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As a crypto noob, can anyone point me to info on what this crYUSD and yUSDVault business is?

by mNovak 5y ago

ericlewis 5y ago
not sure about crYUSD.. but there is an article about yUSDVault here: https://medium.com/talking-crypto/introduction-to-yearn-vaults-and-how-the-yusd-vault-works-c8ffda0d951f https://medium.com/talking-crypto/introduction-to-yearn-vaul...
deleted 5y ago
[deleted]
qeternity 5y ago
These are all tokens that wrap other tokens, in this case, USD stablecoins. 1. You take a stablecoin like DAI or USDC and deposit with Yearn, who in turn lend it out and earn interest. You receive yDAI or yUSDC tokens in return which can be redeemed for the original deposit plus accrued interest. 2. You take your yDAI and deposit that into a Curve pool which is a decentralized exchange specializing in stablecoins. There is a pool that allows swapping between yDAI and yUSDC (and two others). If you deposit in this pool, you get a generic yUSD token that represents your claim to the pool’s assets and fees. 3. You look at your yUSD not content with the financial alchemy you’ve performed so far and think “what can I do with this securitized certificate of deposit?” Fear not, Yearn has a “vault” (lending strategy) specifically for yUSD. You praise the degenerate ape overlords and deposit to earn even more interest on your boring dollars. In return you receive yUSDVault tokens. 4. Not content, you begin to wonder why stop with yUSDVault. Are there any other strangers you can lend your rehypothecated certificate of deposit to? Yes! Cream finance will happily issue you their version of yUSD called cryUSD against your yUSDVault collateral…party on Wayne! 5. Now, Cream aren’t your typical boring bank that incinerate their money on synthetic CDOs and the like. These cryUSD tokens that they issue, can also be used as collateral to borrow other things! Hooray! But in order to value cryUSD, Cream needs to figure out how much the underlying yUSDVault tokens are worth. To do this, they need to figure out how much yUSD each yUSDVault token has claim to, and then multiply by the yUSD price. 6. It just so turns out that if you borrow a bunch of yUSDVault in a flash loan, and then redeem it for yUSD, you can get the balance of the yUSDVault very low. Let’s say you did this and left the yUSDVault balance very low (say, $8m). This is not a problem in itself, as these tokens are designed to be redeemed. 7. Well, knowing what we know from step 5, a clever trader realizes that if they do all of the above, and then borrow some yUSD (say $8m) and just donate it to the yUSDVault, when Cream goes to calculate how much cryUSDVault is worth, it will have immediately doubled in value, because some generous donor has just doubled the balance of yUSD owned by yUSDVault (and doubling the borrowing power of cryUSDVault in the process). So if you had flash borrowed a bunch of cryUSDVault (say $1.5b) against flash borrowed collateral (say $2b of ETH), you just now managed to double the value of your loaned assets to $3b but you’ve only posted $2b of collateral. 8. Normally a borrower’s collateral would be liquidated well before being underwater, but in this case everything is happening atomically inside a single transaction. 9. So the smart trader takes her $3b of cryUSDVault, borrows a bunch of other stuff to repay the $2b flash loan, which leaves her with $1b of collateral to borrow a bunch of other stuff (and ultimately default on).
- delecti 5y ago
  It feels kinda like a pump and dump scheme but using automated feedback loops and fantasy coins instead of penny stocks.
- jollybean 5y ago
  Crypto Tower of Babel. Thanks for the write up, but it seems rather daunting that someone should have to have so much knowledge about such systems.
  - brendoelfrendo 5y ago
    It seems daunting, but I think you can reduce it to an engineering problem by asking "how can I trick the system into overvaluing my portfolio?" From there you "just" need to figure out a way to stack a chain of asset transformations to bamboozle the flash loan process into giving you too much money. I say "just" because it's obviously not a simple process, and there's no guarantee that you'd ever find a flaw in the system where it makes some incorrect assumption of value, but this person did, and was able to exploit it to great success.
    - jollybean 5y ago
      The problem is the system is incredibly complex and adds no value to anything, and opens up tons of risk. It's one thing for crypto to be a fun thing where people can day trade on made up numbers, arguably harming 'no one', but when major transactions get problematic, then it's a huge source of pain. Civil and legal lawsuits galore. It demonstrates that net-net crypto is a value destroyer and is just a bad distraction. The moment we try to regulate it (and we would have to do this if we wanted to normalized it and make it usable in the commons), then 'all the fun' would be drained out of the bubble as it boils down to just regular banking, more or less. It's like an intellectual 'Chinese Finger Trap' for smart people with a bit of money to burn, that has negative externalizes. If it's going to be 'money' then regulate it as money, and watch it the Tower collapse under the weight of it's own complexity.
      - 5y ago

