What’s the best way to put the Ellipsis airdrop to use for the benefit of Yearn and its Backscratcher depositors, while maintaining goodwill with the Ellipsis community?
Ellipsis intend to distribute 25% of its supply to veCRV holders over the next year. Through its yveCRV vault (a.k.a Backscratcher), Yearn is one of the largest beneficiaries. Yearn currently holds over 11 million veCRV.
We’ve already made sure we are able to claim the airdrop correctly.
In informal conversations with the Ellipsis team, it has also become clear that “claiming and dumping” EPS might lead to us being removed from future weekly airdrops.
It is in Yearn’s interest to work out a plan to claim the airdrop and put it to use in the Ellipsis protocol in such a way that we earn additional yield from it, while at the same time remaining eligble to claim airdrops in the year to come.
Each weekly airdrop is based on veCRV snapshot and is vested for three months. However, it can be withdrawn earlier for a 50% penalty tax. EPS can be put to work in a staking pool (which we did as a test) which earns half the trading fees and the penalty tax from other users’ early unlocks. Currently it earns 4350% EPS + 67% BUSD. Staked EPS is also subject to three month lock with rewards coming unlocked.
- Withdrawing early can be worth it if it’s staked, as it earns back the penalty by others doing the same. Economically it makes sense at >400% APR, so you get the same amount after 3 months. The needed APR is less if rewards are compounded.
- By putting the airdropped EPS to use in the Ellipsis protocol, we are good actors and continue to be eligible for future airdrops. The rewards earned from those activities can be re-invested in Yearn.
- Because the snapshot for the airdrops is taken on a weekly basis, investing these proceeds in staking additional veCRV in yveCRV means that Yearn’s future airdrop rewards compound.
A few starting points for the discussion:
1. Farming strategy
- Option A: Unlock EPS after 3 months.
- Option B: Unlock EPS early at 50% penalty and farm with them.
- Option A: Add to Yearn’s veCRV, boosting veCRV/yveCRV supply ratio, effectively meaning more rewards for yveCRV holders.
- Option B: Deposit to yveCRV and distribute to yveCRV holders. This will result in the same increase of veCRV, but won’t make yveCRV vs solo rewards more lucrative.
- Option C: Donate to yvYFI vault, increasing its share price.