Cryptonews DeFi News

Yearn.finance’s yETH Vault Getting Filled With Ethereum

DeFi

Ethereum

Investing Staking

Last updated: June 26, 2023 06:56 EDT

Journalist

Sead Fadilpašić

Journalist

Sead Fadilpašić

About Author

Sead specializes in writing factual and informative articles to help the public navigate the ever-changing world of crypto. He has extensive experience in the blockchain industry, where he has served...

Author Profile

Last updated:

June 26, 2023 06:56 EDT

Why Trust Cryptonews

Cryptonews has covered the cryptocurrency industry topics since 2017, aiming to provide informative insights to our readers. Our journalists and analysts have extensive experience in market analysis and blockchain technologies. We strive to maintain high editorial standards, focusing on factual accuracy and balanced reporting across all areas - from cryptocurrencies and blockchain projects to industry events, products, and technological developments. Our ongoing presence in the industry reflects our commitment to delivering relevant information in the evolving world of digital assets. Read more about Cryptonews

The yETH vault from yearn.finance (YFI), a vault for yield farming with ethereum (ETH), was launched a day ago, and it’s growth could hardly go unnoticed.

The Cryptoverse is today focused on the yETH vault, and particularly its overnight growth. People were commenting on it holding ETH 215,000, or “0.2% of all ETH in 1 day” just several hours ago.

Now (13:32 UTC), looking into the vault, we find the balance of ETH 345,129, with the value of nearly USD 142m. Per etherscan.io too, wrapped ETH (yWETH) token tracker shows yWETH 351,151, and 3,361 addresses.

And the cryptoverse is busy explaining how this new and complicated DeFi (decentralized finance) toy works.

In his daily newsletter, SetProtocol product marketing manager Anthony Sassano explained the yETH vault strategy this way:

You deposit your ETH or WETH (wrapped ETH which conforms to the ERC20 standard) into the yETH or yWETH vault.
The vault takes that ETH and automatically puts it into a MakerDAO CDP/Vault with everyone else’s ETH.
The yETH vault borrows DAI from this vault against this ETH at a 200% collateralization ratio (as a protection against liquidation).
Then, it puts that DAI into the yDAI vault.
By doing this, it adds liquidity to the Curve Finance’s Y pool.
Then, it can earn trading fees from the Y pool and staking the yCRV tokens on the Curve DAO, in order to farm CRV.
It then “recycles the CRV and trading fees into ETH by buying more of it on the open market.”

And here is another, this time, visual attempt:

The benefit of this, said Sassano, is that those who are willing to take the risk can gain automatic exposure to over 100% APY (annual percentage yield) without understanding the details of how the strategy works. But a major risk is if the MakerDAO Vault/CDP falls to below a 150% collateralization ratio because of a ETH price drop. “This would mean that the yETH vault is open to being liquidated and yETH holders could lose money,” he warned.

As to what putting one’s ETH in a yETH vault looks like, Eric Wall, the Chief Investment Officer at crypto asset management firm Arcane Assets, shows it here.

Wall also commented that “We come up with fun ways yETH vault strategists can take advantage of the fact that yETH is probably going to control more than enough stake to 67%-attack ETH 2.0 PoS.” To this, Ethereum co-founder, Vitalik Buterin, tweeted that to say that one entity getting enough to do a 51% attack on PoS (proof of stake) is fatal – is a myth.

Meanwhile, as reported by Cryptonews.com, US-based crypto research firm Delphi Digital warned that, with the roll-out of staking on Ethereum and DeFi protocols like yearn.finance introducing ETH vaults, the market for the second-most valuable cryptoasset may get significantly tighter.

___