[DRAFT] [GF: Phase 1 Proposal] Yearn

Project name: Yearn

Author name and contact info (please provide a reliable point of contact for the project): @omgcorn on telegram or twitter, corn@yearn.finance

I understand that I will be required to provide additional KYC information to the Optimism Foundation to receive this grant: Yes

L2 recipient address: TBD

Which Voting Cycle are you applying for?: Voting Cycle 6

Grant category: DeFi

Is this proposal applicable to a specific committee? DeFi Committee

Project description (please explain how your project works):

Yearn Finance is a suite of products in Decentralized Finance (DeFi) that provides yield generation, lending aggregation, and more on the blockchain. The protocol is maintained by various independent developers and is governed by YFI holders.

Project links:

  • Website: yearn.finance
  • Twitter: twitter.com/iearnfinance
  • Discord/Discourse/Community: discord.yearn.finance
  • Please include all other relevant links below: docs.yearn.finance

Relevant usage metrics (TVL, transactions, volume, unique addresses, etc. Optimism metrics preferred; please link to public sources such as Dune Analytics, etc.):

  • TVL: $555.36m
  • 32 partners/projects using yVaults in their products
  • All-time Strategies created: 327
  • All-time Vaults created: 154
  • Chains: 3
    • Ethereum $532.08m
    • Fantom $23.11m
    • Arbitrum $173.01k

Is/will this project be open sourced? Yes

Optimism native?: No

Date of deployment/expected deployment on Optimism: Already deployed and we’ve already done 2 harvests behind the scenes testing. We’ll have Optimism available on yearn.finance soon. Once we add that users will have access to these vaults day 1:

  • DAI
  • WBTC
  • WETH
  • USDC
  • sUSD

Ecosystem Value Proposition:

  • What is the problem statement this proposal hopes to solve for the Optimism ecosystem?
    • There are 30 existing Yearn partners who are not on Optimism yet, but have yVaults built into or accessible through their products. Existing Yearn partners who are not on Optimism are more likely to make the move when they know the yVaults they trust are already built and available.
    • Yearn strategies have become a seal of approval when it comes to protocol safety and usage.
  • How does your proposal offer a value proposition solving the above problem?
    • More than 80% of deposits into yVaults come through partner integrations. There are 32 projects offering their users access to yVaults today and only 2 (QiDao and Beethoven) of them are on Optimism. We see an opportunity for many of the ones we already work with to move to Optimism and build on top of new yVaults.
    • Yearn has an 8-metric risk framework that we use to evaluate every potential strategy. We evaluate 3rd party audits, TVL impact, complexity, longevity, protocol safety, team knowledge, our own internal code review, and perform extensive testing.
  • Why will this solution be a source of growth for the Optimism ecosystem?
    • yVaults are viable only when there are high quality opportunities to farm. The following are viable farming opportunities already on Optimism that we already use on other chains. We’ll have strategies for these immediately:
      • Aave
      • Velo
      • Uniswap
      • Curve
      • Stargate
      • Ironbank

Has your project previously applied for an OP grant? If successful, please link to your previous grant proposal and provide a brief update on milestones achieved with the grant. If unsuccessful, and this is a resubmission, please specify how you have incorporated significant changes in accordance with feedback. No

Number of OP tokens requested: 1,000,000

Did the project apply for or receive OP tokens through the Foundation Partner Fund? No

How much will your project match in co-incentives? (not required but recommended, when applicable): Our project does not have token emissions so we are not able to do this today. However, with the introduction of veYFI there may be an opportunity to provide additional incentives in the future. We’re leaving the door open for this one.

