With the imminent release of v.2.0 yearn vaults the creation of a new layer of currency within the system is likely to grow in importance. In order to capture this capital AAVE has an opportunity to provide a secure deposit base to benefit from the growth in the yearn TVL.
Propose to add yUSD, yYFI, yETH and yBTC (once operational) at the same collateral and reserve ratios as the base layer assets. Since these assets are accruing value through the strategies over time, there should be comfort in providing the same loan to value ratios on these assets, however, suggest that the liquidation threshold is either aligned to the loan to value or reduced by 50%. With the new mechanics being built into the vaults to allow debt portability in the event of a market downturn (powered by AAVE) there is improved safety from the AAVE module perspective.
CREAM currently provides this support on yUSD and yETH, however, the greater level of platform security, integration with DefiSaver automation and more transparent liquidation mechanics within AAVE present a unique opportunity to ensure this value is captured within AAVE rather than a competitor, and allow AAVE to grow alongside the yearn ecosystem. For holders of large positions within the yearn vaults this added security and transparency will be crucial to deposit yAssets, and AAVE should ensure that it is positioned to capitalize on this opportunity once the new vault system launches.
CREAM collateralization metrics:
I think it is great that many different projects are available for collaboration with the Aave protocol, but before we let everyone in. I would first make sure that we have some system where the Aave stakers or the Aave holders. take great advantage of transaction costs or other ways. but my point is that first the Aave benefit structure must be in order, especially we let everyone in without any benefit for the Aave holder or stakers.
@MarcZeller any thoughts on this?
there’s a lot of synergies with the yearn and curve ecosystems, I personally use and support both projects.
on the technical side, most yAssets are already deposits in Aave.
in order to increase overall yield, yEarn leverage on DeFi composability and as an example, 1 DAI deposited into a Yearn vault is deposited in Curve Y pool then deposited into AAVE.
this kind of synergies increase overall yield and is a very good thing in my eyes, it’s the same for many other actors such as Harvest finance or mStable.
In the case of having yUSD as collateral, I think a good potential solution might be to create a yearn and/or curve market, allowing usage of “yyUSD” and Curve “yCRV” as collateral to segregate liquidity and risk. Aave v2 allows a much more efficient multi-market approach
Aave has a synergies-first and multi-market approach, I believe in the “Seamless Finance” vision where your assets can flow freely and be used as collateral and liquidity on multiple platforms at once increasing performance and use-cases by accepting part of increased risk.
Ok great thanks.
And are you onboard with adding yETH and ywBTC once they are back open?
And any disagreement on LTVs?
I definitely support adding yAssets, but I think their risk is greater than comparable base assets (eg yETH vs ETH, yUSD vs USDC). They have economic risk from borrowing, lending, or exposure to curve pools, as well as potential smart contract risk. So I think having them in a separate market could be a good idea, or if they were in the main Aave market setting more conservative risk parameters for LTV.