Proposal: Transition yUSD to new Vault

Transition yUSD to new Yearn Vault

Basic Summary
The yUSD vault seems to have fallen out of favor with both the Yearn team and the voters in Curve gauges. This leaves this vault at a disadvantage while a large portion of Yearn’s vault APRs come from CRV farming. There are other Yearn vault products that have been developed since the yUSD vault was created and are earning better rewards with equal or better risk profiles.

Abstract - What am I proposing?
We need to migrate our liquidity to a new Yearn vault as the yUSD V1 vault is being phased out. I propose we remove our stablecoin liquidity from the yUSD vault and the yCRV pool and reinvest it into a new Yearn vault instead of just migrating to the yUSD V2 vault. I recommend the yDAI vault because it is one of the most flexible vaults and DAI is the most aligned stablecoin to our vision and values (compared to USDC and USDT) while still being considered relatively safe. The USDC vault would be my second option if we wanted to trade peg risk for regulatory risk.

Motivation - Why am I proposing it?
The YAM treasury currently has around $1MM in yUSD. yUSD is a yield bearing stablecoin from Yearn (their first product) that earns returns using Curve and and internal yield aggregating strategies. Here is a good explanation of how it works under the hood. A large portion of the yield in the Curve based Yearn vaults comes from the CRV rewards given out by Curve. In order to earn a larger share of the CRV rewards, voters need to stake CRV in gauges and vote for those pools. As you can see below (or on, the Y pool doesn’t even show up on the chart and only gets between 0.21 to 0.52% in curve rewards.

The actual pool APR of yUSD is ok at around 2%, but the CRV addition is almost nothing, and after the 2/20 fees on the vault, this kills the yield.

With this yield, we would be better off removing the risk and holding just the yCRV tokens to earn the base APR or hold just the stablecoins on their own. Or we could move the funds to another vault or product.

There are numerous places that we could put our stablecoins to earn a better return, but I would recommend sticking with Yearn as they have a good track record for safety and innovation. And there are DeFi ties too. The “Y” in YAM comes from the “Y” in Yearn. Yearns newer vaults are single asset vaults that allow significant flexibility in what they invest into, further diversifying risk and improving returns.

Yearn yDAI vault - Yearn

Earning 4.27% based on 10 different strategies.
Risks - Vault has similar smart contract risk. There are additional smart contracts that the vault uses in its strategies, but they are siloed so there is less catastrophic risk. DAI has some peg risk itself, but this is no worse than in the yUSD pool, which has peg risk for all 4 assets in the curve pool, DAI, USDC, USDT, TUSD.

Yearn yUSDC vault - Yearn

Earning 4.09% based on 9 different strategies.
Risks- risks are very similar to yDAI but the profile on USDC is slightly different from DAI. Probably negligibly different for us though.

Other options include the Yearn Compound Vault, which is paying a little less (3.7%), but does not have any direct exposure to USDT. The SAAVE vault is paying significantly more right now (15.3%) but contains synthetix sUSD and DAI, lent on AAVE in the pool. From an adjusted risk standpoint, the SAAVE vault is probably only marginally, if at all riskier than the yUSD pool.

If we are going to migrate liquidity, we may as well take this opportunity to move to a better product.

Specifications - How am I proposing it is accomplished?
Instead of writing the code to move the current yUSD to v2, we instead move it to a new better vault. I leave the details to @flygoing.eth and would like to hear his input on if there are any technical issues here.

Poll to Measure Sentiment

  • Stick with yUSD v2 vault
  • Move to yDAI vault
  • Move to yUSDC Vault
  • Move to a different vault or product from what is listed above

0 voters


Based on a quick run through an interest rate calculator, the difference between a .5% and 4.2% interest rate on $1MM over 2 years is $70,000.

There is no promise that the interest rates shown will hold, but the yDAI vault should be able to consistently over perform the yUSD pool.

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