualized ROIs are not accurate metrics.
yVaults are a simple, passive strategy
Furthermore, the yVaults are best suited for individuals who do not want to actively participate in yield farming. They are optimal for individuals who are willing to keep funds in place for 1 month or longer, while the yVault automatically yield farms and continuously accrues profits. yVaults will in almost all circumstances underperform an active yield farming strategy, where the operator is constantly shifting assets (sometimes every 24 hours) between various opportunities in the market. In other words, if your first name starts with Chainlink and ends with God, the yVaults may not be your highest-performing yield farming strategy. Nevertheless, yVaults represent among the best passive, risk-adjusted yield farming products in all of DeFi, and can be utilized in your portfolio alongside a more active strategy.
Current Strategies
Listed below is a brief summary of the current yVault strategies, or updates on upcoming changes:
yETH: Undergoing an optimization process that will enable capital (the CDP) to be transferred to new strategies without totally unwinding the debt. The optimization process is estimated to take an additional 1 to 3 weeks, and the APY is expected to be low until this process is complete. Unforeseen events may delay this update.
yYFI: A new strategy launched this week. This strategy deposits YFI into the Yearn governance staking contract, earns yCRV governance rewards, withdraws yCRV into USDT, buys additional YFI with the USDT and deposits back into the yVault.
yUSD: Deposits yCRV into the y Pool liquidity gauge at Curve.fi and earns CRV. A portion of this CRV is redeposited back into the gauge (to boost returns) and the remainder is sold for DAI, deposited back into the y Pool at Curve to obtain yCRV and deposited back into the yVault.
ycrvBUSD: Almost identical process as the yUSD vault listed above, except it deposits yBUSD (base asset of the yVault) back into the yVault instead of yCRV.
ycrvsBTC: Deposits crvsBTC (Curve.fi sBTC pool LP token) into the sBTC liquidity gauge at Curve and earns CRV. A portion of this CRV is sold for WBTC, redeposited into the crvsBTC pool at Curve and the remainder is deposited back into the yVault.
yDAI: Deposits DAI into the y Pool at Curve.fi and earns CRV. A portion of this CRV is sold for DAI, redeposited into the y Pool and the remainder is deposited back into the yVault.
yTUSD: Operates the same as the yDAI vault, except deposits TUSD instead of DAI into the y Pool at Curve.fi.
yUSDC: Deposits USDC into dForce.network and earns dForce, which is sold for USDC and redeposited back into the yVault.
yUSDT: Deposits USDT into dForce.network and earns dForce, which is sold for USDT and redeposited back into the yVault.
yaLINK: Uses aLINK as collateral to borrow USDC from Aave. The USDC is deposited into the yUSDC vault and yield farms based on that yVault’s current strategy (listed above). Excess profits are harvested and used to buy additional LINK, which is deposited into Aave for aLINK.
yLINK: Deposits are currently disabled for this vault, however you can deposit LINK into Aave to obtain aLINK then deposit into the yaLINK vault above.
A Vulnerability Patched Within 24 Minutes
Members of the Yearn development community discovered and patched a vulnerability within 24 minutes. The vulnerability potentially impacted funds within the yDAI, yTUSD, yUSD, yBUSD, and ysBTC vaults; however, the vulnerability was not exploited. Access to these vulnerable strategies were revoked and reverted to prior strategies that did not have this vulnerability. All funds are safe, operational, and no action is required of users. A detailed write-up of the vulnerability can be found here.
First Yearn AMA
The first Yearn Ask Me Anything (AMA) was conducted on Telegram on September 24th. Users asked various questions which were answered by the Yearn Finance team. Nomad created a nice summary of this AMA, which can be found here. We have also created a Yearn Finance Announcement Telegram channel where we will publish announcements related to the Yearn ecosystem. Additionally, a new feedback site was created and can be accessed here.
Governance Updates (YIPs)
Approved
Voting for YIP: Release fee rewards concluded on Sept. 23 with >94% in favor of releasing fee rewards. No new code had to be deployed. Once the proposal passed the multisig simply set the breaker to true in the governance contract. You can now claim governance rewards without the need to vote.
Proposals Currently Under Voting
No YIPs are currently under formal voting at this date.
Key Ongoing Discussions
Governance Overhaul and Future Rewards
Discussions are still ongoing at the governance forum. But to summarize, this multifaceted proposal would
Revamp governance voting to be fully off-chain, hosted by Snapshot.
Enable YFI located anywhere to be used in governance voting (e.g., aYFI, yYFI, YFI on Uniswap, etc.)
Distribute rewards to YFI stakeholders as yUSD instead of yCRV
Implement a time-locked vote weighting mechanism with gYFI.
See the proposal discussion here.
Burn YFI Minting Ability Permanently
A preliminary non-binding vote was conducted off-chain using Snapshot regarding permanently restricting the ability to mint additional YFI. It received overwhelming support and a formal on-chain vote will be conducted in the near future after a new governance voting contract is deployed.
Link to the governance discussion. Off-chain voting page
Adopt Snapshot + Aragon for Binding Governance
Introduced by Jorge Izquierdo, Founder of Aragon, this proposal would incorporate Snapshot’s off chain voting tool with Aragon’s Court. Currently, Yearn governance votes made on Snapshot are non-binding and merely informational polls. Formal YIPs are voted on-chain here and implemented by the multi-sig following if passed. This proposal would enable votes on Snapshot to be binding and arbitration/implementation overseen by the Aragon Court. In the event of a dispute, the Aragon Court would act as Arbitrator.
See the proposal discussion here.
Creation of the Yearn Auditing Academy
This proposal would form a security auditor academy led by samczsun, a prominent whitehat hacker in the Ethereum developer community. Formation specifics and incentive structure are currently under discussion.
See the proposal discussion here.
yPhoon - Yearn Vaults as Privacy Mixers
Enable users to deposit to yVaults and withdraw to a separate address, essentially making the yVaults privacy mixers.
See the proposal discussion here.
Ecosystem News
Yearn is sponsoring Round 7 of Gitcoin Grants
Yearn Governance Roundup #1—Week of Sept. 21
Blue Kirby launched a daily newsletter called Yearn Pulse
Blue Kirby interviewed yearn.finance contributor, Ali Atiia
DefiDollar has integrated with yVaults
UNI airdrops retrieved from 50+ Yearn contracts/addresses
Resources
https://www.learnyearn.finance/
https://yieldfarming.info/yearn/yvault/
https://py-earn.herokuapp.com/
https://yvault-roi.netlify.app/
https://defimarketcap.io/protocol/yearn-vault
https://yvault-roi.netlify.app/
https://sites.google.com/view/definn/yearn-finance
We invite developers to conceive and propose any new yVault strategies or potential product offerings to the governance forum (https://gov.yearn.finance). Introduce strategies and get paid for your work! We are also always looking for security auditors to help us identify vulnerabilities and exploits. Please reach out to us if you are interested in assisting our security efforts or would like to discuss any business collaborations at franklinyfi@yearn.finance or info@yearn.finance