Yeti Finance: Interest-free borrowing on Avalanche

Emerging as an innovative finance mechanism, Yeti Finance, a new Avalanche-native initiative, became live on April 16 2022.  This novel mechanism got off to a strong start, locking in a total of $500 million in the first 24 hours of business. 

What is Yeti Finance?

Yeti Finance introduces a zero-interest cross-margin lending system built on the Avalanche protocol. Yeti Finance enables users to borrow up to 11x against LP tokens, staked assets, and base assets, as well as 21x against yield-bearing stablecoins.

In addition, the interest rate on these loans is 0%. This integration broadens the lending environment for Avalanche by allowing users to borrow against assets that were previously uncollateralizable.

With decentralized lending, Yeti Finance aims to be transformed into a “liquidity black hole” when customers deposit their entire portfolio of LP tokens, staked assets, and base level ERC-20 tokens. Even though there are already lending services on Avalanche, Yeti Finance maintains that it provides a more capital efficient method to borrow stablecoins by utilizing yield-bearing assets as collateral. 

How does Yeti Finance work?

Liquidity

Yeti Finance is based on the economic concept of Liquidity to maintain peg stability and quick liquidations. This will help Yeti Finance achieve its long-term objective as the primary broker for decentralized finance. 

A single protocol having access to a user’s full portfolio will be able to provide the most advantageous lending rates, netting services to reduce collateral requirements across financial instruments, and additional products such as flash loans and options (i.e. Theta Strategies). 

Cross-Margining

Yeti Finance supports cross-margining, which the bulk of borrowing procedures do not. In basic words, Yeti Finance customers may create a borrowing position on their whole portfolio rather than just one item. Cross-margining makes borrowing against risky assets safer since numerous assets may be used as collateral for the loan rather than just one, thus lowering the risk of liquidations caused by asset volatility and flash crashes. 

Borrowing

Yeti Finance Avalanche - Yeti Finance Avax - What is Yeti Finance - Borrowing

Users may borrow against their portfolio of assets with Yeti Finance, and they will pay no interest on the loan. Borrowers get YUSD, an overcollateralized stablecoin that may be used to purchase more assets and then re-deposited into Yeti Finance to establish a leverage position 

Open your position (Trove) by buying any tokens into the Yeti Finance platform and borrowing YUSD, a hard-pegged stablecoin with a high level of over-collateralization. Yeti holders not only retain their farming and staking profits on yield-bearing assets, but they may also borrow YUSD to stake, provide liquidity, or leverage up to 11x the value of their deposits. 

Staking Curve LP tokens

Yeti Finance - Staking LP Tokens - Yeti DeFi

The YETI token may be obtained by participating in the YUSD pool on Curve and staking the Curve LP tokens on the Yeti Finance platform, to name a few methods. At the time of introduction, around 70% of YETI emissions will be sent to the Curve pool, making it one of the most effective methods to earn YETI. 

Depositing YUSD in the Stability Pool

Yeti Finance - Stability Pool

The Stability Pool constitutes the first line of defense in the effort to keep the system operational. Users may place their YUSD in the Stability Pool to assist in repaying the debts of liquidated Troves that do not meet the required collateral ratio of 110 %. 

After some time, Stability Providers will have a pro-rata portion of their YUSD deposits eroded, but they will also stand to earn from liquidation profits and early adopter awards in the form of YETI tokens.

What are YUSD and YETI?

YUSD is a dollar-denominated stablecoin that is used to repay loans on the Yeti Finance platform. $YUSD is a Yeti Finance-issued, over-collateralized USD-pegged stablecoin. It employs a variety of processes to maintain a steady and fixed price of $1. YUSD may be created by making a collateral deposit on Yeti Finance. It may be redeemed at any moment for the face value of the underlying collateral. 

Yeti Finance’s secondary token is called YETI. It collects the system’s fee money and incentivizes early adopters and frontends. The total quantity of YETI tokens is limited to 500,000,000. To learn more about how tokens are distributed and released over time, see our tokenomics pages: YETI Rewards and Tokenomics. 

Yeti Finance protocol token is denoted by $YETI. $YETI will eventually devolve into a governance token. Overall, the maximum supply of YETI tokens is 500,000,000. 

Users may bet YETI to gain more YETI while also accumulating veYETI.  veYETI may be used for the following four purposes: 

  1. Increasing the incentive for stability pool staking. 
  2. Increasing the reward for YUSD liquidity provision. 
  3. Reducing the yield reduction imposed by the procedure on deposited assets (YUSD rebates) 
  4. Obtaining access to unique methods such as Pandora’s box (aUST-Anchor). 
Yeti Finance - veYETI

The veYETI concept is intended to encourage users to amass and stake $YETI by delivering tangible usefulness to farmers and protocol users. Like vePTP and veJOE, when you unstake YETI, you forfeit your veYETI balance. 

At launch, users may begin amassing veYETI. We will subsequently begin rolling out YETI awards to YETI stakeholders, followed by the veYETI utility in early May. Users who stake at launch will get an advantage in amassing veYETI because of its broad utility features. 

Facts about Yeti Finance

Yeti Finance

Yeti Finance has invested over $800,000 in rigorous protocol security to ensure reliability, including five smart contract audits, two economic analysis studies, and several independent peer reviews. 

Among the security measures were an audit of the core borrowing protocol, a review of all ancillary systems (including vault tokens, collateral integrations, and oracles), and thousands of agent-based simulations of the protocol in response to various black swan events to ensure that it remained operational. 

Furthermore, Yeti Finance collaborates with Three Sigma Labs, a world-renowned economic modelling and smart contract auditing business. The parties have committed to collaborate for 12 months to strengthen the protocol’s economic and smart contract security.

Yeti Finance’s primary advantages include the following: 

  • Minimum Collateral Ratio of 110% – more effective use of deposited assets involves leveraging up to 11x on non-stablecoin assets. On yield-bearing stables, we provide even more leverage. 
  • 0% Interest Rate – as a borrower, you will not have to worry about amassing debt continually.
  • Borrowing for Portfolio Purposes — Rather than creating a separate debt position for each asset, users may simultaneously borrow against all of their assets. This implies that if the value of one asset decreases but the value of others increases, the aggregate value of your collateral will stay high, and you will avoid liquidation. 
  • Directly redeemable – YUSD may be redeemed at face value at any moment in exchange for the underlying collateral. 
  • Income-bearing assets may be utilized to create additional yield while securely providing collateral. 
Aris Ioannou
Aris Ioannouhttps://coinavalon.io
Aris created Coinavalon with the purpose of helping the average person navigate the decentralized web. Aris has been passively in the space since 2017 and full time since late 2020. Before Coinavalon, Aris worked as a Business & IT Architect in the financial services sector. Aris holds an MSc in Advanced Computing from Imperial College London, a BSc in Computer Engineering from University of Cyprus and currently pursuing an MBA degree from CIIM.

Related Articles

Latest Articles