Yearn Finance

Yearn.finance pleads arb traders to return funds after $1.4M multisig mishap

A Yearn contributor said the value lost came from “strictly protocol owned liquidity” in the protocol’s treasury and that customer funds weren’t impacted.

Decentralized finance protocol Yearn.finance is hoping arbitrage traders will return $1.4 million in funds after a multisignature scripting error resulted in a large amount of the protocol’s treasury being drained.

“A faulty multisig script caused Yearn’s entire treasury balance of 3,794,894 lp-yCRVv2 tokens to be swapped,” according to a Dec. 11 GitHub post by Yearn contributor “dudesahn.”

The error occurred while Yearn was converting its yVault LP-yCurve (lp-yCRVv2) — earned from performance fees on vault harvests — into stablecoins on the decentralized exchange CowSwap.

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Euler attack causes locked tokens, losses in 11 DeFi protocols, including Balancer

Euler’s total value locked inside its smart contracts has dropped from over $311 million to $10.37 million since the exploit.

Contagion from the March 13 flash loan attack against Euler has spread far and wide, resulting in frozen or lost funds for 11 different decentralized finance (DeFi) protocols, according to reports from each of them on Twitter. Balancer, an Ethereum protocol with over $1 billion total value locked (TVL), is among the affected protocols. Below is a rundown of the major exploits and what we know so far.

Balancer

Balancer reported on March 13 that the Euler Boosted USD (bb-e-USD) pool had been affected by the exploit. Approximately $11.9 million worth of tokens from this pool were sent to Euler during the exploit. The Balancer emergency subDAO reacted by pausing the pool and putting it into recovery mode. However, over 65% of the pool’s TVL had already been lost by the time it was paused.

As a result of a bug in the app’s user interface (UI), liquidity providers cannot retrieve the remaining funds left in the pool. However, a new UI will be offered “in the near future” that will allow the remaining funds to be withdrawn, Balancer said. No other pools have been affected, Balancer clarified.

Angle Protocol

Angle Protocol released a preliminary report on its exposure to the attack. It may have lost over $17 million worth of USD Coin (USDC). This may have caused the agEUR stablecoin, which is pegged to the euro, to become undercollateralized. The team is still investigating and attempting to prepare a detailed balance sheet. All minting and redemption of agEUR is currently paused, but borrowers can still repay their debts to the protocol as normal, the team said.

Idle Finance

Idle Finance has provided a detailed list of its losses due to the Euler exploit. It seems to have lost around $5.9 million worth of tokens in total, based on March 13 Ether (ETH) and euro prices. The team has paused all Best Yield vaults and Yield Tranches related to Euler to prevent further losses.

Yearn Finance

Yearn.finance has over $423 million in TVL, according to DefiLlama. It reported indirect exposure to Euler, through Angle Protocol and Idle Finance. It has lost approximately $1.38 million. However, the team said that any bad debt not covered by Idle and Angle would be covered by the Yearn Treasury.

Yield Protocol

Yield Protocol is another protocol affected by the exploit. Its “mainnet liquidity pools are built on Euler,” according to the team’s announcement regarding the attack. The company has disabled the mainnet app, paused borrowing, and is investigating the attack. Its mainnet liquidity pools appear to have been affected, with a possible loss of “less than $1.5 million.”

InverseFinance

InverseFinance reported that it was hit as well, with its DOLA Fed for the DOLA-bb-e-USD on Balancer losing over $860,000. The team said it is communicating with Balancer in an attempt to get these funds returned to depositors.

Related: Euler Finance hacked for over $195M in a flash loan attack

SwissBorg

SwissBorg reported that “a small portion of [its] Smart Yield Program was impacted” by the exploit. However, “the extent of the damage is minimal thanks to our Risk Management Procedure.” The team said that it would compensate all losses from its funds, and its users “will not suffer any loss from this event.”

In a Telegram conversation with Cointelegraph, SwissBorg founder Cyrus Fazel clarified that the protocol ranks yield strategies based on risk, time, and APY. Since Euler was rated Risk 2- Adventurous, SwissBorg users “had a limited amount” invested in Euler. This mitigated against losses to the protocol, he explained.

