Taken from https://gov.yearn.finance/t/call-for-ideas-yfi-tokenomics-revamp/11573

TABLE OF CONTENTS:

1. Yearn Finance

2. Keep3r Network

3. Iron Bank

YEARN FINANCE

Introduction:

Yearn Finance was launched by Andre Cronje at the beginning of 2020, and it is the fabric of the Andre ecosystem. In the very basic definition, Yearn Finance is a multichain protocol focused on yield-farming through Ethereum, stablecoins, and some altcoins. It was only working on Ethereum but recently, it went multichain by enabling Fantom Opera.

As of Dec 1, 2021; Yearn Finance has a TVL of $6.8B (97% of the TVL is on Ethereum, and 3% on Fantom Opera.) This makes Yearn Finance the 10th biggest protocol in all DeFi.

Vaults:

Yearn Finance’s main feature is the vaults. The vaults allow users to deposit coins & tokens and earn yields. When it was first launched its focus was on stablecoins, but now there are a variety of vaults for different assets like ETH, WBTC, SUSHI, and tokenized currencies like EURT, ibGBP, and ibKRW (which we will talk more about in detail in the Fixed Forex part). The funds in these vaults are pooled and deposited into various DeFi protocols to provide liquidity. So, why shouldn’t I just deposit to the pools that Yearn deposits for me? The answer is that Yearn Finance automatically switches funds between different protocols to acquire the best return rate. This situation serves users in 3 ways:

Yearn Finance Vaults, from https://yearn.finance/#/vaults

• Users does not have to chase for the best yields

• Users does not pay gas fees over and over

• Auto-compounding

yEarn (and Iron Bank):

One of the main features of the Yearn Finance was “Earn”. yEarn is a lending aggregator that aims to attain the highest yields for the users. Now, Yearn Finance utilizes a different and better lending/borrowing product: Iron Bank. We will allocate a separate section for the Iron Bank in this present article. Though, we should add that yEarn still exists and is used by users. Iron Bank is on Beta.

Zapper:

One of the other products that should be mentioned in this part is Zapper. Zap is a tool that allows users to interact with DeFi protocols with one click by automatizing the transactions. Zap tool saves both time and gas fees for users. Yearn Finance and AC ecosystem collaborate and utilize Zapper.fi. This is extremely helpful if the user doesn’t have the token that he wants to deposit. For example, a lot of vaults utilize Curve’s LP tokens. If the user doesn’t have the LP token, Zap turns the tokens into LP tokens and deposit them to the vaults with one click.

YFI token:

The above-mentioned components are the key features of the Yearn Finance. The protocol is governed by YFI holders. YFI is the governance token of the protocol. Some aspects of YFI token:

• It’s an ERC-20 token.

• The maximum supply is 36,666 tokens and all of them are in circulation.

• So, there is no inflation nor vesting for YFI.

But there is a rising interest from the users of Yearn Finance for a new tokenomics. Why? Because YFI has no value but being a governance token. It is almost certain that YFI tokenomics won’t stay the same as I wrote above. They want to reward YFI stakers with higher yields to increase deposits. How? By distributing a proportion of the fees (converted to YFI) to YFI stakers that bring TVL to Yearn Finance. But there are other alternative suggestions such as reducing fees for YFI stakers, a buy-burn mechanism, or a regular distribution of fees according to the voting.

Here are the objectives for new tokenomics, taken from the Yearn Finance Discord channel:

• Incentivize an increase in TVL

• Produce a flywheel effect where an increase in TVL increases demand for YFI

• Improve the sustainability of the protocol (e.g. used as a safety module)

• Does not excessively discourage the use of the protocol for wallets that do not hold YFI

• Capable of being automated

• Position or token must be capable of being used as collateral

(Convex + Yearn) * Finance Relationship: (sorry, I had to do that…)

Currently, Yean Finance delegates veCRV to Convex Finance. Delegated increases factory incentives for Yearn Finance, and further boosts the voting power of Convex Finance. It’s a mutual relationship between the protocols.

KEEP3R NETWORK:

Introduction:

Keep3r Network was created by Andre Cronje in late 2020. It’s one of the major components of the Andre Cronje ecosystem. So, what is it?

With its own definition, Keep3r Network can be described as a “job matching network for job posters looking for keepers to do tasks for them, together with an incentive mechanism for all the parties involved.” So, who are keepers? What are jobs? And what do they mean?

