Interpretation of "Big Uncle"'s latest online treasury strategy yETH

Editor's Note: This article comes fromGolden Finance, reprinted by Odaily with authorization.

Editor's Note: This article comes from

Golden Finance

Golden FinanceETH, reprinted by Odaily with authorization.

"Yearn Finance" is an aggregated financial management platform that supports automatic transfer of positions. It currently aggregates Compound, dYdX, Aave, DDEX and other protocols. Recently they announced the launch of the latest treasury yVault strategy "yETH". Let us go into details below Find out.

Yearn Finance was formerly known as iearn. When an account deposits, the platform will automatically allocate the funds to the agreement with the highest current yield. Then yearn will give the user a proof of rights and interests called yToken, and the user can withdraw the tokens he originally deposited and the corresponding income through ytoken. Currently, the yearn platform has supported wealth management services for various stablecoins such as DAI, USDC, USDT, TUSD, sUSD, and BUSD.

On September 2, Yearn Finance officially launched the new smart pool yETH and yWETH, and users can earn income by staking Ethereum. The yETH vault has been launched along with the yWETH vault and some other updates, y

The core steps of the yETH treasury strategy are not complicated. First, you need to deposit Ethereum’s native token Ether (ETH), then use ETH as collateral, and obtain the stable currency DAI through MakerDAO with a 200% mortgage rate. After earning interest, DAI Send to Curve Finance, a stablecoin liquidity protocol. Then, the stablecoin DAI you exchanged will be locked and earn interest (this part of the income mainly comes from the transaction fees of the Curve decentralized exchange) and additional CRV tokens. At this time, you only need to sell CRV and exchange it back to Ether Tokens, which are then automatically redistributed to the yETH vault.

Yearn.Finance is currently able to use the yVault strategy, and its token holders are also receiving batch returns. Under the new yETH strategy, it brings MakerDAO governance token MKR holders, Ethereum holders, and YFI holders This is because they can earn YFI token rewards from the "0.5% transaction fee". Thanks to the higher yield, the yETH strategy attracted 345,120 Ether liquidity funds (approximately US$139 million at the current exchange rate) on the first day after its launch, and this number is expected to continue to increase.

Although this new treasury system is somewhat risky for investors, the main purpose of this incentive system for developing new strategies is to motivate developers to build "rock-solid" code. According to the plan, the Yearn Finance agreement may undergo multiple audits in the future. In its analysis report, Delphi Digital points out some of the reasons for Yearn Finance’s success, explaining:

"For now, it is difficult to determine what exactly is the reason for the market to be so excited about YFI, but it is clear that this product has a certain degree of market fit, it is easy to use, especially the efficiency of obtaining fee income is very high, and the benefits are also extremely high. attractive and generate income for token holders without diluting capital.”

secondary title

Is DeFi becoming too speculative?

Yearn.Finance reminded investors in the yETH and wETH strategy release announcement that investors need to be cautious due to the extremely high risk of debt-based vaults.

At present, in the yETH strategy, the biggest risk is the liquidation risk, that is, if the price of the Ethereum token falls to a certain price, the user’s ETH position will be liquidated. This is to ensure that DAI is anchored to the US dollar, and Investors obtain the stable currency DAI through MakerDAO with a mortgage rate of 200% in the initial stage-from this perspective, the risk will basically be "passed on" to investors.