The crypto scene is a fast paced, relentless space that never seems to stop, with a new project or two cropping up every single day. Not all projects are brand new innovations however, with a majority starting out as forks or copies of existing projects (Pancakeswap, Apeswap, Pantherswap, Fishswap, Garudaswap… the list is a long one). That’s not necessarily a bad thing per se, since some of these forks go on to become better projects than it’s original, but one can’t help but become desensitized to it all.
So when I was told that an upcoming project would be attempting something completely new and unique in the market, my interest was piqued. Their “whitepaper” or Gitbook is an extensive one, complete with step by step examples and over 23k words detailing their innovative idea. If that sounds like a little bit too much bedtime reading after a hard day at work, you’re in the right place — Luckily for you, I’ve done all the reading so you don’t have to.
Let’s get cracking.
YSL.IO
The official description over at YSL.IO is that its a “cutting-edge DeFi tool designed to optimise and amplify the returns from yield farming platforms, whilst maximizing the benefits of locked liquidity to create a truly unparalleled token economy”.
For all the laymen out there like myself, YSL.IO is a series of vaults.
Unlike the other vaults out there however (Aperocket, Pancakebunny, Beefy to name a few), YSL.IO isn’t focused on just compounding your farming rewards multiple times a day to generate better APY. While compounding IS one of YSL.IO’s features, it’s unique selling points lie in:
- How it optimises and amplifies those farming rewards.
- A referral program that allows benefits for both the referrer and the referee.
Tokenomics — A quick primer
Before we go on any further, its worth taking a quick minute to understand the tokenomics of the YSL.IO platform. There will be 3 different tokens and I’ll cover each of these in more detail in the following sections:
- YSL — The utility token
- sYSL — Rewards from using the services on the YSL.IO platform (optimisation/amplification/referrals etc)
- aYSL — Used in amplification
YSL token
Being an inflationary token that has no upper supply limit, there are 11 different scenarios in which YSL is minted and paired with BUSD to create LP tokens in the YSL-BUSD pool on Apeswap, with the LP tokens instantly locked away for 1000 years.
That means that regardless of whether a user is buying, selling or even just harvesting their rewards from the vaults, the amount of locked liquidity in the YSL-BUSD pool increases. Over time, this will result in a large enough liquidity pool that it becomes very difficult for any one person to affect the price of YSL (price stabilization).
YSL’s goal = Continuous generation of YSL-BUSD
locked liquidity resulting in a stable YSL price.
The YSL tokens’ pursuit of a stable price has a secondary benefit in that it reduces the risk of impermanent loss. Users will be able to earn buyback and inflation rewards by staking their YSL-BUSD LP tokens in the vault, feeling safe in the knowledge that the more locked liquidity is being created, the lower the risk of impermanent loss.
sYSL token
The sYSL token is the method in which users will truly profit from the YSL.IO platform. The important thing to understand here is that the sYSL price is pegged to the amount of liquidity locked in the YSL-BUSD pool on Apeswap.
The larger the pool of locked liquidity,
the higher the price of sYSL
As we’ve discussed before, there are 11 different scenarios that result in the continuous generation of locked liquidity. Because of this feedback loop, over time the price of sYSL will only appreciate — Here’s a quick example:
- Someone harvests their sYSL rewards from the vaults and decides to sell it.
- The sale of sYSL triggers the creation of more locked liquidity in the YSL-BUSD pool
- The price of sYSL increases since there’s now more liquidity locked away in the pool
Confused? Don’t worry, I was too. Luckily there’s a great example (complete with the exact formulas and numbers!) from the YSL teams’ gitbook that we’ll take a look at in a minute under the Optimisation section that takes us through this process.
Optimisation
Optimisation is the first innovative function that YSL.IO will bring to the table. Via the creation of locked liquidity, YSL.IO offers a flat 150% / 250% boost in rewards (minus fees) compared to what you’d normally get by farming on Apeswap or Pancakeswap.
The % boost is determined by the APR of the base farm. For base farms that offer APRs above 20%, the optimisation feature will boost rewards by 150% (125% LP tokens $ 25% sYSL). For farms that have less than 20% APRs however, the optimisation boost feature automatically kicks in and gives you a 250% boost to the base farms’ APR (125% LP tokens $ 125% sYSL).
