Yield” target=”_new” rel=”nofollow”>https://messari.io/article/yfi-and-the-industrialization-of-yield-farming”>Yield farming is one of the most popular and fastest-growing asset management strategies in DeFi. Simply put, yield farming is a strategy that takes otherwise idle assets and puts them to work earning yield in DeFi protocols. Returns vary depending on the tokens involved, risk desired, and effort put into switching strategies. Many yield farms offer double-digit, if not triple-digit annual yields, making it extremely attractive to put capital to work in such strategies.
However, new money coming into the space faces a steep learning curve. It is difficult for users to evaluate yield farming opportunities and effectively take advantage of them. Furthermore, high gas fees make the most optimal strategies out of the reach of smaller users that can’t spend thousands of dollars a day on multiple transactions involved in the yield farming process.
Asset management protocols called yield aggregators have emerged to help users make their assets productive with minimal effort. Yearn’s rise into a multibillion-dollar behemoth proves that there is a market for a unified one-stop solution, where, in return for a share of the strategy’s profit, a protocol can manage all aspects of yield farming any given token.
yAxis is the most recent addition to this booming yield aggregator space. yAxis seeks to bring DeFi yields to users in a seamless user-friendly interface that abstracts much of the underlying costs and complexities of yield farming. Holders of the protocol’s governance token YAXIS act as fund managers – designing and recommending profitable yield farming strategies that require no user intervention in return for a 2015% performance fee.
Yield aggregation is an emerging growth area in DeFi, and the stakes are high. Total value locked (TVL) has 3x’d this year, to $6.1 billion, for the “Big 3 plus 1” of Yearn, Vesper,” target=”_new” rel=”nofollow”>https://messari.io/asset/badger-dao”> Badger and Harvest.
Competition is fierce. Yearn has returned to dominance in the sector, accounting for a full 40% of the market, while newcomers Vesper and Badger have been growing rapidly, attracting ~ $2 billion between them. Badger is focused on seamless tokenized Bitcoin use cases (it also partners with Yearn on its Bitcoin vaults). Vesper has been winning market share through aggressive use of rewards in its own highly inflationary token.
What is yAxis?
Over the coming year – divided into four quarterly “eras” – yAxis has big plans to bring seamless and frictionless yield farming to everyone, at low cost, and without sacrificing the high returns available in DeFi.
“Era 1” that began on April 17th coincided with the launch of three key elements generally deemed critical for yield farming success:
Strategy vaults, in this case multi-strategy “Metavaults”
A governance token, YAXIS, that can be staked for rewards, voting rights and a percentage of protocol fees
Liquidity pools to allow for token purchases, generally incentivized in the early days, in this case with Uniswap.
Though a seamless UX for newcomers is still in the works, yAxis has started in the right direction with a very simple and easy-to-use interface. yAxis offers DeFi users two-click access to its v2 MetaVault, where users deposit any of the top 3 stablecoins – DAI, USDC and/or USDT – in exchange for 3CRV tokens, with are then deposited in return for a MetaVault Token (MVLT). The MVLT token can then be staked to earn YAXIS rewards. The all-in-one approach compares favourably to other protocols, which often require users to take multiple steps to get setup.
Strategies are developed and approved through a custom governance that involves YAXIS holders voting on strategies.Once new strategies are approved the deposited funds are put to work in the best yield aggregator strategies YAXIS holders can locate. yAxis focuses only on single-asset vaults, which have no risk of the impermanent loss that may occur in two-asset vault strategies.
Though yAxis’ broader approach to yield aggregation is in its early stages, on the back of YAXIS rewards TVL has gone from a standing start on April 18th to over $200 million a mere 12 days later.
In implementing its first vault strategy, yAxis joins a very crowded market designed around depositing stablecoins into Curve in order to receive yield from trading fees and CRV governance token rewards, which combined offer between 11.1% and 85.3% APY.
The Metavault manages the staking, harvesting and swapping of Curve and other reward tokens, and the reinvestment of the returns, less protocol fees.
In late April, the Metavault added a Yearn v2 DAI strategy, providing flash loans through the major DeFi lenders, including Aave and Compound.
While new v2 strategies and the long term plan develop, yAxis is offering some of the aggressive rewards in the yield aggregator space: A full 87% of the 78.20% APY is paid in YAXIS, the yAxis governance token.
Such protocols are complex, but users may be comforted by the two audits – by Quanstamp and Haechi – and the significant bug bounty.
yAxis differs from its competition in that it was founded by an anonymous team. Yearn, Vesper and Badger have charismatic and popular leaders in Cronje, Jeff Garzik and Chris Spadafora, respectively. This makes community development for yAxis a priority and, indeed, a necessity. The first step in developing an incentivized group of strategists and users is to provide for token rewards for the earliest supporters.
