Calling all DeFi enthusiasts, start earning passive income through yield aggregators. These applications pool investor tokens and hunt for the next opportunity to maximize yield.

Vesper Finance

In its simplest form, Vesper Pools combine multiple tokens of the same kind from many depositors to generate a yield for its participants. Users are given the option to select their desired pool/s to deploy assets and in return, the protocol will generate rewards back to the user. Understandably, if you are new to DeFi, or crypto in general, then trusting these protocols with your money may be difficult. However, Vesper conducts regular audits of all its strategies to ensure their safety, with over 50 completed to date. Let’s take a closer look at the inner workings and investigate why Vesper brings a fresh new approach to DeFi.

Throughout Vesper’s product suite is their modular design, a multi-pool approach that enables smart contracts to adapt and transition strategies on the fly. Not only does this type of architecture provide flexibility for changing conditions in the market, but it also enables the upgrading of products without interruption possible.

Modularity also addresses the complex issue of ‘strategy fading’. When a farmer switches to a pool with a better yield, the old pool will eventually become obsolete. Aggregators that keep funding these unproductive pools will have assets sitting idle, essentially gathering dust. To prevent this, Vesper implemented cross-strategy aggregation, which enables the seamless replacement of outdated strategies without any action required from the user.

So, whether you are a crypto degen or just starting out, why not choose and customize how you want to gain yield? Will you be more aggressive, or conservative? The choice is yours. Pick from the list below, or combine multiple strategies:

Vesper Grow: In order for Grow Pools to operate, they need to collect particular assets such as ETH or USDC via user deposits, which can then be deployed to DeFi platforms outlined in the strategy description. Any yield generated by these strategies will be distributed in the same asset type deposited amongst pool participants, based on their contribution.

Each pool, aggressive or conservative, is rebalanced algorithmically. The difference between them is how they decide whether to borrow more money (when there is a lot of capital or the asset they are using goes up in value) and how much to pay back on loans (when capital is taken out or the asset goes down in value). As the name suggests, conservative pools are less risky than aggressive pools but may offer lower yield opportunities. Any VSP rewards for the pool will be added on top of the typical yield generated.

An extra advantage of Vesper’s Grow Pools is its capability to automatically swap non-ERC-20 tokens and reinvest them through its efficient sweeping feature. This contract function seamlessly liquidates non-native tokens and converts the profits to the pool’s designated asset. Additionally, it handles any tokens mistakenly sent to the contract address.

Vesper Earn: Much like Grow Pools, Earn Pools require a deposit to then be deployed to DeFi applications outlined in the strategy. However, what differentiates the two is the payout. The yield accrued by Earn Pools will be different than the deposited asset. Unlike traditional aggregators, where yield is earned by depositing assets in smart contracts, Vesper Earn instead incorporates rules that dictate how the yield is handled. This enables “programmable yield,” as the handling of yield can be programmed for any desired outcome. This versatility provides various opportunities for users and projects.

Vesper Orbit: This is where it gets riskier, are you up for the challenge? Vesper’s Orbit Pools host a more new and unproven style of strategies, however, they have the potential to produce much higher returns.

However, just because they are new and unproven does not mean they are less secure. All Orbit Pools go through the same auditing process and market testing as Vesper Grow Pools. Once the stability and safety of an Orbit Pool have met the requirements (high TVL and ongoing success), it will be upgraded to the regular Vesper app. In doing so, the code does not change. By contributing to these pools, you provide a well-needed service and play a crucial role in determining the outcome of their survival.

VSP/vVSP Governance Pool: To participate in the VSP Governance Pool, users must acquire VSP tokens and then deposit them. All rewards earned from this pool are paid out in VSP which have been acquired from the open market by Vesper. The revenue generated from all Vesper products is used to buy back VSP.

Vesper Lend: Vesper Lend Pools enable you to lend out your crypto assets, much like Rari Fuse. With their innovative design, users can maximize yield safely, simply by harnessing the capabilities of custom lending applications.

Once you have chosen your desired pool and deposited assets you will receive a vToken representing your pool share. This vToken acts like a receipt, allowing you to withdraw at any time. Additionally, you can transfer the vToken to any supported wallet and use it as collateral on other protocols, such as Metronome Synth. This type of strategy is more advanced, however, if you are interested in learning more, we covered it in our last blog.