Other affected protocols

Opyn, Mean, Sense and Harvest also reported they might have been affected by the exploit, though none have provided details on how much has been lost. This brings the total number of affected protocols to 11, with $37.6 million in cumulative losses. 

Euler Finance is a crypto borrowing and lending protocol that runs on Ethereum. It became popular thanks in part to its support for using liquid staking derivatives (LSDs) such as Coinbase Staked ETH (cbETH) or Lido Staked ETH (stETH) as collateral for loans. On March 8, Euler had over $311 million in crypto locked inside its smart contracts. Since the exploit, its TVL has fallen to $10.37 million.

This story was corrected at 2.11 am UTC on March 14 to reflect that the flash loan attack occurred on March 13.

DeFi protocols unite to promote permissionless Web3 experiences

The collaboration of over 30 DeFi projects is an effort to counteract the negative sentiments built in 2022 due to numerous CeFi ecosystem crashes.

The damage caused by the fall of major crypto ecosystems last year is on a path of steady recovery as good actors take proactive measures to rebuild trust among investors. Major players from the decentralized finance (DeFi) ecosystem came together to showcase the incentive behind operating trustless, interoperable and permissionless platforms.

For 24 hours, from Feb. 6 to 7, over 30 DeFi protocols joined in an initiative to “permissionlessly” share tweets from other protocols — thus highlighting the permissionless and interoperable nature of Web3. Projects participating in this campaign include Yearn.finance, MakerDAO, SushiSwap and Aave, among others.

DeFi has amassed mainstream acceptance with significant institutions making their entrance into the space, but it still has a shaky reputation due to its many exploits.

Mamun Rashid, the chief marketing officer at MakerDAO, said that to realize the “full potential” of DeFi, there needs to be a collaboration between the ideas and expertise in the space.

“Together, we can push the boundaries of traditional finance and build a more inclusive and accessible financial system through DeFi.”

The projects collaborating in the campaign defined the “spirit” of DeFi as a more collaborative ecosystem, rather than a competitive one.

Jared Grey, the CEO of SushiSwap, said DeFi is being built to challenge the current status quo of known financial frameworks, which historically create barriers and reduce economic freedom.

“Leveraging the composability of this new technology, we can democratize and provide more equitable, safer, and transparent financial tools and products to reach a global audience.”

Grey said the responsibility to portray the true message of DeFi comes first from within the space. Therefore, the initiative and solidarity of more than 30 builders within the space come at a critical time.

Related: DeFi should complement TradFi, not attack it: Ava Labs CEO | Davos 2023

Over the last year, the DeFi space was a major target for exploits. According to a report from Beosin, DeFi-based projects experienced the highest number of attacks in 2022.

This vulnerability led to a 47.4% rise in security losses in 2022 compared with the previous year, which totaled $3.64 billion in losses.

Additional industry insights revealed that the trend of DeFi exploits should be expected to continue into this year due to new projects entering the market and more sophisticated hackers.

Nonetheless, the space started the year with significant growth, according to a DappRadar report. In January, a new $150 million ecosystem fund was created by Injective to boost DeFi and Cosmos adoption. 

Yearn​.finance opens vault deployment access to all users

“All factory-deployed vaults have no management fees and a flat 10% performance fee,” the DeFi project wrote.

Decentralized yield protocol Yearn.finance said in a Jan. 9 tweet that all users can now create sophisticated Permissionless Vault Factories on its platform. The current version of Vault Factory works with stablecoin-swapping platform Curve Finance and its liquidity provider (LP) tokens and features three premade yield strategies.

“Our new Permissionless Vault Factory lets anyone deploy an auto-compounding yVault for any Curve pool with an active liquidity gauge. Yes, anyone. Factory-deployed vaults have no management fees and a flat 10% performance fee. Nice!”

Cast your vote now!

As told by Yearn.finance, the first, dubbed “Boosted Factory,” uses Yearn’s vote-escrowed CRV balance of 45.1 million to give users a maximum boost of 2.5x on CRV rewards. The second, “Convex Factory,” supplies additional CRV LP tokens beyond the maximum to the decentralized platform Convex Finance to earn CRV and CVX rewards. Finally, “Convex Frax Factory” enables users to access rewards on the Frax Share algorithmic stablecoin platform.

