Yield farming is moving at light speed right now, and I expect there will always be new strategies and optimizations that can be made even after things slow down, making YFI a valuable meta-yield protocol to govern. However, I noticed the main way value accrues to the YFI token is fees from the yield (feel free to correct me if I’m wrong here).
One issue that may occur is parasitic farms. Take this image as a dumbed-down version of how I’m perceiving v2 to work:
What’s preventing someone from taking their own forked vault that doesn’t take any fee and pointing it at the same controller/strategy? Since all of this is happening on-chain, depending on the design of yearnV2, someone could trivially design a parasitic farm that rides on the strategies that YFI governance comes up with without paying the associated fees into the YFI system. I believe even in a worst-case scenario someone could manually fork all of the contracts for themselves (including having no fee).
There’s a similar issue that was discussed in the prediction market community about parasitic markets , or oracles in general.
I want to raise this issue to pose these questions for consideration as we move forward:
- What can/is being done to make parasitic farming harder?
This can be things like making the controller contract not reveal which strategies it’s delegating to on-chain except in cases necessary for the system’s function. This at least makes a parasitic farm have to manually follow along to keep up with new strategies.
- What can we do to entrench YFI/yearnV2’s value proposition in a way that parasitic farming is actually unappealing relative to just using a yVault?
This could be things like protocols having special incentives for the yearn pool that a parasitic farm wouldn’t get, using an exchange contract that doesn’t accept non-yearn liquidity, or anything similar that makes the gain in yield from pooling in specifically yearnV2 relative to a parasitic farm greater than the fee on the yield.
Thanks for reading
 image credit to @yieldbouncer on twitter: https://twitter.com/YieldBouncer/status/1287288667325624320?s=20