Yearn Finance

Next up is Yearn. Their primary goal is to maximize returns on crypto assets for its users. It operates on the Ethereum blockchain which makes it not only accessible but a great choice for users of all levels. With its wide range of tools, Yearn provides a diverse scope of ways users can earn yield, from simple to more complex methods.

yVaults

Much like Vesper, Yearn offers a similar system called ‘Vaults’ which acts as a savings account for your crypto assets. They accept deposits and then route them through different strategies to optimize yield, seeking out the highest currently available yields in DeFi. Users will always receive the same token reward as the token deposited, which automatically compounds. This is especially key to note because it means you don’t have to keep re-adding rewards to the pool to increase your APY. Equally as important, Yearn is also able to offer lower gas costs and transaction fees on each vault-related transaction, increasing profits.

With the introduction of V2 came multi-strategy vaults (up to 20 per vault) which enabled yield-bearing tokens to adapt to market conditions by adding and rotating strategies. It also removed the one-time fees that was charged upon withdrawals for all vaults. Now users can easily switch between strategies if they are not comfortable or happy with the current APY.

This however does not mean there are no fees altogether. Since the old structure has been abolished and static fees removed, a more dynamic system was put in place to manage market conditions. These can be checked in real time here.

yCRV

This is where it may get more complicated, but once understood could increase your yield significantly. yCRV is Yearns veCRV wrapped system that enables the tokenization of Yearn’s veCRV position. Under the hood, the token is composed of yCRV (the base token) and three derivative tokens called activated tokens. Although yCRV carries no native rewards, it does enable users to enter into other activated tokens that do. For example, as Yearn hands over the benefits of its veCRV position to yCRV-activated token holders, users can benefit from holding one (or more) of the following:

• st-yCRV (Staking Rewards): Receives admin fees and bribes from locked CRV inside yVault.

• lp-yCRV (Liquidity Pool Rewards): Automatically compounds fees and emissions for yVault CRV/yCRV LP tokens.

• vl-yCRV (Curve Gauges Voting Power): Provides vote power to vote on Curve gauge weights.

yBribe

Apart of the Yearn Finance arsenal is their yBribe platform which incentivizes voting. veCRV holders are provided with a different form of compensation from buyers interested in increasing their CRV emissions to their Curve pool’s gauge. Their tagline is quite appropriately “enabling users to extract the value of their voting power.”

As Curve holds weekly gauge votes, the opportunity to influence the direction of CRV rewards can be quite high, depending on the number of tokens held. By buying votes, you can also boost yields in pools that directly benefit you. Furthermore, veCRV holders can also sell their gauge votes to the highest bidder each week by simply voting on the bribed gauge with the highest APR.

Beefy Finance

As a top contender in the space, Beefy Finance “beefs” up crypto holdings through its yield optimizer application. By utilizing investment strategies, Beefy Finance maximizes user rewards from liquidity pools, AMMs, and many other opportunities in the DeFi ecosystem.

Its main product, much like Yearn, is its ‘Vaults’, in which you stake your crypto assets. Essentially, these vaults follow a set of strategies and techniques that reinvest your funds with a compounding effect. As the pairing vaults don’t have a locking mechanism, you can check, withdraw, and reinvest at any time. In doing so, you will receive mooTokens representing your share in the vault. Similarly, Beefy does offer single token lockups in return for a yield, but these are riskier so it is imperative you are sure it is what you want to do before confirming.

With Beefy, you can receive more LP tokens simply for staking on their platform. Their simplistic, yet effective approach works by reinvesting yield rewards. This greatly reduces the typical risks of crypto payouts diminishing over time. To help make informed decisions, visible stats with filter options are available on the app. This helps show each vault’s overall quality, with the best having higher APY and daily gains.

In Summary

DeFi yield aggregators are a great way to get involved in the DeFi ecosystem and start putting your crypto assets to work. They operate very similarly to banks: users deposit funds into a savings account and earn interest. Many people favor DeFi aggregators because they are permissionless, trustless, and usually earn a much higher yield than traditional banks. This can typically be conducted with a large array of tokens, giving you much wider accessibility and variety.

There are many protocols out there that can help you get started, varying in difficulty. Some of the standout applications that we recommend are Vesper, Yearn, and Beefy as they offer complete packages with user-friendly UIs and multiple strategies.