Proposal: Simple Update to YFI Vault Strategy

Proposals Other Products (Labs)
1

Hi everyone,

Observation:

On the yearn.finance page it says the YFI vault is earning 2.76% APY, but, from what I see on these two community resources:

https://feel-the-yearn.app/
https://stats.finance/yearn

…the YFI vault has actually had no ROI over the past 1 and 3 days because it is not invested in anything. That 2.76% number is since inception. I guess it was previously holding the YFI elsewhere, but now there is no yield there for it there.

Suggestion:

While I understand that YFI is such a new asset that it isn’t integrated widely, I noticed Aave has a 0.06% APY on it, so I think the YFI vault should move some part of the tokens there. Stay with me, I know that’s not a sexy number.

Reasoning:

  1. Aave is the best. It is a high relative credibility protocol.
  2. There is a small amount of yield there to earn, which is non-zero, especially for those of us small holders that are long YFI.
  3. The Aave pool of YFI is large enough (6,730 YFI at the time of writing) that it could absorb some or most of what the vault holds (currently 785.36 YFI)
  4. Even as lending/borrowing rates change in the medium-term (in crypto land that means like this month), in my opinion, Aave would still be a solid place to store the vault’s holdings as opposed to keeping it idle. Since Aave will be the main venue where people look to borrow YFI, by moving the vault’s position there, the vault holders will get to accrue some return in YFI instead of nothing.

Thoughts? I see this as a very unexciting, but low-risk and non-zero reward idea.

Cheers,

Clive

2 Likes
2

YFI then has a 40% collateral factor on Aave, so you can easily add in a conservative stablecoin play on top of this.

  1. Deposit YFI into Aave
  2. Use half of available collateral factor to borrow USDC (so 20% of the value of the deposited YFI) to protect against price swings
  3. Deposit USDC into Compound and farm COMP
  4. After a month, sell all COMP for YFI, pay off Aave loan, convert leftover USDC from interest accrued into YFI
3 Likes
3

Perhaps one of the core team can chime in but I think they are trying to align incentives for governance staking before they restart the YFI vault. It’s just been put on pause, I believe

4 Likes
4

I think the vault is avoiding doing something like this because there are plans to roll out a v2 yYFI strategy soon. If they deposited somewhere like Aave, there is a chance they would not be able to remove all of their capital when needed for the new strategy, and returns are currently very small.

If someone wants to do this with their YFI, they are free to currently, as the withdrawal fee is turned off now while the vault sits idle

2 Likes
5

Oh good to know! Thanks.

6

Any update on a new YFI Strategy?