Proposal to add YFI as Collateral

Proposal to add YFI

Proposal to add YFI as a capped collateral to Interest Protocol.


YFI is the governance token of Yearn Finance.


Token Address: 0x0bc529c00C6401aEF6D220BE8C6Ea1667F6Ad93e
Capped Token address: TBD
LTV: 70%
Liquidation incentive: 10%
Cap: 353 (~$3,000,000)
Primary Oracle Address: Chainlink
Secondary Oracle Address: Uniswap v3
Price deviation: 20%


Market Cap: $311,800,000
Liquidity: $4,500,000 (Uniswap V3 YFI-WETH)
Coingecko 7-day avg 24hr volume: $40,400,000
Notable exchanges: Coinbase, Binance, Kraken, Gemini, Balancer, Uniswap

Technical risks

Type of contract: ERC20
Underlying asset: N/A
Time: Deployed July 17, 2020
Value: Governance token for Yearn Finance
The contract owner, Yearn Timelock Goverance, has the ability to call the below functions. The Yearn Timelock Goverance contract is controlled by a 6/9 multisig.

  • addMinter
  • mint
  • removeMinter
  • setGovernance
    Upgradability: None
    Supplemental Information: N/A

Relevant References

Maker YFI Technical Assessment


I support this proposal, as it may pave the way for an eventual integration into the various Yearn Finance strategies.

1 Like

hey @PaperImperium what are the potential advantages of adding YFI as collateral? the token isn’t as liquid as it seems an wont add any potential demand to use this as collateral from the external market.

1 Like

Great question. As always, up for the community to decide at the ballot box.

YFI has become an underserved collateral asset, with ongoing offboarding at Maker (which has very high fixed costs due to oracles expenses). It is one of the frozen markets on Aave V2, and so not currently available to use as collateral for new positions. Aave and Compound V3 do not support it as a collateral asset, leaving Compound V2 as the only major market to utilize YFI.

The low development cost to implement and the ability to cap the exposure at an amount that is both low in absolute terms + meaningful to IP at its current size played a role in proposing it. The timing would also be good to capture the two active YFI vault users at Maker, who will be forcibly offboarded.

More speculatively, holders of YFI seem likely to be engaged and active DeFi users, given the nature of what Yearn is as an investment.

Anyway, that was the line of thinking, and liquidity currently seems to support modest exposure to YFI collateral, especially with 70% LTV and 10% liquidation penalty.

hey @PaperImperium, your rationale seems quite reasonable and should be doable with the parameters which you have proposed!
A quick question on the Cap, how much % of the protocol TVL will be the max Cap for YFI?
I can’t find any dashboard to get that number

The cap is 353 YFI tokens. The protocol would be “full” and stop accepting more YFI as collateral if that number of tokens were in vaults. All capped tokens are limited by the number of tokens, so the market value is subject to fluctuation. I chose 353 here simply because it was about $3m in market price at time of writing. If YFI depreciates, obviously the maximum dollar amount of exposure to the token will decline. If YFI appreciates, the protocol would have a higher maximum exposure in dollar terms.

Someone else can probably comment better than I on why this design choice was made, but sufficient liquidity is usually a function of what supply of the token is able to be safely liquidated, rather than a fixed dollar value.

If YFI fell out of bed, for instance, the protocol wouldn’t necessarily want to accept a larger % of the total supply just because the price per token was low. This has been a consideration over at Maker for some assets, which declined in value in the bear market. Because Maker limits exposure by debt rather than collateral it meant that the same amount of debt and collateralization would require larger and larger percentages of total token supply. That requires constant attention, and Interest Protocol is more “software only” than Maker, which has full-time risk professionals monitoring it.

As always, these things are trade offs, but hopefully that answers your question?

1 Like

sorry mate, just realised that my question was wage and edited it!
I was referring to the protocol TVL (the total locked in Interest ) and its correlation to the proposed cap of 3M

Not sure I understand the question entirely, but here’s a good analytics dash for IP overall