Yearn.finance, an automated DeFi yield-farming protocol, has recently launched the latest yvault strategy, yETH. yVault strategies are a set of predefined actions that allow users to deposit funds and have them automatically sent to liquidity pools where high-yield interest and additional token rewards are earned.
The yETH vault was launched on September 2, along with the yWETH vault and a few other updates. The yWETH vault is equivalent to the yETH vault but uses wrapped ETH, an ERC-20 token pegged and backed by ETH.
According to a recent client newsletter by Delphi Digital, the yETH vault strategy has four major steps. First Ether (ETH) is deposited, then it is used as collateral to acquire DAI through MakerDAO at a 200% collateralization rate. Interest is earned and the DAI is sent to Curve Finance, a stablecoin liquidity protocol.
The DAI is then locked and interest (from the trading fees at the Curve DEX) and extra CRV tokens are received. CRV is then sold for Ether which is reallocated back to the yETH vault.
At the time of writing, the yVault strategy has an interest rate of 90% and a 0.5% withdrawal fee which is then distributed to YFI token holders.
Yearn.Finance and the future of DeFi
The yVault strategies currently available on Yearn.Finance are achieving massing yields for their holders and in the case of yETH, it is bringing a bullish outlook for holders of MakerDAO’s MKR, Ether, and of course for YFI. This is because token holders receive rewards for holding YFI from the 0.5% withdrawal fees.
Given the high yield of the vault, yETH currently has 345,120 Ether ($139 million) committed to the vault just one day after launching and analysts expect that this figure will increase.
While this new vault system is risky for investors, the reward system for developing new strategies is meant to incentivize developers to create rock solid code and the protocols are expected to undergo multiple audits. In the report, Delphi Digital also pointed out a few…