Yearn Keeps Chugging With V3 of Vaults Aggregator

Yield Aggregator Taps ERC-4626 Standard for New Vaults Offering

By: Owen Fernau Loading...

Yearn Keeps Chugging With V3 of Vaults Aggregator

Yield aggregators are a strange breed. They generate earnings by pushing capital strategically through DeFi protocols and they have largely fallen out of the limelight in a crypto world engulfed by Bored Apes and multi-chain ecosystems.

But the leader in the category, Yearn Finance, is still making moves. On May 3, the yield aggregator unveiled a third iteration of their core product, Vaults. It’s the biggest collection of updates in Yearn’s history. Upcoming changes include issuing Yearn’s vault tokens, which essentially represent deposits in the protocol’s vaults, using the ERC-4626 standard.

DeFi Infrastructure

In January, The Defiant reported how ERC-4626 standardizes yield bearing tokens, making it easier for developers to build on top of tokens that accrue value instead of having to create custom solutions for each.

Chris Eberle, a contributor at Yearn Finance, sees the inclusion of the standard, as well as the whole of the protocol’s forthcoming v3, as progress towards establishing Yearn as a piece of DeFi infrastructure for yield.

Brain Time

“We’re focusing a lot of brain time and energy on being a protocol others want to come build on top of,” Eberle told The Defiant, emphasizing what he sees as Yearn’s focus on security, ease of integration, and fee sharing through a partnership program.

“As you’re seeing in v3, and also in our work in security (for Yearn and others who need our help in war rooms), we’re serious about evolving the space,” Eberle said. Yearn and especially its developer Banteg, is known for helping projects mitigate the effect of hacks when they’re discovered.

New Standard Promises to Clean Up ‘Mess’ in Yield-Bearing Tokens
New Standard Promises to Clean Up 'Mess' in Yield-Bearing Tokens

New Standard Promises to Clean Up 'Mess' in Yield-Bearing Tokens

The Fresh Approach Could Support All Yield-Bearing Tokens

The Defiant The Defiant

Other changes in Yearn’s v3 include junior tranches, which will be higher risk and higher reward, according to the project’s Twitter. Theoretically, this will allow what Eberle called “advanced users” to take risks with their vault deposits.

The protocol is also writing its v3 Vaults in the programming language Solidity. According to DeFi Llama, 69% of smart contracts are written in Solidity. Yearn believes the change in language will allow the protocol to tap into a larger developer base.

Proposal 65

According to Eberle, Yearn is working on implementing changes to its tokenomics as part of Yearn Improvement Proposal 65 (YIP-65), details of which surfaced last December, in addition to the V3 changes. At a high level, YIP-65 will implement vote locking tokenomics similar to that of the automated market maker Curve Finance.

At $2.25B in total-value-locked (TVL), Yearn Finance is the leading yield aggregator by more than $1B, according to DeFi Llama.

Yield aggregators as a whole haven’t attracted nearly as much capital in aggregate as have protocols like decentralized exchanges (DEXs) and lenders — the two categories combined have amassed over $100B in TVL, while yield aggregators as a whole have less than 5% of that.

Rankings of Protocol Categories by TVL. Source: DeFiLlama

Yearn’s YFI token is down 26% in the last 30 days, according to CoinGecko as of May 3, which is better than the DeFi Pulse Index’s 39% swoon.

With its v3, “the biggest collection of updates in Yearn history,” the yield aggregator is working hard to emerge from the bear market with stronger offerings.