Proposal TL;DR
Allocate $100k of Yearn Treasury Stablecoins from active yv3 vaults to Spectra PT/IBT-Curve Pools in a Pilot Program
Summary
This proposal seeks approval to refactor $100,000 of Yearn Treasury assets from the yv3-crvUSD vault (yvcrvUSD-2) into PT and YT, leveraging the existing yv3/ERC-4626 composability to enhance treasury returns.
Background
The Yearn Treasury (treasury.ychad.eth) currently holds ~$7.8M across USDC, crvUSD, DAI, USDS, and other blue-chip assets in Yearn v3 vaults. These vaults deliver 2–5% APY, but they miss out on an additional layer of returns that capitalizes on yield volatility itself.
Spectra Finance enables any yv3 vault (any ERC-4626) to be split into a Principal Token (PT), locking in a fixed yield, and a Yield Token (YT), capturing the floating yield, in a permissionless manner. When tokenizing the yv3 vault, the liquidity is automatically zapped into a Curve stableswap PT-IBT-pool.
This unlocks a new layer of capital efficiency by combining:
- the base vault APY
- fixed-rate returns via PT
- Curve swap fees on PT/IBT trades
- Spectra incentives
Motivation
This proposal aims to unlock an additional layer of yield from Yearn v3 vaults by leveraging permissionless DeFi-native infrastructure. While Yearn v3 vaults currently generate base yield, they do not capture value from yield volatility itself. By splitting vault positions into Principal Tokens (PT) and Yield Tokens (YT) via Spectra, and zapping the Yearn v3 vault of an interest-bearing token (IBT) into PT-IBT Curve-stableswap pools, the treasury can earn additional returns through swap fees driven by the yield volatility itself, as well as Spectra incentives. This pilot also serves as a proof of concept, demonstrating the composability and productive deployment of Yearn v3 vaults in the broader DeFi ecosystem.
Benefits
- Higher Capital Efficiency: Generates returns on both yield and yield volatility
- Composability: Operates on top of Yearn’s existing vault architecture
- Protocol Synergy: Introduces/Increases strategic alignment between Yearn, Spectra, Curve by utilizing yv3
- No Integration Work Needed: Everything is available via existing interfaces
Risks
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Smart Contract Risk: Spectra is audited and follows the highest standards of secure product development; Curve is battle-tested. Pilot size reduces exposure.
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Liquidity Risk: PT/IBT pairs may have limited depth initially, but if held to maturity
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Impermanent Loss: PT and IBT are highly correlated; Curve stableswap AMM reduces impermanent loss risk.
Proposal:
This proposal seeks approval to refactor $100,000 of Yearn Treasury assets from the yv3-crvUSD vault (yvcrvUSD-2) into PT and YT, leveraging the existing yv3/ERC-4626 composability to enhance treasury returns. We propose a duration of 6 months and are interested in kicking off the discussion to get feedback on the vault selection.
Specification
For:
Proceed with allocating $100,000 from the yvcrvUSD-2 vault to a 6-month pilot using Spectra and refactoring the liquidity into PT+YT and zapping it into PT/IBT-Curve Pools.
Against:
Do not proceed with the proposed $100,000 pilot program.
Poll:
- For
- Against
- Abstain
Further Resources
Spectra Yield Strategy Guide for Liquidity Providers - Google Docs