Proposal:
Build a Yearn V3 vault that produces the highest yielding liquid ETH derivative token in the world. With several times higher yield compared to other ETH derivative tokens.
Summary:
Deploy a V3 Yearn vault that utilizes top performing ETH-ETH liquidity pools to provide yield for a wrapped, staked, liquid yield bearing ETH derivative token with 5-10x+ higher yield than wstETH.
Background:
Wrapped liquid yield bearing ETH derivative tokens become more valuable compared to ETH over time.
The market cap of all yield bearing ETH derivative tokens is over $24B, which is a higher market cap then the 10th highest market cap token.
The first major ETH derivative token made was wstETH, which currently dominates the yield bearing ETH derivative market, with over a 14 billion dollar market cap.
wstETH generates yield via ETH staked to secure the Ethereum network. That yield is used to increase the value of wstETH compared to ETH at a consistent rate over time. At a rate of 3% per year.
More recently weETH came to market, which initiated the mass adoption of ETH derivative tokens that benefit from multiple layers of yield.
weETH currently has over a $6B market cap, and provides a yield of 4.2% via staking ETH and then restaking it to secure other blockchains.
Very recently, a new generation of ETH yield derivative tokens have come to market. Such as superOETHb that utilizes ETH staking, liquid restaking, and other strategies involving liquidity pools, lending, and leverage to generate an annual yield on ETH as high as 8%.
Top DEX platforms such as Aerodrome, Velodrome, and Thena having recently been directing significant emissions to stable and concentrated LPs composed of only ETH and ETH derivative tokens. Top performing ETH-ETH LP yields typically range between 5-20% and occasionally rise as high as 150% for 1 or more weeks at a time.
Yearn is well positioned to use its V3 Vault architecture to deploy an ETH derivative token with an unprecedented rate of annual yield by utilizing revenues & incentives from ETH-ETH LPs, plus yield from ETH derivative tokens that are deployed in LPs, plus yield from arbitraging ws-yvETH tokens between the open market DEX value and the vault redemption value of ws-yvETH.
Motivation:
ws-yvETH has a very strong likelihood of obtaining a 3 billion to 15 billion dollar market cap within 1-2 years after deployment
With a 10% vault fee, Yearn’s future revenue if ws-yvETH obtains 1B TVL is between 15-30 million per year.
With 10B TVL and a 10% vault fee, Yearn’s future revenues could reach over 300M per year.
Yearn could easily increase the Yearn protocol fee on ws-yvETH to 20%. Potentially generating over 600M in revenues with a 10B ws-yvETH market cap of 10B.
Which would make Yearn one of the top 10 highest revenue generating protocols in the world.
Specifications:
Develop a V3 vault with the following functions
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Deploy vault deposits into top yielding stable and concentrated liquidity pools that are composed of only ETH and ETH derivative tokens.
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Utilize automated liquidity management vaults to handle the process of deploying ws-yvETH vault funds into concentrated liquidity pools & balancing LP ranges as necessary.
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Compound LP gains back into LPs.
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Periodically migrate vault funds to liquidity pools with a significantly higher return rate.
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Check the value of ws-yvETH across all same chain liquidity pools.
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Execute batch swap LP arbitrage transactions powered by Aave flash loans and temporarily generated ws-yvETH tokens whenever the DEX market value of ws-yvETH becomes depegged from ws-yvETH’s vault redemption rate.
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Burn all ws-yvETH earned from Vault executed arbitrage batch swaps, adding further yield to ws-yvETH.