“In all three strategies, any earned tokens are regularly claimed, sold for more of the underlying Curve LP token, and then deposited back into the strategy to compound the yield.”

Yearn.finance stated that the Vault Factory represents a “massive” step forward in automation that allows the firm to reduce its cost of operations. All vaults deployed using the new method will incur a management fee of 0% and a performance fee of 10%. Previously, management and performance fees were 2% and 20%, respectively. Performance fees go to the Yearn treasury and are calculated on top of profits. In addition, the deposit and withdrawal fees are also set at 0% for the new self-created vaults, although gas fees are still incurred during interactions.


What is Yearn.finance (YFI) and how does it work?

One of the fastest growing DeFi projects, Yearn.finance has spawned a range of core products that provide passive earnings on crypto assets.

Launched in July 2020, Yearn.finance has emerged as one of the major players in the emerging decentralized finance (DeFi) space that provides services such as staking, lending aggregation and yield generation on the Ethereum blockchain. Boasting the most user-friendly crypto trading services that are being meted out autonomously, the project uses its native ERC-20 Yearn Finance (YFI) cryptocurrency to incentivize those who lock their crypto tokens in Yearn.finance contracts through any of the supported platforms such as Balancer and Curve DeFi.

With all of its protocols operating on the Ethereum blockchain, Yearn.finance is managed through developers that act in accordance with governance proposals voted for by YFI holders. Crafted with the vision of simplifying the process of investing in DeFi products, the Yearn.finance platform also offers its users the ability to invest in other DeFi protocols in addition to earning a percentage of the platform’s fees in proportion to their YFI holdings. 

Who is behind Yearn.finance?

A veteran of the cryptocurrency and DeFi space, Andre Cronje launched the Yearn.finance protocol without raising any funding either through public or private means. Instead, the software architect relied on his over two decades worth of software development experience to launch the protocol first and then issued YFI tokens to retail investors, which are currently limited to a maximum supply of 36,666 tokens. 

Apart from the extremely rare approach adopted by Cronje, the Yearn.finance platform has benefitted from his previous experience as the founder of the Keep3r Network and his association with notable DeFi projects that include the likes of PowerPool, Hegic, Cover, Pickle, Cream V2, SushiSwap and Akropolish, among others. Unlike other founders, Cronje didn’t reserve any YFI tokens for himself prior to the Yearn.finance protocol’s launch, believing that a truly decentralized blockchain technology-based platform should not have the founder hanging on and dictating its future course. 

In fact, the history of Yearn.finance can be traced back to his efforts over the past five years to launch cost-effective financial products for the unbanked segment of the world’s population and has been heavily influenced by his efforts in Africa toward achieving the same. By choosing to focus on creating value for the entire DeFi ecosystem of developers, partners and investors on the Yearn.finance platform, Cronje has provided scores of crypto entrepreneurs with a new perspective on how to build DeFi products for the masses. 

 What is Yearn.finance (YFI) and how does it work? 

Built on the Ethereum blockchain, the Yearn.finance protocol eliminates the need for a financial intermediary like a bank and offers crypto investors and tokenholders access to its range of lending and trading services that include Vaults, Zap, Earn and APY. The Yearn.finance protocol can deploy its smart contracts on the Ethereum blockchain as well as other decentralized exchanges that operate on it. Offered through a simplified web interface, Yearn.finance is a radical experiment in the DeFi world and has one sole aim- to maximize returns on crypto assets for its users. 

The most complex among its products is the Vaults product, which acts as a mutual fund of sorts and has 50+ different vaults or staking pools for Yearn.finance’s users to deposit their tokens in. These Yearn.finance vaults are basically investment strategies in other DeFi projects like Convex Finance and Compound Finance, with pre-programmed logic deciding when to shift capital and code automation deciding the yield generation and rebalancing process. Users additionally benefit from the lower gas costs and low transaction fees levied by Yearn.finance on each vault-related transaction.