As a crypto noob, can anyone point me to info on what this crYUSD and yUSDVault business is?

by mNovak 5y ago

As a crypto noob, can anyone point me to info on what this crYUSD and yUSDVault business is?

not sure about crYUSD.. but there is an article about yUSDVault here: https://medium.com/talking-crypto/introduction-to-yearn-vaults-and-how-the-yusd-vault-works-c8ffda0d951f https://medium.com/talking-crypto/introduction-to-yearn-vaul...

deleted 5y ago

[deleted]

qeternity 5y ago

These are all tokens that wrap other tokens, in this case, USD stablecoins. 1. You take a stablecoin like DAI or USDC and deposit with Yearn, who in turn lend it out and earn interest. You receive yDAI or yUSDC tokens in return which can be redeemed for the original deposit plus accrued interest. 2. You take your yDAI and deposit that into a Curve pool which is a decentralized exchange specializing in stablecoins. There is a pool that allows swapping between yDAI and yUSDC (and two others). If you deposit in this pool, you get a generic yUSD token that represents your claim to the pool’s assets and fees. 3. You look at your yUSD not content with the financial alchemy you’ve performed so far and think “what can I do with this securitized certificate of deposit?” Fear not, Yearn has a “vault” (lending strategy) specifically for yUSD. You praise the degenerate ape overlords and deposit to earn even more interest on your boring dollars. In return you receive yUSDVault tokens. 4. Not content, you begin to wonder why stop with yUSDVault. Are there any other strangers you can lend your rehypothecated certificate of deposit to? Yes! Cream finance will happily issue you their version of yUSD called cryUSD against your yUSDVault collateral…party on Wayne! 5. Now, Cream aren’t your typical boring bank that incinerate their money on synthetic CDOs and the like. These cryUSD tokens that they issue, can also be used as collateral to borrow other things! Hooray! But in order to value cryUSD, Cream needs to figure out how much the underlying yUSDVault tokens are worth. To do this, they need to figure out how much yUSD each yUSDVault token has claim to, and then multiply by the yUSD price. 6. It just so turns out that if you borrow a bunch of yUSDVault in a flash loan, and then redeem it for yUSD, you can get the balance of the yUSDVault very low. Let’s say you did this and left the yUSDVault balance very low (say, $8m). This is not a problem in itself, as these tokens are designed to be redeemed. 7. Well, knowing what we know from step 5, a clever trader realizes that if they do all of the above, and then borrow some yUSD (say $8m) and just donate it to the yUSDVault, when Cream goes to calculate how much cryUSDVault is worth, it will have immediately doubled in value, because some generous donor has just doubled the balance of yUSD owned by yUSDVault (and doubling the borrowing power of cryUSDVault in the process). So if you had flash borrowed a bunch of cryUSDVault (say $1.5b) against flash borrowed collateral (say $2b of ETH), you just now managed to double the value of your loaned assets to $3b but you’ve only posted $2b of collateral. 8. Normally a borrower’s collateral would be liquidated well before being underwater, but in this case everything is happening atomically inside a single transaction. 9. So the smart trader takes her $3b of cryUSDVault, borrows a bunch of other stuff to repay the $2b flash loan, which leaves her with $1b of collateral to borrow a bunch of other stuff (and ultimately default on).

delecti 5y ago
It feels kinda like a pump and dump scheme but using automated feedback loops and fantasy coins instead of penny stocks.
jollybean 5y ago
Crypto Tower of Babel. Thanks for the write up, but it seems rather daunting that someone should have to have so much knowledge about such systems.
- brendoelfrendo 5y ago
  It seems daunting, but I think you can reduce it to an engineering problem by asking "how can I trick the system into overvaluing my portfolio?" From there you "just" need to figure out a way to stack a chain of asset transformations to bamboozle the flash loan process into giving you too much money. I say "just" because it's obviously not a simple process, and there's no guarantee that you'd ever find a flaw in the system where it makes some incorrect assumption of value, but this person did, and was able to exploit it to great success.
  - jollybean 5y ago
    The problem is the system is incredibly complex and adds no value to anything, and opens up tons of risk. It's one thing for crypto to be a fun thing where people can day trade on made up numbers, arguably harming 'no one', but when major transactions get problematic, then it's a huge source of pain. Civil and legal lawsuits galore. It demonstrates that net-net crypto is a value destroyer and is just a bad distraction. The moment we try to regulate it (and we would have to do this if we wanted to normalized it and make it usable in the commons), then 'all the fun' would be drained out of the bubble as it boils down to just regular banking, more or less. It's like an intellectual 'Chinese Finger Trap' for smart people with a bit of money to burn, that has negative externalizes. If it's going to be 'money' then regulate it as money, and watch it the Tower collapse under the weight of it's own complexity.
    - 5y ago