[Proposal] Create a Index vault using $YFI

Simple summary

The “Yfi Index” strategy is in charge of deploying $YFI into all vaults of the yearn finance and to earn yields. The strategy will work as a form of Index and depositors will be exposed to all profitable/possible loss opportunities among the protocol.

Abstract

We introduce a new vault with the “Yfi Index” strategy, which deploys its capital on various vaults on operation. The basic form of the vault can be understood with the format of an Index fund from traditional finance, which is an investment vehicle that deploys its capital on various products and creates a basket.

The strategy accepts only $YFI as collateral and distributes the collateral to all vaults by on the Yearn Finance. For that, $YFI is swapped to underlying tokens of the vault before distribution and accumulates its value on the changed token. In terms of withdrawal, the designated amount is withdrawn from the strategy and converted back to $YFI for withdrawal.

The intention of this vault is to let users thoroughly experience yield-farming function of the yearn finance by leveraging all strategies. By doing so, the depositor can expose their capital to various vaults already deployed on the Yearn Finance, which have gone through a strict due diligence process of the Yearn Finance governance. Such a predetermined aspect of the protocol assures the depositor to pursue yields from well-established strategies, moreover minimizing the risk of using Defi protocol.

Furthermore, such vault&strategy imposes utility to the governance token $YFI, creating a utility-based demand power. The value proposition of the $YFI can be extended by adopting the “Yfi Index” strategy.

Motivation

  1. Additional value proposition of the governance token

Like many other defi products, the governance token $YFI lacks value in terms of utility as it only serves as means of voting. The value of the token can be derived in diverse ways, and imposing a utility upon the token is a good way of doing so. The “Yfi Index” strategy uses $YFIF as collateral and allows the user to experience yields from various vaults upon the protocol, thus creating a utility base value proposition of the token.

  1. Maximizing the yield-farming experience

The current vault&strategy works only and if only a designated token is deposited. A strategy works in a way of accruing the amount of token, thus limiting the flexibility of the strategy. Using a multi-tokens as a collateral diversifying the strategy is a burdensome way of doing so, but however similar goal can be achieved in a from of index find where a single token is swapped to various underlying tokens and a yield is generated upon it.

Specification

The APR of the strategy is mainly based on overall performance of the Yearn finance protocol, as the strategy deploys its underlying capital to all vaults on the protocol.

  1. Using $IFI as a collateral
    User can only deposit $YFI to the vault.

  1. Deposited $YFI is distributed to all Vaults on Yearn Finance, for the vault to act as Index fund of the Yearn Finance.
    a. $YFI is swapped to the designated token of the vault to be accepted as collateral.
    While doing so, a buyback fund can be used to alleviate the selling pressure of the $YFI on the open market.
    b. The capital is evenly distributed among the vaults and starts earning yield. The “Yfi Index” vault holds the yVaults tokens of the other vaults and accumulates yield upon it.
  2. Withdrawal of the fund operates exactly backward of the deposit procedure.
    a. At times of insufficient idle funds, the shortcomings amount are evenly withdrawn from the stragies&vaults.
    b. The withdrawn tokens are swapped to $YFI to be withdrawn to the initial depositor.
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