SnowSwap: Bringing Liquidity to Stablecoin Yield Farming | by Snowman | SnowSwap | Sep, 2020 | Medium

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The launch of Curve.fi’s y pool was a watershed moment for DeFi. It introduced the LP token yCRV, which was the first asset of its kind to enable holders to earn yield from two different sources simultaneously: interest from lending pools, and LP fees from an AMM pool.

yEarn (formerly known as iEarn) pioneered the notion of a “smart” stablecoin which optimized lending pool yield, and Curve extended it to add:

  1. Basketing for diversifying yield across different stablecoins to avoid needing to swap between coins to optimize interest yield.
  2. Additional yield in the form of 4 bps per trade.

With the second coming of Andre Cronje, yEarn introduced the concept of Vaults. Designed to combat the high barrier to entry for yield farming (due to gas costs), yEarn’s yVaults allowed users to deposit stablecoins in a pool managed by an on-chain yield farming strategy, effectively allowing gas costs to be subsidized by economies of scale. This led to the creation of the USDC vault, and shortly thereafter the yCRV vault. Today, there is a yVault for every major stablecoin.

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These vaults enabled users to participate in yield farming strategies without having to worry about gas costs, and gave rise to yet another source of stablecoin yield. Today, the yVault token yyCRV is one of the highest yielding wrapped stablecoins to-date. Providing its holders with the combination of lending pool interest, AMM LP fees, and yield farming returns. Since yyCRV has become so popular that it has been renamed to yUSD. As of this writing, over 220 million yUSD tokens have been minted, providing an annualized yield of over 84% to depositors.

yVault stablecoins represent the highest passive yield that can be earned on stablecoins today. However, there is no liquid market for the likes of yUSD — even Uniswap only has about $150k of liquidity for yUSD.

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Exiting yVault positions can be costly as well. Withdrawing stablecoins from vaults incurs a 0.5% withdrawal fee, and can incur additional fees in the form of high gas costs if the requested funds need to be withdrawn from the strategy contract. These gas costs can sometimes be hundreds of dollars, depending on gas prices.

SnowSwap

SnowSwap is designed for low slippage stablecoin swaps and is based on Curve’s AMM. By creating pools for yVault stablecoins, traders can easily swap between different vaults without paying withdrawal fees and can exit positions cheaply by swapping into vaults with sufficiently large token reserves and then withdrawing. SnowSwap users can also diversify their yield across multiple stablecoin vaults by acting as LPs, and can also earn additional yield in the form of trading fees, which will initially be set at 0.04% per swap.

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The first pool will support yVault USDC, DAI, USDT, and TUSD. The second pool will support yUSD and ycrvBUSD. Vanilla stablecoins can be deposited via a zap contract and the corresponding yVault token will automatically be minted and supplied to the pool. Upon successful deposits, LPs will receive the ySNOW token, which will increase in value against the underlying pool tokens as AMM fees accrue to the pool.

Governance

SnowSwap is intended to be a community-owned initiative. As the protocol evolves and we add additional pools and revamp features, we will seek the community’s active involvement in the decision making process. Likewise, we believe in an equitable distribution of protocol fees among SnowSwap’s community members.

We are finalizing the UI and will be launching publicly later this week. Accordingly, we’ve decided to facilitate the creation and growth of the community through our token. Stay tuned for more information.

For real-time updates you can follow us on Twitter and join our Discord server.

We invite savvy DeFi users to become Beta testers.

Made with ❤️ (and a lot of ☕️)

☃️

WARNING:

The code is currently unaudited and the frontend is not fully tested. We strongly advise caution to anyone who chooses to use the early experimental version that is launched this week. PLEASE DO NOT RISK ANY FUNDS YOU CANNOT AFFORD TO LOSE.

This is not some “unaudited contract = $400M YOLO” reverse psychology attempt. We seriously mean it. If after this disclaimer you still want to try SnowSwap, we recommend that you read our contracts carefully before depositing funds. Don’t trust, verify.