YFI: Possibilities for Aggregators

Editor's Note: This article comes fromBlue Fox Notes (ID: lanhubiji), reprinted by Odaily with authorization.

In the internet age, aggregators capture the vast majority of value. Google aggregates the content of various websites, Facebook aggregates social relationships and content, Amazon aggregates products and transactions, and Airbnb aggregates guest rooms... These technology giants have subverted traditional industries and built a near-monopoly position.

Editor's Note: This article comes from

Blue Fox Notes (ID: lanhubiji)

, reprinted by Odaily with authorization.

In the internet age, aggregators capture the vast majority of value. Google aggregates the content of various websites, Facebook aggregates social relationships and content, Amazon aggregates products and transactions, and Airbnb aggregates guest rooms... These technology giants have subverted traditional industries and built a near-monopoly position.

Will there be an aggregation effect similar to the Internet era in the DeFi field? Today, let's take a look at the possibility of YFI's aggregator.

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LINK tokens can participate in yVault liquidity mining

A few days ago, Blue Fox Notes mentioned the iteration of YFI, which focused on its yield optimizer for liquidity mining. It includes three parts: token pool (yVault), controller and implementation strategy. In addition to stable coins, the deposited tokens participating in liquidity mining can also be other tokens. As for what tokens to deposit, it is ultimately determined by the YFI community governance. LINK is the first token to participate in yVault liquidity mining.

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(YIP 33 proposal passed by the community)

Users can deposit LINK tokens into yVault and receive yLINK tokens. LINK in the yVault token pool will be used as collateral, deposited in a lending agreement, such as Aave, and the stable currency with the highest current yield (such as USDC, which will be adjusted according to market changes), and then deposited into yVault, so that Get an annualized return of about 20%.

Finally, the settlement of income. The income earned with USDC will be converted into LINK, and then returned to the vault, so that the amount of LINK tokens in the pool will increase. The important reason for choosing the volatility token LINK is that the LINK token has a high market value, which is conducive to locking in larger assets and is conducive to capturing more fees for the YFI protocol.

The core of why people participate in YFI’s liquidity mining pool lies in its optimization strategy, which can continuously optimize storage strategies and mining strategies, thereby bringing higher returns, while manual operations are more troublesome, and the returns are not necessarily better High, it is more convenient to hand over these tedious tasks to YFI's optimizer. In addition, for users, the handling fee for frequent operations is very high, and participating in YFI's yVautl pool only costs deposit and withdrawal fees.

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Whether it is liquidity mining, staking, lending, or AMM of DEX, it is essentially depositing tokens into the storage pool and then earning income. This means that whoever earns more is likely to siphon more tokens.

At present, there are lending, DEX, derivatives agreements and aggregators that attract tokens, and finally, staking of various tokens themselves. These agreements seem to be in different fields, but in essence, they have a certain degree of competition. The underlying protocol is the basis for generating revenue, and the aggregator is responsible for the optimization of revenue, and will eventually reach an equilibrium.

From the perspective of user operations, aggregators are more in line with their interests, more flexible, and more profitable. Of course, the aggregator also has higher risks, because the aggregator involves more agreements, and once one of the agreements is at risk, the high returns outweigh the losses.

Once the aggregators such as YFI mature, they can subsequently aggregate lending, DEX, derivatives, etc., and it is possible to obtain the most users, thereby capturing the most benefits of the industry.

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YFI aggregates siphon funds, and through locking, it can increase the demand for tokens and reduce circulation, which in turn will have an impact on the overall market. For example, if YFI can lock a large amount of LINK, stabilize and increase the price of LINK, then, since LINK is the weathervane of the oracle track, it may also affect the performance of other tokens in the entire oracle field. Such as BAND, TRB, etc.

As of the writing of Blue Fox Notes, Aave has more than 140 million US dollars worth of LINKs. Assuming these LINKs are deposited in yVault, then based on an annualized return of about 20% and 4 times the excess mortgage, it can generate a value of 7 million US dollars a year income, so $19,178 worth of LINK purchase demand is generated every day.

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The risk of YFI

The YFI aggregator embodies the most fascinating part of DeFi: composability. It does not require permission and can create all kinds of new things, but it also increases the risk. For example, the risk of smart contracts, the chain reaction of currency price plummeting, etc. These are all things to consider. Before the aggregator can really release its energy, it must first undergo the safety baptism of the DeFi industry.

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Possibilities for DeFi Aggregators