If you need a recap on yield farming and liquidity mining, you can check out this article here.ĬOMP farming basically changed the whole landscape of finding the best yield and checking the APY of a deposit was no longer sufficient. The COMP token distribution was also pretty much the time when all the yield farming hype started. This changed dramatically with the introduction of liquidity mining with Compound’s COMP token distribution as a prime example. Up to this point, finding out what the best APY on a given stable coin was fairly easy. 圜RV pool contains the following yTokens: yDAI, yUSDC, yUSDT, yTUSD, making it easy to swap between the yTokens without unwrapping them into their underlying tokens.īy depositing stable coins to the 圜RV pool, the users can earn trading fees for providing liquidity on top of getting a return on their yield-bearing yTokens. Now, the protocol had to also anticipate what would happen to the APY if a large amount of funds are moved in, so it would have to also optimise splitting funds between different protocols and choose the most optimal solution.Īt this point, Andre also started working with Curve on the 圜RV liquidity pool. As the money in the pools started growing, some of the previously obvious strategies like moving coins into the highest paying lending protocol stopped working. From the protocol’s perspective, adding more funds to the pool was beneficial as there were more opportunities for triggering rebalances with more deposits and withdrawals taking place.Īfter the initial warm welcome by the community, Andre started working on improving the protocol itself. Further DevelopmentĪfter the initial version of the protocol was completed, Andre decided to open it up to more people who were also interested in automating their yield strategies. This is because most users want to withdraw the same stable coins as they initially deposited. So for example, if a user deposits DAI, the protocol would never swap it to USDC, even if USDC has a higher yield. One thing that the protocol always assures is to never swap the initially deposited stable coin to a different stable coin, even if there is a higher yield available. If a user wants to withdraw their initial DAI + accrued interest they can burn their yDAI and receive the underlying DAI.

The protocol checks if there is a better yield available at the time a user deposits or withdraws money from the pool, triggering a rebalance of the pool if necessary. For instance, if Aave offers a better yield on DAI than Compound, the yearn protocol can decide to move all or some of the DAI to Aave. The DAI that is pooled together can then be moved between different lending protocols to always maximise the yield. For example, if a user deposits DAI, the protocol issues yDAI. By depositing a stable coin to a pool, the user receives their yTokens that are yield-bearing equivalents of the coin that was deposited.

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