Summary
We can generate more yield with our stagnant yVault tokens by using them on CREAM as collateral. I propose offering secondary vault(s), that manage the yVault token(s). Automatically borrowing on CREAM and re-investing into the vault the deposited yVault token was originally generated from.
As an example,
I could (or soon will be able to) take my yVault v2 tokens I gain from depositing into the crvSETH yVault, and use them as collateral on CREAM. Then borrow ETH at 10% APY and deposit that ETH back into the crvSETH yVault at about 25% APY. Given an assumed 75% collateralization limit, I could repeat that process, borrowing on CREAM, depositing into the crvSETH vault, in smaller increments every time, limited by my starting principle/transaction cost. Hence, why I’d rather Yearn do it for me, in a more efficient, sexier manor.
Some excel napkin math using those APY numbers and a starting principal of 28,000 ETH (Roughly half the crvSETH vault currently), this example vault would have a proposed 29% APY including Yearn’s cut, and excluding transaction fees. This is an example in an ever shifting landscape, so numbers are not current to today’s APYs.
Background
I’m fairly new to defi, maybe I’m missing something, but my numbers appear to add up. Seems too easy honestly.
CREAM just voted to open up more yVault tokens as collateral, enabling this strategy to be used in coordination with many existing v2 vaults soon.
Motivation
More yield
Specification
The strategy I’m proposing is pretty simple. Just a positive feedback loop that diminishes each time in a process of depositing, borrowing, depositing again, and borrowing again etc…
Limiting factors are principal, collateralization limit of borrowing on CREAM, APY of borrowing CREAM, and APY of the vault. Principal at yearn is not a problem, managing to keep Yearn APYs higher than CREAM borrowing APY is the biggest concern.
For: Create new vault(s) to put our yVault tokens to work, with coinciding strategy
Against: Do nothing
Poll: