This proposal aims to introduce a new yCRV market to FiRM, Inverse Finance’s fixed-rate lending platform. As the first market of its kind, it is expected to garner attention from the Yearn and Curve communities, as well as DeFi enthusiasts. The proposed yCRV market showcases FiRM’s key features, including Personal Collateral Escrows (PCEs), reward accrual on collateral, and the Pessimistic Price Oracle (PPO). The Risk Working Group (RWG) conducted a comprehensive risk assessment to guide the deployment parameters for this market which can be viewed here.
yCRV plays a vital role in the Yearn ecosystem, representing voting power and earning potential, second only to cvxCRV. Users deposit their CRV tokens into Yearn, locking them as veCRV and receiving equivalent amounts of yCRV tokens. This one-way conversion cannot be reversed, but users can trade their yCRV tokens for CRV through existing liquidity pools.
The value of yCRV is derived from the CRV tokens locked in Yearn and the platform’s ability to continuously accumulate more CRV. Yearn attracts CRV by offering attractive yield farming opportunities and streamlining the process for users. The value of yCRV is closely linked to Yearn’s success in the ongoing competition within the Curve ecosystem, known as the “Curve Wars.” In this moment, Yearn has 63,533,179 veCRV (10.51%), ahead of StakeDAO’s 45,568,088.74663 veCRV (7.54%) and second only to Convex’s 293,741,116.99724 veCRV (48.58%).
In July 2023, Yearn initiated a pool migration for the yCRV/CRV pair to a new Curve LP. This migration enables the utilization of Curve’s renewed EMA price oracle and the use of staked yCRV as collateral with ERC-20 compatibility. This update underscores Yearn’s commitment to enhancing the utility and value of the yCRV token within the DeFi ecosystem. The integration of yCRV into lending markets like FiRM generates increased interest, demonstrating its utility and driving demand.
The RWG conducted a thorough risk assessment on yCRV, determining it to be a suitable collateral for FiRM.
To ensure stability and security, the market requires a composite oracle implementation utilizing multiple price feeds. The chainlink price feed for CRV acts as a “price ceiling” for yCRV. When the yCRV price falls below 1 CRV, the price is derived from the Exponential Moving Average (EMA) of the yCRV/CRV liquidity pool. This robust and reliable oracle implementation, combined with FiRM’s Pessimistic Price Oracle safety feature, mitigates upward and downward malicious price manipulations.
Given the importance of the price oracle component, it underwent an external audit of FiRM conducted by Nomoi. Additionally, all yCRV market and FiRM-related smart contracts have undergone rigorous smart contract safety reviews by both internal and external developers.
Based on the risk assessment, the following parameters are proposed for the yCRV market on FiRM:
- Supply Ceiling: $1,000,000.
- Initial Fed Supply: $500,000.
- Daily Borrow Limit: $100,000.
- Liquidation Factor: 50%.
- Collateral Factor: 50%.
- FiRM Global Supply Ceiling: $37,000,000.
The addition of the yCRV market to FiRM presents an opportunity to expand the platform’s offerings and attract attention from the DeFi community. By incorporating the risk assessment recommendations and launching the market in “guarded-mode” initially, a safe and successful integration of yCRV as collateral on FiRM can be ensured. This proposal represents a well-researched and thoughtful addition to the platform, and we encourage the Inverse Finance community to support its approval.
- Add YearnCurveMarket to DBR contract
- Set borrowController of Market to FiRM BorrowController
- Set daily limit in BorrowController to $100,000
- Change market supply ceiling in Fed to $1,000,000
- Set FiRM Oracle price feed for yCRV to the newly deployed YearnCurvePriceFeed
- Increase FiRM Fed global supply ceiling to $37,000,000
- Set Collateral Factor to 50%
- Set Liquidation Factor to 50%