Proposal to Whitelist veCRV-DAO yVault (YVECRV-DAO)
Contract Address:
0xc5bddf9843308380375a611c18b50fb9341f502a
TL;DR
Bancor affords Yearn Ecosystem participants and DeFi users, a unique opportunity to earn secondary yield on YVECRV-DAO via single-sided exposure. Further, participants will be protected against impermanent loss (IL).
Discussion:
Yearn Finance is a suite of products in Decentralized Finance (DeFi) that provides lending aggregation, yield generation, and insurance on the Ethereum blockchain. The protocol is maintained by various independent developers and is governed by YFI holders.
Yearn Finance Vaults
Capital pools that automatically generate yield based on opportunities present in the market. Vaults benefit users by socializing gas costs, automating the yield generation and rebalancing process, and automatically shifting capital as opportunities arise. End users also do not need to have a proficient knowledge of the underlying protocols involved or DeFi, thus the Vaults represent a passive-investing strategy.
CRV DAO Token
The main purposes of the Curve DAO token are to incentivize liquidity providers on the Curve Finance platform as well as getting as many users involved as possible in the governance of the protocol. Currently CRV has three main uses: voting, staking and boosting. Those three things will require you to vote lock your CRV and acquire veCRV. CRV can now be staked (locked) to receive trading fees from the Curve protocol. A community-lead proposal introduced a 50% admin fee on all trading fees. Those fees are collected and used to buy 3CRV, the LP token for the TriPool, which are then distributed to veCRV holders.
veCRV-DAO yVault
The veCRV-DAO yVault is a vault that accepts CRV in exchange for perpetual claim on Curve DAO admin fees across all Yearn products. The vault may be interacted with on yearn.finance or https://crv.ape.tax/. At the time of writing, participants can exchange CRV for yveCRV and earn 1.42X the yield than if they were to solo stake CRV on Curve Finance platform. This returns about 71.39% APY. However, participants can stack their yield by providing liquidity to the WETH/yveCRV-DAO on SushiSwap. Finally, they can stake their Sushi WETH/yveCRV-DAO LP tokens on Pickle Finance. While this may be lucrative, users could experience IL potentially costing hundreds, if not thousands.
Bancor Single-Sided Exposure and Impermanent Loss Protection
Most first generation AMMs require LPs to contribute equal or determinate parts of each asset represented in the pool. This is both an inconvenience and a liability for many LPs who may hold only one of the assets and/or are only interested in exposure to that single asset. Bancor v2.1 breaks this paradigm, allowing LPs to contribute and maintain 100% exposure in a single token. LPs can provide liquidity to a pool with single-sided exposure, either in an ERC20 token (“TKN”) or in BNT.
Bancor’s IL Insurance accrues over time, by 1% each day, until 100% protection is achieved after 100 days in the pool. There is a 30-day cliff, which means that if a liquidity provider decides to withdraw their position before 30 days passes, they’d incur the same IL loss experienced in a normal, unprotected AMM. If an LP withdraws any time after 100 days, they receive 100% compensation for any loss that occurred in the first 100 days, or anytime thereafter.
Bancor will afford an opportunity to DeFi users to participate in familiar, high-yield DeFi protocols in Curve Finance and Yearn Finance, while maintaining 100% exposure in a single yield-bearing token while maintaining protection from IL.