Keepers and Jobs:

A keeper is an external person(s) who executes a job. These jobs can be anything, like calling a transaction or collecting harvests. So, a keeper executes smart contract calls. With the same logic, jobs are basically smart contract calls. People who post jobs must register them and provide the relevant docs, info, etc. All these processes take place on-chain.

A job posting on Keep3r, from https://keep3r.network

Keep3r Ecosystem:

We simply explained the Keep3r logic: which are keepers and jobs. Keep3r Network has an ecosystem that utilizes these mechanisms. These are Options Liquidity Mining, Fixed Forex, V3 incentives, and Keep3r V2.

Options Liquidity Mining (OLM) is a tool for DeFi protocols, it’s not something designed for DeFi users. OLM is rewarding Liquidity Providers with option-based tokens. They get their rewards on a specific percent discount that was set by project owners. For example, vKP3R (will be explained) holders benefit from this platform as 1% of all exercised option fees will go to them. It is/will be used internally on Fixed Forex and V3 incentives.

V3 incentives, as we can understand from its name, is a liquidity mining program launched on Keep3r v3 for Uniswap V3. Liquidity providers (LPs) will be able to deposit their UNI v3 positions and earn KP3R. 50% of fees earned will be distributed to vK3PR holders. It has been said that it will support any Uniswap V3 position in the future.

Keep3r V2 is basically automated smart contract execution with keepers and jobs. It was the main and the first focus of the Keep3r Network when it was first launched.

The last component of the Keep3r Network is Fixed Forex, but we will talk about it later in the Keep3r Network section in more detail.

KP3R Token:

KP3R is the native token for the Keep3r Network and having more KP3R represents a higher “reputation” in the Network. Those who complete tasks are rewarded with KP3R, and the rewards will be equivalent to the gas spent on the transaction plus a premium, the amount of which depends on the complexity of the job. The more KP3R tokens you have, the higher your “reputation” in the space, and as a result you can take on higher-end jobs. The above-mentioned “reputation” needs bonded KP3R.

There are four KP3R tokens:

• KP3R: the native token of the project, could be locked for vKP3R.

• vKP3R: lock KP3R to get vKP3R. vKP3R holders share 100% protocol fees + rKP3R rewards.

• rKP3R: rewards for farmers & vKP3R holders, redeemable for oKP3R (and then exercised for KP3R 1:1). It never expires.

• oKP3R: redeemed from rKP3R. It could be exercised for KP3R with a 10% discount (need to have USDC for the striking price. e.g., if $KP3R is $1000, you need $900 USDC in the wallet before exercising the option), it expires in 24 hours.

rKP3R can be earned by providing liquidity to IB (will be explained as well) forex assets on Curve, or Uniswap V3 liquidity to KP3R/ETH.

KP3R token has a total supply of 280k, and all of the tokens are in circulation. As of now, 27.30% of the supply is locked as vKP3R.

The tokenomics were changed at the end of this summer. Andre said that he never took into account speculative users, most of the keepers were dumping the tokens after they finished a job. That’s why, with the new tokenomics, keepers are rewarded with rKP3R. Also, with the new tokenomics, Andre introduced vKP3R. vKP3R is used to vote on Fixed Forex KP3R emission and pool allocation. 1vKP3R is equal to 4-years-locked KP3R, like the veCRV model. So, how does vKP3R accrue fees? It accrues from:

• Fixed Forex and Iron Bank Fixed Forex fees distribute to vKP3R

• KP3R/ETH liquidity pool exercise fees distributed to vKP3R

• Keep3r generalized OLM program with 1% exercise fee, distributed to vKP3R

• Keep3r v3 liquidity incentives with 50% trading fees, distributed to vKP3R

Also, the KP3R token used to have open-ended emission, but with the new tokenomics, it has have isolated liquidity mints, decreasing gradually over 4 years. 1% of all future emissions will be sent to the treasury to fund future development.

ib Assets:

ib* (stands for Iron Bank) assets refer to ibEUR, ibGBP, ibJPY, ibCHF, ibAUD, ibKRW. Each of them is pegged to the corresponding fiat. These assets can be traded on Curve and Sushiswap. As of now, ib assets have a total market cap of $550M.

