Yearn.finance, an automated DeFi protocol for high-yield farming, recently launched yvault’s latest strategy, yETH. YVault strategies are a series of pre-defined actions that allow users to deposit money and automatically send it to liquidity funds, where high-yielding interest and additional token rewards are earned.
The yETH Vault was released on September 2nd along with the yWETH Vault and several other updates.. The yWETH vault is the same as the yETH vault, but uses Wrapped ETH, a linked ERC-20 token that is supported by ETH.
According to a current newsletter from Delphi Digital, YETH’s vault strategy consists of four main steps. Ether (ETH) is deposited first and then used as collateral for the purchase of DAI through MakerDAO with a collateralization rate of 200%.. Interest is earned and the DAI is sent to Curve Finance, a stable coin liquidity protocol.
Then DAI is secured and interest (from Curve DEX trading rates) and additional CRV tokens are received. The CRV is then sold for Ether, which is reassigned to the YETH vault.
At the end of this issue, YVault’s strategy provides for an interest rate of 90% and a payout rate of 0.5%, which is distributed to holders of YFI tokens.
Yearn.Finance and the future of DeFi
The yVault strategies currently available on Yearn.Finance generate massive returns for their owners And in the case of YETH, it brings an optimistic outlook for MKR owners from MakerDAO, Ether and of course YFI. This is because token holders receive YFI Holding Rewards equal to 0.5% of the payout rates.
Given the vault’s high performance, yETH currently has 345,120 ethers ($ 139 million) tied up for the vault Just one day after the launch, analysts expect this number to rise.
While this new vault system is risky for investors, The system of rewards for developing new strategies is intended to encourage developers to create solid code, and logs are expected to undergo multiple audits. In the report, Delphi Digital also pointed out some of the reasons for Yearn Finance’s success, stating:
“It’s hard to give just one reason our team is so excited about YFI. There is clearly a product market. It’s easy to use, especially with the efficiency it gets for installments. The returns are attractive and generate income for owners with no dilution. “
Is DeFi getting too speculative?
At the display Yearn.Finance warned about the vault tweet from YETH and WETH There is a high risk associated with safes because they are “debt-based safes with extremely high risk”..
The risk mentioned here is a settlement risk, which means that When Ether drops to a certain price, the user’s Ether positions are liquidated. This is done to make sure the DAI is pegged to the dollar as the DAI is guaranteed by ETH at a rate of 200%.
Indeed, The limit of the collateralization rate is 150%This means that there is a very high risk of losing all funds deposited in these vaults.
Also, There are general risks and issues associated with the current DeFi ecosystem, including the high gas charges required to interface with smart contracts and the fact that the YETH vault interacts with multiple smart contracts, adding multiple levels of risk to the process.
As high-risk investments in DeFi continue to outperform themselves, The hype surrounding the industry and the price increases observed in space suggest a possible formation bubble.
When asked about the DeFi hype and how it compares to the 2017 ICO hype, Lanre Ige, a research fellow at 21Shares, told Cointelegraph that there may still be room for growth. He explained:
“While difficult to compare as the current cycle is still smaller than the previous one, the big difference so far has been that current valuations have not been driven by large inflows of new money, although there is certainly an interest in more sustainable and long-term institutional Environment than 2017. “