The Ones in the Arena: Yeti Finance

“This new paradigm is one where anyone, anywhere in the world can experiment and have their successful experiments succeed at a large scale. That is what excites us most about crypto and DeFi.” —RoboYeti, Co-Founder, Yeti Finance

Yeti Finance is thinking big—like, Himalayan mountains big.

The decentralized borrowing protocol builds on Avalanche but describes itself as “aquantum leap forward,” citing its innovative fee structure as just one among several key differentiators with the potential to make Yeti one of DeFi’s most substantial protocols.

This week, as Yeti enters the C4 arena, we asked co-founder RoboYeti to tell us more about the project, his views on DeFi security, and what else makes him roar—er, tick.

What are you building, and what sets it apart from similar offerings in the space?

We are building a decentralized borrowing protocol with an over-collateralized stablecoin. It is a combination of Liquity and Abracadabra on steroids.

Key things that set us apart from other stablecoin/borrowing protocols:

Portfolio Borrowing: You can borrow against your entire portfolio of crypto assets in one collateralized debt position. We accept staked assets, LP tokens, and base-level assets such as WBTC and WETH as collateral. The portfolio approach is superior to the approach of one debt position per asset because it has a lower risk of liquidation, meaning users can take on higher leverage safely.
Zero Interest: Anyone can mint YUSD (our USD-pegged stablecoin), by depositing collateral into Yeti Finance. There is a one-time deposit fee when you deposit collateral into the platform. But we charge zero interest on your loan and you can maintain your debt position for as long as you want without paying any additional fees.
High Leverage: We are able to offer up to 11x leverage on assets because of our unique liquidation mechanism, which works very similar to Liquity. We have a stability pool of YUSD which is utilized during liquidation to pay back risky debt positions and receive the corresponding collateral.
Hard-Pegged stablecoin: Our stablecoin is similar to Liquity in that there are hard-peg mechanisms to ensure that YUSD = $1 at all times. This compares to systems like Abracadabra, which only have much weaker soft-peg mechanisms.
Incorporating Cutting Edge Ideas on Protocol-Owned Liquidity/tokenomics: We strongly believe in using our tokens efficiently and building a company that can scale to the multi-billions. There are a couple of key priorities for us to make this happen:
a. Protocol-Owned Liquidity: We will offer bonding of YETI/WAVAX JLP, YUSD/WAVAX JLP, YUSD Curve LP and YUSD tokens. You can bond these tokens in order to receive YETI. This is a much more efficient way for Yeti Finance to acquire sufficient liquidity. Bonded YUSD will also go into the Stability Pool.
b. Large Treasury: We have allocated 73% of all YETI toward the treasury. We believe having a large treasury that can be nimbly deployed will be a major competitive advantage relative to other protocols that either have a small treasury or do not have flexibility in the way they use their treasury because of governance or other limitations.
c. Fundamentally Sound Token Value: Yeti protocol will have significant protocol revenue from one-time deposit fees. These fees will flow to the sYETI (staked YETI) contract, where they are used to repurchase YETI that is then distributed to YETI stakers. We believe strong fundamentals will be a necessity for winning in DeFi in the long-term. We also have a unique demand-driven fee structure which allows the protocol to capture value for assets with significant borrowing demand.

“If you believe your protocol will fundamentally change the DeFi landscape, then security is of the utmost importance. People’s money is at stake. The short-term tradeoff of being scrutinized now is much better than being scrutinized after the fact.”

What’s your vision for your project? What are you building towards in the longer view?

Yeti Finance has a much bigger long-term vision. With decentralized borrowing, Yeti Finance will become a “liquidity black hole” as users drop in their entire portfolio of LP tokens, staked assets, and base level ERC-20 tokens.

This will enable our long-term goal for Yeti Finance to become decentralized finance’s prime broker. A single protocol with access to a user’s entire portfolio will be able to offer the most optimal lending rates, netting services to minimize collateral requirements across financial instruments, and other products including flash loans and options (i.e. Theta Strategies). Think Compound + Yearn + Ribbon + Opyn + Alpha Finance Lab in one.

This has the potential to turn Yeti into one of the largest protocols in DeFi.

What’s the most innovative idea in your protocol?

Our most innovative idea is our unique fee model. For protocols like ours or Abracadabra, which accept more esoteric collateral, we need to put caps on our protocol accepting risky collateral. Abracadabra simply has fixed caps that are set by the team. Often, there is enough borrowing to hit Abracadabra’s caps for in-demand collateral such as wMEMO.

We use a different model, which allows us to capture additional protocol revenue on borrowing against in-demand collateral. Say we only want to accept $50 million of wMEMO in our protocol because we do not want more than that amount backing our stablecoin. As wMEMO in the system approaches $50 million, the deposit fees on wMEMO increase. This de-incentivizes wMEMO deposits while providing more revenue for YETI stakers.

It takes courage to undergo a public audit by a swarm of anonymous security researchers. It also says a lot about how much you prioritize security. What advice would you give to those on the fence?

If you believe your protocol will fundamentally change the DeFi landscape, then security is of the utmost importance. People’s money is at stake. The short-term tradeoff of being scrutinized now is much better than being scrutinized after the fact.

Security has become an increasingly vital topic in DeFi. How do you think the ecosystem needs to evolve in order to rise to the challenge?

The highest-impact way to improve DeFi security is greater accessibility for security services. The ecosystem needs to have more high-quality audit firms that can take on projects that want to ship rapidly. Additionally, we are strong believers in Code4rena-style hack contests as well as bug bounties. All serious projects need to have multiple layers to their security strategy.

What gets you most excited about DeFi?

We believe that blockchains are a better infrastructure to build web companies, and that the next generation of web applications will be built on trustless and decentralized blockchain infrastructure.

This new paradigm is one where anyone, anywhere in the world can experiment and have their successful experiments succeed at a large scale. That is what excites us most about crypto and DeFi.

Complete the following sentence: “I wish more DeFi projects would…”

focus more on building a vibrant community.

What DeFi project name do you wish you’d thought of first?

Yeti Finance was our first choice!

What do you geek out about, beyond DeFi?

philosophy, culture, and art.

Learn more about Yeti Finance:

Yeti Finance’s $100K security audit contest opens December 16, 2021, and runs for one week. Details at code4rena.com.

The Ones in the Arena spotlights emerging and established DeFi projects and their founders, with an eye to celebrating and learning from them. The series’ name is inspired in part by Teddy Roosevelt’s famous quote, which has a central place in Code4rena’s philosophy.