Proposal for token distribution:

  • How will the OP tokens be distributed? (please include % allocated to different initiatives such as user rewards/marketing/liquidity mining. Please also include a justification as to why each of these initiatives align with the problem statement this proposal is solving.)
    • Yearn will distribute 100% of grant $OP tokens to yVault depositors to incentivize the move to Optimism.
  • Over what period of time will the tokens be distributed for each initiative? Shorter timelines are preferable to longer timelines. Shorter timelines (on the order of weeks) allow teams to quickly demonstrate achievement of milestones, better facilitating additional grants via subsequent proposals.
    • 25,000 tokens per week for 40 weeks
  • Please list the milestones/KPIs you expect to achieve for each initiative, considering how each relates to incentivizing sustainable usage and liquidity on Optimism. Please keep in mind that progress towards these milestones/KPIs should be trackable.
    • This program will be successful when we:
      • Enable 10 new partners on Optimism
      • Grow Optimism to our second highest TVL by chain
  • Why will incentivized users and liquidity on Optimism remain after incentives dry up?
    • 40 weeks of incentives ensures a long enough window to measure success and to continue building more strategies and vaults in the ecosystem. Yearn on Ethereum is quite sticky and that’s because of the partners who have built on top of Yearn vaults. We’ll make sure all current Yearn partners are aware of this program and all vaults available on Optimism today so they can get to work building on Optimism too.
    • Even after $OP token incentives are gone, there will be lending markets, swap fees, bridges, etc as high quality sources of yield.
    • As long as farming opportunities remain active, so will the use of yVaults. We have been using strategies with projects mentioned above in the alignment section on mainnet for a long time, some since 2020.
2 Likes

Salome again from Prime Rating :slight_smile: Happy to share some insights from our latest review of Yearn. With an overall rating of A+ (89%) Yearn is in the top 10 of our rated projects and is seen as one of the torchbearers of the DeFi industry. They have an excellent technical score of 93% and a very good fundamental score of 84%.

With regards to this proposal, I noticed that the section on competitors, peers, or similar projects, which is part of the template, was not highlighted here. However, that’s probably also a very obvious one. Some of these competitors are for example Harvest Finance, Beefy.Finance or Vesper. Another player that can be seen as a competitor is Convex Finance, which exceeds Yearn’s market capitalization at this point. However, there is a key difference between the two. While Yearn is a token-unspecific yield aggregator, Convex focuses solely on CRV. Nevertheless, 5 days ago a teaser of $yCRV (yCRV is the latest generation of Yearn’s liquid veCRV wrapper product) got released that indicates Yearn entering a new area.

As mentioned in this proposal Yearn has expanded into other chain like Fantom and Arbitrum, the vast majority of the TVL however is still locked up on the Ethereum chain. I am wondering if there are enough incentives and support from the Yearn ecosystem to push for the OP infrastructure? Is there any forecast on how much the OP incentives will boost the yields on the vaults mentioned?

As Yearn is a trusted player with a strong reputation and is well positioned to bring a lot of value to Optimism I am in support of this proposal. In addition, Yearn’s in-house talent is widely accepted as top-tier. Multiple core contributors are thought leaders and influencers in the DeFi sectors that can bring value to the OP ecosystem.

2 Likes

Hey Salome nice to meet you and thank you for this thorough comment. I hope you don’t mind I omitted the competitor section. You’re right we do fit the Yield Aggregator category however we have a big shift in value for only offering risk-adjusted returns. For instance, in our single asset vaults on Optimism all are liquid, none of the strategies will give users exposure to IL, long locks, and all will pass our risk management framework.

Good questions on incentives. When we added Fantom and Arbitrum over half of those deposits were from net-new users. I think we’re going to see more net-new Yearn and Optimism deposits. These are going to be channeled through our partners building on top of the 5 super high quality vaults we have going live. Those 5 single-asset deposit vaults are in high demand and have over $175 million in deposits on mainnet vaults. These are a really solid foundation to build on. If we have $30 million in DAI deposits at 3% we’re looking at ~$17,300 per week. If that vault has 25% the deposits and we give it 25% the 25,000 per week $OP reward I think that’s sufficient. I hope we have the problem of dwindling rewards because of high TVL and we can always discuss a subsequent proposal when the time comes. I think this is a great place to start.

Thanks for putting in the time to look at this one Salome

2 Likes

Excited to have Yearn on Optimism.

2 Likes

Hi, I have some conusltas for you:

  • Do you have exact implementation date of Yearn in Optimism?

-Could you please detail the token distribution plan? which yVault will be incentivized and what % to each one?

  • What are the 10 potential partners you think will come to Optimism once Yearn is implemented?