How Yearn Boosts Yield yearn fi

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A surprising observation was the steep drop in value of yveCRV-DAO relative to CRV – it’s clear that people want out of their locked CRV positions and are prepared to take a big haircut to do so. The ROI calculations for the yveCRV vault is a little simpler – each week there is a deposit of 3CRV tokens into the vault which are the income stream generated from the locked CRV tokens. We take the value of the deposited 3CRV tokens over the value of the CRV tokens in the vault over each 7 day period and annualise it to get the vault ROI. Each yVault is structured around a particular underlying token – there are vaults for Eth, USDC, WBTC and many others. Users can deposit in the yVault native token, or they can deposit using any other token & take advantage of Zaps.

  1. There are several actions that could trigger this block including submitting a certain word or phrase, a SQL command or malformed data.
  2. Vote locking, “Boosties”, or “Vote boosting” is a Curve Finance feature where CRV is locked into the Curve DAO.
  3. Yearn has been steadily growing its stack of CRV tokens to provide increasing rewards for those vaults.
  4. When users deposit CRV into the yveCRV vault, they receive 1 yveCRV-DAO token for each CRV deposited.

Users receive veCRV tokens (voting escrow Curve Tokens) for doing this, and more tokens are received the longer the locking period. VeCRV holders can still participate in governance voting, they receive 50% of Curve trading fees and they qualify for boosted rewards (up to 2.5x) when they provide liquidity in Curve. This vault builds on the yveCRV yVault, but automates the process of collecting the weekly rewards. The Strategy behind this vault collects the 3CRV rewards each week, swaps them for more yveCRV then deposits them back into the vault. The yvBoost vault is a standard Yearn yVault – you can withdraw part or all of your outstanding deposit and any accrued gains at any time.

Fee distribution for veCRV holders happens weekly and users need to collect these manually and pay the gas cost for the transactions. Users have tokens which they want to hold – Yearn puts those tokens to work by finding the best yield farming opportunities across DeFi. It does this in a gas efficient way for the user, so even small deposits can get decent returns over time.

We attempted to answer the question of whether there was an impact on the usage of the yveCRV vault from the introduction of the yvBoost vault – a more improved & automated version of yveCRV. We saw that the usage of yveCRV had already dropped prior to the introduction of yvBoost, so there was no opportunity for yveCRV usage to fall much further. The launch of yvBoost, however, generated an upswing of deposits to the yveCRV vault, as yveCRV-DAO tokens were required to deposit into the yvBoost vault. The relative pricing of yveCRV-DAO to CRV meant that minting fresh yveCRV-DAO tokens was the best way to enter yvBoost. Since the initial 6 week upswing of yvBoost, we have seen the growth of both vaults level out with yvBoost declining a little.

yVault Usage – Total Value Locked in USD

VeCRV (staked CRV), receives a share of trading fees from the Curve protocol (50% of all trading fees generated). Those fees are collected and used to buy 3CRV, the LP token for the TriPool (DAI+USDC+USDT), which are then distributed to veCRV holders. You can use this veCRV token to manually rebalance your votes to obtain a boost on your provided liquidity to the Curve.fi platform. Now the veCRV-DAO yVault (also known as the yveCRV Vault) is a little different to the others. Curve is a dex which specialises in stableswaps – swaps between tokens which have approximately the same value.

Beyond staking, another major incentive for CRV is the ability to boost your rewards on provided liquidity. This website is using a security service to protect itself from online attacks. There are several actions that could trigger this block https://cryptolisting.org/ including submitting a certain word or phrase, a SQL command or malformed data. The fees generated for veCRV holders are collected in the form of 3CRV tokens (shares in the Curve tripool), which can be redeemed for stablecoins if desired.

Working in the native tokens of the yVault, users can deposit or withdraw yveCRV-DAO tokens. Alternatively, users can take advantage of the Zap function and deposit pretty much any ERC-20 token into the vault. They can also withdraw using Zap and collect WETH, WBTC, DAI, USDT or USDC. As the Zap conversions occur on the way in and out, the user maintains price exposure to the yveCRV-DAO tokens whilst deposited in the vault.

yveCRV yVault

The longer time period that CRV is locked for, the more veCRVs are received. Many Yearn vaults have strategies built on Curve pools and therefore use CRV token to optimize them by voting to direct reward allocations towards those pools. Yearn has been steadily growing its stack of CRV tokens to provide increasing rewards for those vaults.

In true Yearn fashion there is a vault & a strategy to maximise the returns from this CRV locking process. This is the yveCRV yVault and it’s different to the other vaults in that you can’t withdraw your tokens. Yearn takes CRV tokens and locks them with the CRV DAO for the maximum 4 year period and continually renews this lock. In addition, all Yearn vaults send 10% of earned CRV into this vault for additional boost. The returns to the users are in the form of the 3CRV tokens earned by the veCRV – like the CRV staking contract, these are collectable weekly as an income stream, and must be collected manually. YVault depositors receive yveCRV-DAO tokens as their share in the vault.

Vault Return on Investment

This growth in yveCRV was driven by the yvBoost growth because yvBoost requires yveCRV-DAO tokens to deposit. These are obtained either by depositing CRV into yveCRV and minting new tokens, or by purchasing them on the secondary market. The yvBoost vault makes the choice based on what is best value at the time – we will examine the relative pricing a bit later. This means we give all of Yearn’s rewards, which we could have claimed for the protocol, to yveCRV depositors, boosting their weekly rewards. When a user deposits CRV into the vault, that CRV is locked on the Curve.fi platform as veCRV and the user is returned a tokenized version of veCRV, yveCRV. Every week, these rewards can be claimed as 3Crv (Curve’s 3pool LP token).

The yVault contains logic which automatically allocates the vault deposits to whichever combination of Strategies gives the best return for the users. The rewards from the yield farming accrue into the vault, so the value of the vault token is always increasing. When a user withdraws from the yVault, they get more tokens than they deposited.

The graph below shows the same data as above, but looks at the net token growth over time rather than the TVL of each vault. YveCRV grew steadily from Jan-Mar 2021, then growth dropped to almost zero for a month or so. The growth kicked off again once yvBoost launched, and slowed in line with the slowing in yvBoost growth at the end of June. It’s unclear what is driving this pricing mismatch – perhaps the competition for CRV token locking with Convex is causing people to exit their yveCRV positions in search of better yields elsewhere. Vote locking, “Boosties”, or “Vote boosting” is a Curve Finance feature where CRV is locked into the Curve DAO.

We will examine what impact the launch of the yvboost yVault had on the usage of the yveCRV yVault. Yearn buys yvBOOST from the market, unwraps it into yveCRV, and donates that yveCRV into the yvBOOST vault, increasing the underlying value of yvBOOST.

Curve has optimised their swap code to make these swaps efficient from both a liquidity impact and fee perspected – see this post for a further exploration of Curve & stablecoin swaps. The pricing above is curious – why is yveCRV valued at such a steep discount to CRV? We will see if there is any impact from the Return on Investment of the vaults in question. Based on Yearn’s share of the total veCRV, 50% of trading fees will be claimed as CRV, out of which 10% will in turn be locked into the Curve DAO for more veCRV. This is an overview of how Yearn investment strategies take advantage of CRV vote locking on Curve Finance in order to increase yield.

Yearn users deposit their tokens into yVaults, and receive a token in return which is proportional to their share of the vault capital. A yVault is a smart contract with one ore more Strategies sitting behind it. The Strategies are the yield-farming recipes which are created by clever humans (Strategists) and monitored & managed by bots (Keepers).