Yearn Finance has become the hottest thing in DeFi over the past couple of months when it introduced high yielding liquidity vaults boasting three-figure annual returns.
Since then, liquidity has fallen back, and collateral has been shifted to better yielding pools resulting in a slump in earnings. According to Defipulse.com, Yearn liquidity has fallen 26% over the past 30 days.
The best example of this is the yETH vault, which, when launched, promised over 90% APY in ETH for those that deposited into the vault. At the time, it was described as a ‘black hole’ for Ethereum, which would also be a boost for ETH prices.
Today there is still almost 100,000 ETH in the vault according to Yearn stats, but earnings have plummeted to a paltry 1% or so. yETH is not the only vault to see earnings slump, the high yielding Curve vault, which once boasted three-digit returns, is now only yielding 10%, and the YFI vault is not much better.
State of The Vaults
Yearn Finance needs to do something to lure back that liquidity, and there are several planned upgrades to is yVaults as highlighted in the latest blog post.
— yearn.finance (@iearnfinance) October 5, 2020
There has been very little official information yet, but Yearn is developing v2 vaults, which are likely to increase earnings for liquidity providers by shifting strategies. The design proposals for v2 vaults were just released today, Oct. 6, and include multiple strategies and streamlining.
The yETH vaults are also undergoing an optimization process that will enable the CDP (collateralized debt position) to be shifted to new strategies without totally unwinding the debt, it added. Meanwhile, the yYFI vault, which currently stakes collateral into governance, has adjusted its withdrawal fee.
The yUSD/ycrvBUSD/ycrvsBTC vaults are also a high priority for the team;
“updating these vaults with the updated strategy is one of the team’s highest priorities.”
It is hoped by the team and investors alike that these new strategies will increase yields again to attract more liquidity.
YFI Price Update
Yearn Finance’s native token has taken a hit along with the rest of the DeFi related assets over the past month. YFI is currently trading down a percent or so on the day at just below $17,600.
It has been in a steep downtrend since mid-September when YFI hit its all-time high of $44,000.