YAX swap for YAXIS
Before the launch of yAxis v2, the founders realized that the capped supply YAX token – the original yAxis protocol token – limited the yAxis’s ability to offer rewards to attract new users. Since April 17, the 1 million YAX tokens can be swapped into the new YAXIS token. The process is almost complete with only 168,000 tokens still needing to be swapped. The YAXIS token uses the ERC-677 standard, which is backwards compatible with ERC-20 but also allows both transfer and call functionality in one transaction. As there is no need to approve before swapping, the cost of entry and exit halves, saving gas fees -another boon for smaller investors.
The long-term goal, envisioned to be operating in yAxis v3, is that the protocol approximates a community-run hedge fund. For now, YAXIS holders can propose and vote on strategies. The voting system is quadratic to limit the power of large holders.
Most new protocols subsidize the provision of liquidity for AMMs that trade the protocol’s token for a short period after launch. yAxis has incentivized such LPs on Uniswap. As at May 1, 146,245 YAXIS tokens were pooled with 2,159 ETH, providing a source of YAXIS for new entrants as well as for the token purchases needed at harvest time to pay YAXIS stakers their performance fee.
The swap of YAX into YAXIS on April 17th marked the beginning of the first Era. By the start of the second Era on the 17th of July, yAxis has planned to offer a BTC bridge and launch delegated multi-strategy Canonical Vaults.
The Canonical Vaults will add ETH, BTC and LINK strategies, expanding the total addressable market from stablecoin holders to three of the largest cryptocurrencies. The Bitcoin bridge would allow seamless transitioning from nativeBTC to tokenized BTC that will be deposited in yAxis vaults to earn a higher yield than BlockFi or Celsius currently offer.
Fiat on-ramps are also planned, which will ease friction for token acquisition, especially for new entrants. No need to source small amounts of stablecoins, LINK, tokenized BTC or ETH from other protocols.
New yield aggregators typically need to entice farmers away from other protocols by offering high incremental rewards in their own token. Alpha Homora’s DAI stablecoin vault offers two-thirds of the 20% yield in its ALPHA token, while Vesper’s VSP token rewards count for three quarters of the advertised APY. Rewards such as these have contributed to the fast growth ofn both of these protocols as well as Badger.
The original protocol token YAX was fixed in supply and fair launched to the community last year. However, yAxis soon learned that token rewards are an extremely effective way to attract new users. The yAxis team also wanted to use tokens to bring VCs on board to provide publicity, coverage, and validation. Tokens will also be used to incentivize community activities.
Beginning with the 1 million YAXIS tokens resulting from the YAX swap, the supply will rise to the 11 million cap over the course of one year (the four eras). The vast majority of tokens will be provided to the user and manager communities. Currently, there are just over 1 million tokens outstanding, as some YAX tokens have still not been claimed, while the reward season, called The Great Harvest, has begun.
The YAXIS token is used in the following ways:
Incentivize the staking of tokens for governance and strategy development purposes
Incentivize liquidity providers on Uniswap
Boost the APY in order to attract early users to the new protocol, and grow TVL
Compensate strategists and community participants
The following YAXIS distributions are planned for Era 1:
The remaining 8,000,000 tokens are available for the remaining 3 Eras.
The total 11,000,000 tokens are planned to be allocated over the 4 Eras ending April 17, 2022 as follows:
1,000,000 (9.1%): Initial swap with YAX holders
4,000,000 (36.3%): Staker and Liquidity Provider rewards
4,000,000 (36.3%): Vault depositor rewards
800,000 (7.3%): To be determined
500,000 (4.5%): Champions Programme
400,000 (3.6%): Development
300,000 (2.7%): Team
Currently YAXIS rewards are allocated as follows:
The performance fee is converted to YAXIS and distributed to stakers on a regular basis. There is a virtuous circle that has the potential to drive value to the YAXIS token. Higher TVL results in more tokens allocated to the buyback multisig, and less tokens are then paid in rewards to Metavault depositors per unit of fee income.
The Future of yAxis
yAxis has succeeded in rapidly growing TVL in a short time based on stablecoin strategies augmented by significant YAXIS token awards. Yet the ultimate goal is much larger than just growing the multi-strategy vault. Era 2 Canonical vaults and BTC and fiat on-ramps are intended to target the large subset of crypto users who are not yet in DeFi, especially the institutions. The founders have a vision of creating “a decentralized version of BlockFi… for retail and professional investors.”
The roadmap is ambitious and, if successful, yAxis may not only be able to steal some market share from its competition, but also provide a valuable service to newly arriving DeFi users for whom active yield farming is out of reach due to time constraints, complexity and high gas fees.