This Week’s Forum Threads (August 16th)

Here are some forum threads I recommend you follow:

Yearn V3

Yearn is proposing to launch the long-awaited V3 of their protocol. The significant change between V3 and prior implementations of Yearn is that in V3, Vaults, and Strategies are stand-alone and wholly independent of one another. As such, Vaults can deploy capital to different Strategies, and Strategies can receive capital from different Vaults. Finally, as each Vault and Strategy complies with the ERC-4626 standard, any DeFi protocol using the same standard can easily integrate with their product. A range of other notable improvements is coming with V3, including roles that control permissioned functions, better customization with role add-ons, reduced gas costs, better capital efficiency, and yield streaming, replacing harvesting at set intervals.

The structure of Yearn V3

Importantly, as Strategies are now stand-alone Vaults, V3 has had to modify how Yearn collects fees. Yearn will now charge fees through the introduction of a Protocol Fee. When Vaults report, the Protocol Fee collects a percentage of the total fees charged by Vaults and Strategies. The Protocol Fee will ensure that some revenue from Yearns V3 ends up in their treasury regardless of who controls the Vault or Strategy. YFI holders will set the level of protocol fees through governance.

Yearn V3 Fee Breakdown

The proposal recommends that Yearn begin deploying V3 where they have little presence. They are initially proposing focusing the launch of V3 on Polygon. Focusing on Polygon means Yearn will launch V3 there with a collection of Strategies and Vault. As readers are undoubtedly aware, new protocol versions can sometimes act as a catalyst for the protocol. Yearn is a popular protocol, so I would not be surprised if V3 takes off and is a catalyst for $YFI. So far, this proposal and the new version of Yearn have seemed to fly under the radar, but I still recommend readers follow the launch.

RPL Inflation Changes

Rocket Pool has received a proposal from a member of its incentive committee to modify RPL inflation to target rETH growth. Currently, 70% of RPL inflation goes towards Node Operators – which makes sense as they are the ones who run the protocol. Rocket Pool rewards node operators with 687K RPL per year, about $19.2M. However, the proposer thinks Rocket Pool could better optimize its reward scheme to encourage rETH growth by rewarding node operators for their mini-pool count and focusing rewards on LEB8s over EB16s, as LEB8s create more rETH. Although not a final proposal, this thread signals that Rocket Pool is working to increase the supply of rETH and could change the dynamics of how their protocol works. As readers are aware, shifts in protocol dynamics, especially around token supply and issuance, should be followed closely.

Honorable Mentions

  • 1inch proposes launching their aggregator, limit order protocol, and fusion mode on Base. 
  • Aave is considering selling $2M of ARB into stablecoins, and negotiating with Bored Ghost Developing on their service agreement with Aave.
  • Alchemix grapples with the Curve alETH/ETH exploit and if/how they should reimburse users affected by the hack.
  • Bancor debates burning the 1M BNT captured by their vortex and begins sunsetting the V3 of their protocol.
  • Compound proposes deprecating their V2 market by ensuring adequate USDC liquidity in V3 and allocating V2 rewards to USDC suppliers on V3.
  • Yearn received a proposal from Wintermute to loan them 350 YFI at .1% in exchange for Wintermute using their CRV on Yearn.
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