Providing liquidity in the BANANA-BNB farm on Apeswap would net you 249.13% in returns after a year. Instead, depositing those same BANANA-BNB LP tokens into a YSL.IO vault would see you earning returns of 279% APR on BANANA-BNB LP tokens that are automatically compounded back into the vault and 55.8% APR in sYSL.
“How is this possible?”, you might ask. Initially, the math doesn’t seem to add up. If YSL.IO only earns 249.13% in BANANA from Apeswap, how can it afford to pay out to its users 279% in BANANA-BNB LP tokens and 55.8% in sYSL? Fret not, I highly recommend you check out this great step by step example which dives into the math behind how this all works.
Amplification
The second innovative function that YSL.IO is bringing to the market, there are 2 types of amplification that will be available to all users — Strategy 1 amplification and Strategy 2 amplification.
Strategy 1 Amplification
This is the default strategy that will be activated so long as a user deposits LP tokens into any vault on the YSL.IO platform. Doing so will automatically offer users 1% APR in sYSL on top of what the user would normally earn via optimisation.
Going back to our earlier example, the final APR for a user who deposited BANANA-BNB LP tokens would be 335.8% APR (279% in BANANA-BNB LP tokens + 55.8% in sYSL from optimisation and 1% in sYSL from amplification).
Strategy 2 Amplification
Unlike in strategy 1, strategy 2 is not an addition onto the optimisation function. Instead, using strategy 2 amplification will deactivate the optimisation feature but reward investors with a 250% boost to the base farm’s APR in LP tokens and a further 50% in Amplification rewards. Activating strategy 2 however, is not “free” and will require that the user holds in aYSL at least 10% of his TVL on the YSL.IO vaults.
Which methodology should you go for then? Optimisation with Strategy 1 amplification or just Strategy 2 amplification? The example in the YSL.IO teams’ gitbook doesn’t make it clear so let’s take a quick look here.
In this scenario we’ll take a look at two users who are both staking $10,000 in the BUSD-USDC stablecoin farm on ApeSwap. The farm has an APR of 10.26%.
User 1 — Optimisation & Strategy 1 Amplification
- Staking the same funds in a traditional yield optimiser like Autofarm or PancakeBunny would see your daily rewards harvested and compounded daily for a resulting APY of 10.80%.
- In YSL.IO vaults however, because the APR is less than 20% the optimisation boost feature kicks in. Along with the 1% bonus from strategy 1 amplification, you enjoy an APY of 24.77%.
- No additional funds were necessary to achieve this result.
User 2 — Strategy 2 Amplification
- Staking the same funds in a traditional yield optimiser like Autofarm or PancakeBunny would see your daily rewards harvested and compounded daily for a resulting APY of 10.80%.
- Activating strategy 2 amplification deactivates both optimisation and strategy 1 amplification. Due to the larger boost provided by strategy 2, you enjoy an APY of 30.567%.
- An additional $1100 (10% of your TVL + aYSL entrance fees) would have to be provided to buy aYSL in order to activate strategy 2 amplification.
In the end, whether or not you choose to activate optimisation and Strategy 1 amplification or just Strategy 2 amplification will depend on your risk appetite and your assumptions for the market. Either way, it’s clear that having your funds staked in the YSL.IO vault will give you better returns compared to a traditional yield optimiser. Ultimately, this just provides an additional strategy amongst the many out there for you to choose from.
Ending Thoughts
Because I am not a financial advisor, I’ll skip my personal thoughts and whether or not I’ll be investing into the project. Instead, in the remaining time before YSL.IO launches on the 30th of June 2021, I highly recommend you check out their gitbook and DYOR regarding some of the topics I briefly touched on above.
Signing off for now.
If you liked the article, check me out here on Twitter and Medium where I write about other crypto topics I stumble across.
Important Links:
- Website: https://ysl.io/
- Twitter: https://twitter.com/ysl_io
- Telegram: https://t.me/ysl_io
- Medium: https://ysl-io.medium.com/
- Gitbook: https://docs.ysl.io/
- Linkedin: https://www.linkedin.com/company/ysl-io
