YEarn, an automated aggregator protocol that is based on the principles of fairness and transparency, has been one of Ethereum’s most popular attractions and most promising pillars for 2020. Currently, yEarn is the fifth-largest DeFi protocol. It offers easy access to automated yield strategies. One of the most distinctive cryptonative products is yEarn’s Vaults. These vaults allow users to deposit assets and then maximize their yield using a variety of DeFi maneuvers.Nevertheless, everyone was abuzz last week when yEarn launched its highly-anticipated yETH Vault service, a DeFi-exclusive ETH-centric yield-farming service.

The yETH Vault

Although yEarn’s smart contract engineering feat, the yETH vault is easy to understand. This is how a yETH position works (and it’s all done with just a few clicks on yearn.finance).

  • Send the desired amount of Ethereum to a yWETH vault
  • The ETH is deposited in the lending protocol MakerDAO
  • This collateral is used as collateral to back an automated Dai Loan via Maker
  • Curve receives the Dai to participate in the protocol’s CVR farming campaign
  • CRV profits can be sold for ETH

Users can now use their ETH to farm more ETH. DeFinn, a community member, recently published a great primer graphic that explains how this works. You’ve voted, I listened. Here’s the “Understanding @iearnfinance’s brand-new yETH Delegated Vat”.

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Understanding the risks

The yETH vault employs a debt-based yield farm model, i.e. It is backed by ETH-backed Dai loans. This makes it inherently risky. There are many layers of risk involved.

Steven Zheng, The Block’s lead researcher, noted this week on Twitter that the yETH vault was vulnerable to code flaws in three projects and volatility within the cryptoeconomy.

However, many investors avoid participating because of the risk involved. The yETH vault can offer APY returns well above +60%.

So far, doing well

Although the yETH vault hasn’t been operational for a week, it has attracted a huge amount of interest and ETH.

In fact, the new system was launched with nearly 400,000 ETH in 48 hours. This is 0.35% of the total ETH supply. Users flocked to the new system to take advantage the unique ETH farming opportunity.

Since its launch 2 days ago, the new @iearnfinance-yETH vault has absorbed 378k Ethereum

It also managed risk during a 25% crash.

In the same time frame, the yETH Vault managed to mint +70million Dai, which is more than 10% of all Dai currently available. The vault became the largest open position within the MakerDAO ecosystem, helping to push the Dai price down towards $1 after stablecoin traded above that mark in recent week.

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A Major Force

The ETH price can be impacted by the yETH Vault’s rise. This means that the service will be buying ETH from the open market consistently, and this buy pressure – which will undoubtedly increase as yEarn, DeFi, and other factors grow – is unprecedented. It’s possible that the yETH vault will become a major driver of fundamental value for ETH over time.