[Proposal] Factory Deployed Partnership Vaults

When digging into Yearn’s ecosystem recently, I realized that Yearn offers a partnership program which is pretty hard to discover and incentivizes primarily wallets and aggregators to integrate Yearn vaults, but may not incentivize the needs of protocols.

This high level proposal is a concept on how Yearn could develop tooling to more specifically target partnerships via protocol integrations.

Summary

The goal of this proposal is to create a factory that deploys pre-built vaults and strategies for other projects to use in a P2P (protocol-to-protocol) fashion within their ecosystem.

These pools would replicate the most common incentive models, and aim to to position Yearn’s vaults as a building block for other protocols.

Similar to how ALCX implemented Yearn into their protocol.

image

These pools would make it easy for protocols to create standard AMM liquidity lockup yield farms using Yearn tooling.

Background

If we look at the success of Curve Finance in the stablecoin space, a signifgant uptake of the protocol is from teams using the Curve Factory to deploy pools for their token + 3Pool, having their users stake that token in their own protocol and siphoning off a portion of the proceeds.

Protocols are adopting this model so that they can drive some sort of base revenue captured on the trade. Something that is fairly distinct from any other LP model where right now, most of the value is captured in a rising value of the LP token and therefore harder to extract.

Despite this other protocols still incentivize the lockup of their tokens in LP pairs on Uniswap (V2/V3), Sushiswap, and other AMMs, often using existing systems like MasterFarmer to manage this distribution.

These systems are flawed as:

  1. They capture no value for the deploying protocol itself.
  2. MasterFarmer rewards aren’t based on value-add and instead are time-linear.
  3. MasterFarmer rewards are based on a per block basis and do not transfer well to other chains.
  4. They offer no automation for the users in claiming and managing rewards.

So far, the only team to attempt to automate the creation of LP mining is Dodo, but it only works with their own AMM. Yearn, being on the LP management layer and not the AMM, has the ability to make these designs AMM agnostic.

Motivation

  1. Yearn has the goal of making Yearn Vaults broadly accessible.

  2. Yearn has an existing program to provide 50% of vault profits to partners.

  3. Other than a tweet from back in March, it’s really hard to find any info about a partnership program.

  4. Yearn’s current partnership approach applies only to existing vaults, which makes it ideal for wallets and aggregators, but not for new projects.

  5. Nearly all projects incentivize their early liquidity through a similar approach targeting one of three main AMMs, making it easy to standardize this approach.

  6. There is currently no simple way for most protocols to earn a cut of the trade volume generated by their users.

  7. This places Yearn at the economic center of many new protocols and captures value in early stage tokens broadly which can be a strong boon to the treasury.

  8. This helps have other protocols introduce new users to Yearn without Yearn directly spending time and resources in marketing.

  9. This could eventually evolve to have Yearn also provide some rewards to these vaults in a way that is voted on using YFI (a la veCRV).

Specification

Yearn designs a factory that creates:

  • Yearn Vault
  • ETH/{PartnerAsset} Pool (Sushiswap?)
  • {PartnerSelectedStrategy}
  • Reward Vault for locking up LP pair and dripping out rewards in {PartnerToken}

Vaults show under a seperate section of the Yearn website as ‘factory created’ or ‘user generated’

These strategies would all be simple implementations of:

  • Have partner token.
  • Sell half for ETH.
  • LP pair ETH/PartnerToken.
  • Stake LP pair for reward.
  • Sell 50% of reward for LP pair.
  • Repeat.

For:

  • Has the potential to dramatically expand Yearn’s TVL
  • Results in Yearn getting a cut of new tokens at their earliest stage which means the treasury basically has a broad investment in defi.
  • Fills a clear market gap.
  • Motivates teams to integrate by giving them a clear source of revenue.
  • Expands Yearn to new users.

Against:

  • Could result in low quality projects attempting to leverage a perceived partnership with Yearn to market their project (although this hasn’t been seen with Curve Factory pools)
  • Teams may not want vaults that dump their reward token too much, and so new vault structures could be required.
  • May consume signifgant amount of Yearn resources in supporting other teams both integrating and troubleshooting.
  • Expands the amount of vaults, strategies and keepers that require oversight.

Poll:

Is this proposal worth further exploration?

  • Worth Further Exploration
  • Not Worth Further Exploration

0 voters

1 Like

Interesting. Imo it would be good to get feedbacks from upcoming projects currently in stealth mode to see if this wouldl be attractive for them. Ultimately these projects will have the most opiniated view.

1 Like

This topic was automatically closed 7 days after the last reply. New replies are no longer allowed.