If you've ever browsed to yearn.finance and been intrigued by the high APY numbers but have been completely confused when you see "yveCRV (a.k.a. backscratcher)" and "yvBOOST", have no fear! In this article we'll cover these two tokens, their role the Yearn ecosystem, and how they benefit from the on-going Curve Wars... and maybe we'll drop some alpha along the way .

In order to properly explain it all, we'll have to go back in time for a little Yearn history. It won't take too long, so strap in.

If you're already familiar with the tokenomics, click here to skip straight to the alpha 🚨

Disclaimer: Nothing in this article should be considered investment advice. While we will cover only the Yearn ecosystem, it is also worth checking out Convex Finance and other protocols to learn how their competing tokenomics work.

Just looking at the name is somewhat confusing, so let's break it down: - "yv" is the prefix given to all Yearn vaults and vault tokens - "veCRV" is the token symbol for Curve protocol's vote escrowed CRV.

In order to understand yveCRV, we first must understand some of the tokenomics of Curve. While the CRV token itself has little utility on Curve protocol, that all changes when a user "locks" it to their account (making it non-transferrable for up to 4 years). Once locked, there are some rights given to them by the Curve DAO weighted in proportion to their overall share of veCRV:

1. ability to vote in Curve DAO governance

2. ability to vote for Curve gauge weights (influence APR and boost)

3. receive weekly protocol fees in the form of 3Crv

So how does this all relate to Yearn?

One of Yearn's most attractive qualities has always been it's ability to maximize boosts (and thereby APY) on Curve for it's users. In order to do this, the protocol has needed to perpetually lock more CRV to have competitively weighted voting power in Curve DAO. To help bolster this game of perpetual CRV locking, one of Andre's many genius ideas was to design a mechanism whereby any user could lock their CRV directly to Yearn (via what is called the "backscratcher" vault).

But why would anyone give their CRV to Yearn?

Well, for every 1 CRV deposited to Yearn, in return the user gets a new token: yveCRV. The key benefit of yveCRV is that it collects an outsized share of Curve's weekly protocol fees which are paid out in 3Crv. That is, any user with 1 yveCRV earns nearly 2x the amount of profit from weekly protocol fees versus a users who decided to locked that 1 CRV themselves, not through Yearn.

OK, so let's recap how yveCRV is unique from typical vault tokens:

1. Users deposit CRV (not veCRV as the name would suggest)

2. Users cannot ever withdraw the deposited CRV from this vault. Any deposited CRV gets locked to Yearn.

3. Holders get paid in 3Crv tokens simply for holding yveCRV in their wallets.

4. Thanks to Yearn's donations, the weekly 3Crv earned is nearly 2x higher than as user would get on their own.

5. Unlike typical vault tokens, there is actual DEX liquidity for yveCRV

You guessed it: another Yearn vault! This one takes yveCRV as the underlying token. If applying typical Yearn naming convention, the symbol this vault would be yvyveCRV. Since that looks and sounds pretty ridiculous there was an idea to give it a more frinedly name that rolls off the tongue a bit better: yvBOOST.

The yvBOOST vault is straightforward because it has just a single srategy which is to claim the weekly Curve protocol fees as profit and sell them for yvBOOST, compounding the users' position. It is much more similar to traditional vaults in that there is no lock-up of the underlying; users can always withdraw at any time.

One of the design goals of this vault is that, unlike naked yveCRV, it allows users to be exposed to weekly 3Crv profits from Curve protocol fees while also allowing them to move their tokens around to do things like LP for Sushi rewards (at the time). Prior to yvBOOST, users who LP'd yveCRV could not also receive weekly rewards. Additionally, the yvBOOST token is much more "portable" than yveCRV which costs more gas to transfer due to the contract code complexity.

Now that we have the background out of the way, let's break down a few reasons for why yvBOOST is positioned to keep performing well.

Triggered by this governance proposal, Yearn has begun voting on bribed gauges to collect incentives. Since the post, the amount of bribes collected adds up to over $4,000,000 to use in buying back yvBOOST which has created significant positive price impact. We can see this in the yvBOOST price chart which is up over 215%.

What the heck are bribes?

Back in August 2021, bribe incentives to veCRV holders have become massively popular as a way for protocols to increase APY on gauges they're interested in. When more veCRV holders vote on a gauge, it will receive more CRV emissions.

Because bribes are claimable proportionally to a users' veCRV, and Yearn owns over 6% of the total supply of veCRV (more than any other entity except for Convex), it has huge ability to capture bribes.

To demonstrate this, here is the full history of bribes collected by Yearn. As you can see, the total dollar value has been on the rise in the past few months.

Not only is yvBOOST bought-back, but all of the bought-back tokens are burned 🔥, decreasing the total supply of yvBOOST.

Finally, the yveCRV that is redeemed when burning yvBOOST shares is airdropped back to the vault, increasing the price per share and APR for all yvBOOST holders.

How do burns and donations work?

All of the bought-back yvBOOST are sent to this Donator contract. Any user can call the donate() function which will perform a burn of yvBOOST and donation of the underlying back to the vault.

Since the Donator contract was deployed, we've seen it be called consistently when the function becomes available every few days.

Note: The benefits of these burns/donations are realized only by yvBOOST holders, not yveCRV holders.

As we mentioned before, Curve rewards veCRV holders weekly with protocol revenue in the form of 3Crv. So if you lock 1 CRV yourself for the maximum amount of time, 4 years, you will get earn fees on 1 veCRV.

However if you hold 1 yveCRV (either through locking 1 CRV with Yearn, or from purchasing it on the market), you will receive 1.7x more 3Crv rewards.

On top of that, 1 yvBOOST can be used to redeem 1.302 yveCRV from the vault. So to get the true earning power of one yvBOOST, we can use this formala:

yvBOOST_pricePerShare * yveCRV_to_veCRV_earning_ratio = yvBOOST_to_veCRV_earning_ratio

With current numbers that is: 1.7 * 1.302 = 2.2189

This means that 1 yvBOOST earns more than 2.2x more Curve protocol revenue than 1 self locked veCRV.

To put this into perspective, let's see how much money Curve collects in fees each week.

It is a lot! Since Yearn holds nearly 7% of total veCRV, this means that on a typical week, over $100,000 gets shared across yveCRV holders (used by the yvBOOST strategy to compound into more yveCRV on harvest).

The best part about this all is that 1 CRV trades at a significantly higher price than 1 yvBOOST. So if you're most intersted in earning fees as passive income, this might be a bargain price.

If you're ready to get a bag of yvBOOST there are two ways:

• Use CRV to mint yveCRV 1:1 and then deposit into yvBOOST

• Trade for yvBOOST directly on a liquid market

As of today, the latter method is most price efficient because yvBOOST is trading well below the price of CRV. So all we need to do is follow these steps:

1. Visit Yearn Finance's Labs page and select the yvBOOST vault

2. Select any token you'd like to "zap" for yvBOOST. This will automatically create a trade for you.

3. Execute the transaction and verify that you now have yvBOOST in your wallet.

4. Sit back an watch your underlying yveCRV grow with each harvest and donation.

5. When you're ready to exit the pool, simply zap back into your desired token. After gas fees, you'll get back what you put in plus any accrued yield.