The Earn product, Yearn.finance’s first product, relies on the interest rate changes on the Aave, dYdX and Compound protocols to let its users benefit from the best interest rates at all times. A lending aggregator, in principle, Earn allows Yearn.finance’s users to allocate their crypto tokens to either or all of these liquidity protocols and earn higher interest rates than that provided by traditional finance instruments. For those invested in stablecoins such as Binance USD (BUSD), USD Coin (USDC), Tether (USDT), TrueUSD (TUSD) or Dai (DAI), the Zap product enables them to swap between liquidity pools on the Curve Finance platform and deposit into any of Yearn.finance’s vaults using almost any token on a single click. 

How does “Earn” a lending aggregator works in Yearn.Finance

This results in not only cost and time savings but also simplifies the entire task as many individual trades are coupled with Yearn.finance’s coding. The platform also provides its annual percentage yield, or APY, tool that compiles the interest rates offered by the various DeFi lending protocols at a glance, thereby helping crypto investors in narrowing down on the right platform for further investing. 

What can you do with Yearn.finance?

The Yearn platform has something for everyone-investors, developers and even other DeFi projects that are interested in partnering with Yearn.finance. For crypto investors, the Earn, Zap and APY products help them to lend their crypto holdings or trade them for short-term yields, all in an effort to bolster their chances of earning a passive income. Zap and APY effectively improves the user experience when they use the Earn product, essentially a yield farming tool, to earn the highest interest rates across the Aave, dYdX or Compound lending protocols. 

The Yearn.Finance model

Vaults, on the other hand, introduces users to a revolutionary way of actively investing using Yearn platform’s self-executing code, mimicking how traditional mutual funds operate to extract the best return for their investors. By using the Yearn.finance platform to run its smart contracts on the Balancer and Curve DeFi trading platforms, users can enjoy all aspects of a yield optimizer without having to worry about the internal workings. In this way, Yearn.finance is also a DeFi yield aggregator, but with a design that is simple, intended to maximize investor returns and works for the benefit of all YFI tokenholders.

Written in the Solidity programming language, users with a fair knowledge of this language can even transparently see how the code for each vault invests the lent tokens further into different DeFi protocols. For developers, Yearn.finance offers the functionality of creating custom vault strategies that then undergo a peer review, testing in a production environment and going live once the Safe Farming Committee provides its approval. The Yearn platform details the various procedures that are needed to be followed by developers, including naming conventions and operating procedures for these smart contracts. 

For other DeFi projects, Yearn.finance has displayed a rabid enthusiasm for collaboration as the platform strives to build a DeFi future where everyone can access any service or protocol from anywhere. Furthermore, Yearn.finance joined forces with the layer-2 Optimism protocol in August 2022 and is an example of its inclination toward building cross-chain interoperability and working toward improving capital efficiency for its users.

Is Yearn.finance secure and is YFI a good investment?

By virtue of providing YFI tokenholders the right to vote on community-submitted proposals, Yearn.finance has all the trappings of a truly decentralized DeFi project that prioritizes the tokenholders’ interest above all else. Known as Yearn Improvement Proposals (YIPs), any member can start a YIP on Yearn.finance’s governance forum and if a majority number of the members support it, the YIP will be put ahead for official voting through the YFI governance staking model. 

All YFI holders are eligible to vote on these YIPs, whether it be about a new vault, changes to the governance mechanism or even suggesting changes to the current fee structure. However, as admitted by founder Andre Cronje, DeFi involves risk and had even quit the space briefly before getting back to launch the Yearn platform. That being said, despite all efforts to ensure that the Yearn platform functions transparently, users do face a moderate risk of facing losses caused by volatile market conditions. The YFI cryptocurrency too is subject to trading fluctuations, changing market sentiments and speculative activity by large institutional traders. 

That said, as has been seen with various blockchain projects that have been successful over a period of time, investors may choose to hold onto their YFI holdings to potentially benefit from long-term price appreciation. With the peak total value locked (TVL) in the Yearn.finance protocol reaching a high of $6.91 billion, the Yearn platform is counted among the fastest-growing DeFi protocols in existence. Considering the range of benefits it provides and the honest nature employed in its governance model, Yearn.finance can be counted among the most significant DeFi investment platforms to have emerged in the post-pandemic era.

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