Decentralised yield earning platform Yearn.finance has introduced a new permissionless vault Factory that can be opened by all users of the exchange. yVault allows users to deposit ERC-20 tokens into liquidity pools managed by DeFi exchanges Curve Finance and Convex Finance and earn rewards in return. The platform will not charge any fees on deposits or withdrawals.
On Monday, Yearn.Finance, a yield earning decentralised finance (DeFi) protocol, launched a new “Permissionless Vault Factory” that will allow the platform’s users to deploy yVault (Yearn Vault) with existing yield strategies to earn rewards.
The current version of Yearn’s Vault Factory works with liquidity pool tokens (LP) available on stablecoin-swapping platform Curve Finance (CRV) and decentralised exchange Balancer (BAL). Curve’s LP Token Vault Factory was the first yVault to be deployed on the Ethereum mainnet. Users can deploy yVaults for any LP token that is available in the Curve pool to earn rewards in CRV tokens.
The Vault Factories have three ready made yield strategies available, they are: Strategy Curve Boosted Factory, Strategy Convex Factory and Strategy Convex Frax Factory.
The first vault called Boosted Factory, uses Yearn’s 45.1 million balance of veCRV tokens – escrowed CRV that allows users to vote on proposals – to give users a maximum boost of 2.5x on their CRV rewards. Convex Factory, the second strategy, supplies the maximum CRV LP tokens to DeFi exchange Convex Finance (CVX) to earn rewards in CVX and CRV tokens. The third factory called Convex Frax Factory, allows users to earn rewards in CRV LP tokens that can be staked on algorithmic stablecoin exchange platform Frax.
According to Yearn, tokens earned as rewards in all three strategies are regularly claimed, sold for the underlying Curve LP tokens, and deposited back into the Vault Factory by users to compound yield. The Ethereum-based platform stated that the Vault Factory is a massive step forward for the company, enabling it to significantly reduce cost of operation.
All vaults deployed using the new, permissionless method will bring management fee which was previously 2%, down to zero, and performance fees which was 20%, down to 10%. The platform will also not charge any fees for deposits and withdrawals on each vault, although gas fees are still incurred when making transactions on supported blockchains.
Performance fees charged from yVault users will go straight to the Yearn treasury and are calculated on top of profits that are harvested. Users can harvest rewards from the Vault Factory by making a permissionless calling action. They can simply add the strategy address from the factory vault where they earn rewards and call the action to harvest.
When users deposit tokens in Yearn’s Vault Factory, they receive a yVault token in return. These tokens are like deposit receipts that represent a holder’s share in the yVault they are participating in. In the case where a Vault Factory generates profit, the share value of yVault tokens held by users in the pool will increase.
The reason for this is because there will be more underlying tokens in the yVault to redeem upon withdrawal due to it generating additional rewards during its lifetime. yVault will be linked to the ERC-20 token a user deposits into a vault, and can be exchanged and traded as the underlying asset. When withdrawn, the LP token is burned automatically. Currently, Yearn.finance vaults are available on Ethereum (ETH), Fantom (FTM), Optimism (OP) and Arbitrum networks.
At the time of writing, YFI, the native token of Yearn.finance, is trading at $5,840 – up by 1.4% in the last 24-hours. Meanwhile, CRV is currently trading at $3.37 – down by 1.3% in the same period.