[YFI] - MIP6 Collateral Onboarding - yEarn

  1. Who is the interested party for this collateral application?
    ParaFi Capital

  2. Provide a brief high-level overview of the project, with a focus on the applying collateral token.
    Yearn.finance (“yEarn”) is a DeFi yield aggregator and optimizer. yEarn uses a suite of DeFi protocols and primitives including yTokens and delegated vaults to maximize yield. YFI is yEarn’s governance token. YFI is an ERC-20 token used to vote on yEarn improvement plans (“YIPs”) and new yield strategies for liquidity providers. Token holders can stake their YFI through the governance portal to earn a percentage of fees generated by the protocol.

  3. Provide a brief history of the project.
    yEarn was launched in early 2020 and initially optimized yield across Compound, dydx, Aave, and Fulcrum. yEarn has continued to add new DeFi products including yleverage.finance and ypool.finance. In mid-July 2020, yEarn announced the release of the YFI token. Given the number of configurable parameters in yEarn, the YFI token is used by the community to govern the protocol. There was no pre-mine, sale, or allocation for investors/team. YFI was only earned by providing liquidity. 30,000 YFI tokens were minted and have been fully earned/distributed among the community. The community is currently working with firms such as Delphi Digital and Gauntlet to construct an optimal token model and inflation schedule. A 6/9 Gnosis Safe multisig has been granted full rights over the YFI governance contract. YIP 40 proposes replacing inactive multisig signers with four new signers. Since the launch of YFI, yEarn has grown from $8M to over $1 billion in total value locked (“TVL”).

  4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.
    YFI Token
    Yearn Documentation
    Learn Yearn
    Yearn Medium
    Governance Forum
    Dune Analytics
    Feel the Yearn

  5. Link any available audits of the project. Both procedural and smart contract focused audits.
    Security Audits

  6. Link to any active communities relating to your project.

  7. How is the applying collateral type currently used?
    YFI is a governance token. Token holders can vote on YIPs and stake YFI to earn fees generated by the protocol.

  8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?

  9. Where does exchange for the asset occur?
    YFI trades on decentralized exchanges including Uniswap and Balancer, as well as centralized exchanges including Binance and FTX.


I support this 200%

Oh my…

Heavily in favor of this. Very active community, 1B TVL, and long term investors who don’t want to sell their precious YFI

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I support this.


YFI has high volatility, a short track record, and tons of key man risk . That being said, accepting YFI as a collateral asset could be a smart move as it would allow yearn to mint DAI for farming with yYFI vault. Once some of the more exotic yield farms go away, farming with DAI carry trades will probably be yearn’s best option for yYFI.

++ updated tags and thread category


Absolutely support this. One of the most fairly distributed coins with a proactive community of builders.

I would like to bring attention to risk evaluations being done by people who own the token they are evaluating. If YFI were to receive a risk assessment I would want it to be done by a team with no affiliation with said token. How can we ensure that no conflicts of interest occur in this regard?


Do you mean calculating the risk premium? The number really doesn’t matter if we understand the basic risks that are common to most DeFi products. 4% is as good as 8%.

@Aaron_Bartsch I agree with you here–but this is such a small ecosystem that it is impossible to get an evaluation like the ones in Traditional Finance. Maybe one day when there are Compliance Officers, Analyst, and Restrictions on what insiders can own, and say. So, what can we do? Hope for the best I guess… I’m sure the Risk Teams will analyze such risk.

Such a small space–if you and I had a friend at Coinbase I’m sure we would get ahead of the Coinbase listing game :laughing: Not that I recommend it :roll_eyes:

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We should probably stop hand waving away these problems and start to think strongly about how we as a collective can mitigate these scenarios for the future. After all, we’re in charge…aren’t we?


I am in favor of approving YFI as collateral, it has a strong community and high likelihood of vault usage.

Yes, YFI is relatively new and is still in price discovery mode which brings about a certain amount of risk. However, given Maker’s collateral onboarding times (polls -> executive -> implemented by smart contracts team), I am guessing this might stabilize even further by the time we get there. This is a similar situation to COMP being voted in which has stabilized relative to when it was first discussed on the forum (and is still not useable collateral).

