Maximising Yield and Minimising Risk With PieDAO’s PieVaults
Maximising Yield and Minimising Risk With PieDAO’s PieVaults
Hey DEFI TIMES community,
A lot of people stay away from DeFi services because they are too risky. They believe it’s better to be safe than sorry. That’s why they decide not to use DeFi services in the first place to protect themselves against potential hacks.
However, you don’t have to sacrifice yield to stay safe in the DeFi space.
This guest article was written by Will from PieDAO.
Wanna know how PieDAO keeps you safe but ensures maximum yield?
Then you’ll definitely enjoy this one!
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Why Diversification Matters.
On Monday Cover Protocol’s staking contract was exploited resulting in 40 quintillion tokens being minted out of thin air.
The bug related to the project’s Blacksmith staking contract, allowing users to withdraw a near infinite amount of tokens, well beyond the stated supply cap. The price of one $COVER fell from $700 to almost nothing.
It was a catastrophic event, and from what I can gather in the community discord, many people lost everything.
Some had felt that the partnership with Yearn had been a seal of approval and put more money into COVER than they could afford to lose. Ranging around the $50m market cap and with over 70% APR in their shield-mining program, it was an attractive proposition for many, and I don’t blame them.
But the bug shows that no project in this nascent space is immune from disasters. For those who lost everything I have nothing but empathy.
But there’s a better way.
Diversification is the key to investing. It’s something that holds true in traditional finance where ETF products are the established norm. In our industry where one bug can cause total failure, it’s essential.
When you spread your investment across multiple assets you minimise risk. When events like the COVER exploit happen, the bulk of your portfolio is protected.
Many users have been choosing high-yield returns over safety, but thanks to PieDAO now investors can have both.
Maximising Yield with PieVaults
Index protocols have provided a solution, automatically rebalancing between assets to maintain a fixed allocation. The issue for many is that locking up assets in a passive index just doesn’t feel like an efficient use of capital, especially not when compared with high-yield DeFi farming.
PieDAO set out to solve this issue, and PieVaults are the result. PieVaults provide the same risk-minimising diversification of passive indices, but allow native staking of the assets as well.
It’s not just staking, PieVaults enable multiple yield-generating strategies like lending of the assets, bouncing between protocols like Aave and Cream.
With PieVaults users mint one ERC-20 and the contract sources the underlying tokens and begins using them productively across DeFi, moving betweens strategies in order to maintain the best yield. This PieVault token can also be staked, allowing investors to earn yield on their basket of yield-generating assets.
A second core advantage of PieVaults is efficiency. PieVaults manage strategies automatically, saving you both gas and time. When Ethereum is congested even simple actions like collecting and compounding your returns can bring a greater gas cost than you would receive.
As a community we took this a step further, voting to allow gas-free minting with a community Oven. The Oven lets users pool their ETH together, with the PieDAO treasury handling the costs. Minting can use up to seventy transactions to source the underlying assets across decentralized exchanges, so Oven is a huge win for users.
YPIE
The first PieVault to launch was YPIE, giving balanced exposure to the growing Yearn Fiance ecosystem.
As you can see from the diagram, multiple strategies are employed. Sushi is staked natively as xSUSHI, while YFI is lent out to the protocol offering the highest yield at that moment in time.
YPIE has already been battle tested with the COVER exploit. Many existing indices are built using automated market makers (AMMs). These designs can suffer a fatal flaw if one asset fails, as the pool will continually buy up the falling asset until the entire fund is drained.
PieVaults are not built using an AMM design and are not vulnerable to this risk.
While the price of COVER dropped, because YPIE is constructed using a market-cap weighted allocation the token only represented a small percent of the PieVault. The core team nevertheless managed to act quickly, immediately pushing an emergency vote to snapshot and removing COVER from the system, protecting the bulk of this allocation.
YPIE might be the first PieVault, but it certainly won’t be the last, with BTC, stablecoin and ‘degen’ allocations all being discussed by the community.
PieDAO
PieDAO is a community of DeFi users and strategists who make products together. Everything goes through the DAO, and anyone can become involved. There’s no minimum deposit or oversight, and the only requirement to participate is to own DOUGH. DOUGH is the community’s governance token, but it also accrues a revenue stream from fees generated from all of our products.
Anybody can propose a PieVault strategy, and the community Discord is an active and welcoming hub for discussion. I’m there seven days a week, and we’re always happy to say hi to new users and talk about pie.
Diversification is a necessity in the growing DeFi ecosystem, but that doesn’t mean investors should have to shun yield-generating strategies. PieVaults provide yield-maximisation without compromising on security.
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All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.