Fixed Forex:

Fixed Forex (fixedforex.fi) lets users mint and exchange fiat-pegged stablecoins including the USD, EUR, ZAR, JPY, CNY, and others. Why there is such thing as Fixed Forex?

From https://fixedforex.fi/mint, ib assets can be seen such as ibKRW or ibGBP

Making a payment from one country to another involves changing the base currency such as USD to a stablecoin like USDT or USDC. This then gets sent to an exchange in the target country and needs to be converted to the local currency before being withdrawn to a bank. Fixed Forex wants to simplify these steps.

To mint the fiat-based currencies, the protocol will calculate Loan-to-Value (LTV) ratios and accept collateral in accordance with lending protocols like Compound, Aave, etc. Cronje noted that the amount available to mint against collateral would be proportional to the on-chain liquidity available on Fixed Forex.

Fixed Forex uses a mechanism called “gentle liquidations”, a mechanism that ensures a users’ collateral does not get fully liquidated during a market drawdown. Instead, the protocol will liquidate only a minimal amount of funds to repay the debt and maintain the collateralization ratio.

There are 3 roles in Fixed Forex: the minter, the issuer, and the user.

• The minter mints ib assets such as ibEUR at fixedforex.fi and deposits them to the issuer (yearn.fi/lend).

• The user** **deposits collateral to the issuer and borrows ib assets.

• The user pays back interest, and the issuer gets some of it.

• The remained interest is paid to the minter.

Fixed Forex works on the Keep3r Network, with Yearn Finance, and utilizes Iron Bank assets. Thus, all of Andre Cronje Ecosystem works in harmony with each other.

The foreign exchange market currently represents an estimated $6.6 trillion in value. Even if Fixed Forex can get a small piece from this market, it could get much, much bigger. As much as I know, there is no competitor of Fixed Forex in DeFi right now. As of Dec 1st, 2021, the liquidity TVL is $271M, and $2.2M of fees has been accrued.

Fixed Forex vs MakerDAO:

I have seen some comparisons between Fixed Forex and MakerDAO. There are some differences such as collateral does not earn interest on MakerDAO, while it does on Fixed Forex. Also, MakerDAO only has DAI (pegged to USD), while Fixed Forex has a variety of currencies.

IRON BANK:

Introduction:

Iron Bank was first introduced by Cream Finance. At the very basic definition, Iron Bank is a protocol-to-protocol lending platform and liquidity backstop. Normally, lending protocols in DeFi are peer-to-peer protocols. So, what does that mean? And how does this system benefit DeFi?

Iron Bank vaults, from https://yearn.finance/#/ironbank

Peer-to-peer lending protocols, as we can understand from the name, work as middle-man and connect individuals to each other. Because we don’t know individuals, these P2P protocols work with over-collateralization. This system is not very capital efficient. In traditional finance, instructions can enable undercollateralized borrowing due to knowing who are the users and having recourse.

How does Iron Bank benefit to DeFi:

The above-mentioned things are pretty hard to enable in DeFi, and I think they are against the essence of De (decentralized) Fi. Iron Bank solves this problem by limiting what borrowers can do with their borrowed assets. This is nearly impossible to do in Traditional Finance, but can be done in DeFi thanks to smart contracts. Iron Bank enables undercollateralized, and even zero-collateral lending.

How does Iron Bank add value to Yearn Finance:

How does Iron Bank create added-value to Andre Cronje ecosystem? Iron Bank does not utilize individuals for lending and borrowing, it utilizes Yearn Finance itself. So, there are no trust issues: a user can take his capital and go away but Yearn Finance can’t unless governance votes for it. So, on Yearn Finance, a user can access more leverage per unit via Iron Bank. That’s how Iron Bank creates added-value to Yearn Finance. A collective consensus is accepted by the users of Yearn Finance and Iron Bank, allowing them to use their capital more efficiently.

Thanks to Michael for his help writing this article and Aron, for providing us a guideline for how to write it and always pushing us to become better researchers.

Let me introduce myself. I’m mertdemir.eth (also known as; mertdemir.sol, mertdemir.ust, mertdemir.tez, and hopefully soon, mertdemir.avax). I work in a crypto asset management company as a research analyst. Every time when I start to research something, my first reaction to everything is “gosh, why they don’t write this shit more simply”. So I said; hey, why don’t I write the things I researched so other people won’t get tortured.

If you are a crypto geek like me I think you’ll love it here. Yeah, that was it.

GM (as always).