Re: risk paramaters, I would use risk parameters from tokens like LINK, LEND, REN, and COMP to inform YFI (Have these been discussed yet?) Doesn’t seem like we have to reinvent the wheel here when it comes to Risk, YFI is basically a DeFi governance token you can stake.


Yes I agree, however it does not make sense to include control measures that we can’t enforce. For the time being I would suggest that it’s preferable to not have any participation in such tokens however it’s not a constrain. And as they said previously it’s such a small ecosystem that it’s almost impossible to do.

I think that listing every shiny startup doesn’t make much sense. What’s the point of using a startup that test in prod and can die in a second? The experience from KNC and ZRX isn’t support for it anyway. LRC didn’t even pass the inclusion poll. There is already a backlog of bigger DAO projects.

Maybe we should set a standard like $500M market cap of free float and $10M annual earnings for DAO adoption?

The project is really young and already 4 of 9 members of the multisig are leaving (they stayed active what? 30 days?). Isn’t that a red flag?

Not that I’m against putting it on the backlog. But it would be sad for it to front run some collaterals that have more strategic value for Maker Protocol.

PS: I saw that @Mariano_Conti is now on the YFI gouvernance, that was a short break from Maker :slight_smile:


Perhaps we should establish some rules for collaterals

-Must be on production for minimum 3 months
-Must have a market cap of minimum 300 mil
-Must have a daily average volume of 20% of the market cap

They could however be subject to community greenlit poll to advance on the matter in the mean time.

I agree our main bottleneck from what I can see are collateral onboarding and our priority should be in basis of dai potential but there may be other elements to take into account like implementation challenges. Prior checklist should be taken into account as long as implementation challenges remain equal between collaterals.

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The implementation prioritization is at the discretion of the Maker Foundation employees. MakerDAO gouvernance has no direct power on it (which makes sense).

WBTC did not meet all these requirements, and it has been one of our best collateral types. I don’t think the market cap minimum should be higher than 50 mil, and I think the daily volume average should be heavily discussed. Do we even want collateral with such high turnover as 20% of market cap?


It implies high liquidity, WBTC is a token of it’s own kind, a centralized version of btc on ethereum which “apparently” it’s insured up to 100m


Also If my memory does not fail me, it was onboarded after black thursday under a very special context and then it turned out to have huge upside because it basically is btc on ethereum.

I would not like to have the exception being the rule, what sort of impact is a 50m token going to have on dai?? 1-2m top. With so many collaterals to review is it really worth it?

If it grows great, we take it into consideration, if it doesn’t then perhaps we shouldn’t, why should maker assume the risk & time of a 50m collateral when it can be onboarded later on?

YFI is a different beast from KNC, LRC, ZRX and MANA, given that they have been yielding actual daily profits, and through this have amassed a treasury that’s even larger than MakerDAO’s own. It is highly likely they would use the YFI vault themselves as a strategy to generate Dai, make profits, and distribute it to their holders; which is different in nature from the users of these other ERC-20 vaults.

Some projects have been around for years, have large marketcaps, yet have very little activity, traction or value capture mechanisms. Once we vote in yETH vaults, we will see how much of an effect their protocol has on ours which may help further inform our decision.

Added to this, a hypothetical scenario is that YFI releases a MKR strategy that can one day become a voting whale on our protocol, as they are currently doing to CRV.

Also, I don’t think any of the RWA companies would be able to pass those min collateral requirements, yet we have been placing heavy importance on those projects.


Agreed although I believe RWA need requirements of their own kind, it’s a different asset class

Not sure if it’s an appropriate place to delve into such discussion but your take about “4 of 9 members of the multisig leaving” and such is wildly incorrect. Yearn is not a VC-funded project, it has no founder allocation and no budget. Community has taken over after this artice (or something similar) and responded by deploying a multisig which was comprised entirely of volunteers and no founder. This was less than a week in. None of them has signed up to be responsible for $1 billion of AUM nor many of them expected such growth.

I don’t personally support adding YFI as a collateral because there are more untapped more impactful collateral types on the table, but dismissing YFI for young age seems inappropriate, the traction is undeniable.