Victor Ugochukwu · Dec 14, 2020 . 5min read
Forget SushiSwap, yEarn’s yETH launch is the hottest DeFi Yield farming strategy now
Over 252,000 ETH has been locked in yETH vault on Maker worth $110,086,731.05.
By Victor Ugochukwu · Sep 4, 2020 . 6min read
An epoch event happened in the DeFi industry while so many were busy getting distracted with the SushiSwap frenzy and it’s the yEarn’s yETH vault launch recently.
On 1st September, the DeFi industry’s pioneer yield aggregator and hottest rave, yEarn Finance by Andre Cronje launched the most anticipated yETH vault. And since then, over 252,000 ETH has been locked in yETH vault on Maker worth $110,086,731.05. Moreover, the yETH vault launched with ~90% variable APY flatly outpacing other CeFi and DeFi options for earning on ETH.
Additionally, yETH vault makes it extremely super easy for those involved in the practice of yield farming to earn interests on their ETH without necessarily having first to deposit stablecoins. The vault abstracts all the complicated procedures away and from the yield farming process giving DeFi users relief, especially in terms of gas costs while converting ETH to stablecoins.
How the yETH vault works
As a yield farmer or anyone who like to earn interest on their capital (in this case ETH) you deposit your ETH in the vault which automatically converts it to yETH (yearn – ETH). The yETH is basically an interest in generating ETH. The following question then is: where does it generate its interest from? A yETH vault is a smart contract coded to use the ETH deposited to borrow DAI on MakerDAO optimally. In other words, every ETH on yETH vault is a collateral debt position (CDP) on the Maker protocol. The Maker protocol then lends out Dai, as well as the ETH. Basically, at the best interest generating pools (Curve’s yPool specifically) while constantly keeping depositors debt levels safe. So, yETH vault leverages a Triforce: ETH, MakerDAO and Curve to keep the yield interest and debt security level optimized.
Interestingly, many within the DeFi industry see this as an autonomous on-chain hedge fund. This is because any developer can write additional or even multiple strategies for the same or other assets.
However, unlike many who keep calling out the present DeFi industry growth as a bubble, yETH vault is different. Maker mints Dai for the yETH vault at 200% collateralization ratio. This reduces much of the under collateralization risk these debts could encounter.
But of course, the high APY yETH vault offers also comes with its risks as nothing is exactly certain. However, YFI token which has continued to surge in price has another utility added into it because every withdrawal from the yETH vault attracts a fee of 0.5% which goes to YFI holders who stake into the ecosystem. With the yinsure.finance platform also a part of the yEarn ecosystem, YFI may beat those who are trying to short.
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