A few weeks ago, yearn.finance, the popular DeFi protocol governed by the YFI token, released a new yVault for automating yield earning with ETH. The yVault is a popular yearn.finance product which allows one to deposit tokens like ETH and sit back while sophisticated yield farming strategies work in the background for you.
The yETH vault quickly saw ~1% of total circulating supply of ETH deposit within about 48 hours. The APY of the yETH vault rose to nearly 90% APY for several days and continued to sink lower with more ETH deposits. The yearn.finance team paused deposits within a few days mainly due to risk of such a new product holding so much ETH with such new smart contracts. It definitely harkened back to the days of the DAO for some, minus the unhappy ending this time!
Since then, folks have been anxious for yearn.finance to open back up for deposits as the estimated APY is still hovering around 18%. For most who hold ETH, the idea of earning 18% annually on ETH is a pretty remarkable opportunity if the rate can actually hold with a sustaining yield farming strategy.
Today, even though yETH and yWETH vaults are closed for deposits, I’m gonna show you a sneaky way to convert ETH to yETH!
How yETH and yWETH Strategies Work
Before I show you how, here’s a quick explainer on the magic happening within smart contracts when one deposits ETH or WETH into a yVault by yearn.finance. Thankfully, another DeFi YouTuber named Gabriel Haines created this handy diagram of how the yETH strategy works:
- When DeFi users still were able to deposit ETH or WETH into the yVault, the ETH was used to open a Maker Vault and borrow DAI against the value of the ETH.
- With a lower loan-to-value ratio (less DAI compared to the value of ETH), DAI is deposited into the Curve Y Pool (a stablecoin swap) to earn market-making fees, lending interest, and generate CRV.
- While the Curve Y Pool fees and interest accumulates, generated CRV is sold for profit to ETH.
- The end result as of today is about 18% APY on one’s ETH deposits.
The Sneaky Way to Get ETH into the yETH Vault
What few still understand is that whenever one deposits into any mechanism in DeFi, they receive an IOU (aka a token). Whether you’ve known it or not, you’ve always received some IOU token when using a DeFi app that requires you deposit some asset. When one deposits ETH or WETH into the yVault, they receive yETH or yWETH.
Here’s the sneaky part: what if those already into the yETH pool were willing to trade their claim on the ETH earning in the yVault for ETH? Well, that’s how DEXs work! Liquidity providers lend a provision of their tokens to a pool where anyone can trade between the assets.
The missing link here has been who would be crazy enough to focus on lending, borrowing, and swapping high yield returning DeFi assets like yETH. Thankfully, Cream Finance showed up on the scene months ago to offer this kind of exotic exposure in DeFi assets, which started with forking Compound. Today, Cream continues to work with Compound as a paid consultant.
Recently, Cream launched new swap pools that work just like Balancer or Uniswap, where you can trustlessly trade between different tokens, except Cream’s brand and mission is about offering these newer yield-returning DeFi assets to lend, borrow, and now trade. One of the pools just happens to…
Hi! My name is Lark Davis!
I’m a cryptocurrency investor with years of experience and I’ve been making consistent profits in the crypto space.
I’m passionate about helping others do the same, so I run multiple educational channels on crypto investing.
