[OGP-6] Use of Yearn Vaults for Ethos Reserve

Proposal Title: Use of Yearn Vaults for Ethos Reserve

Proposal Chain: Optimism
Type (Choose one): OATH Improvement Proposal (OIP)
Proposal Author: @omgcorn
Date: 8/16/2023

Executive Summary

This is a proposal for Ethos Reserve to onboard Yearn Vaults on Optimism as a source of yield for WBTC, WETH, OP, or any future additions to the actively managed assets within the Ethos Reserve protocol.

Proposal Motivation

Yearn is uniquely positioned to offer Ethos Reserve yield-generation opportunities across its collateral. Yearn is an established and reputable organization that shares Ethos Reserve’s ideals around decentralization and safety. Yearn’s risk-adjusted vaults are battle-tested (some v2 vaults are over 2 years old) and have handled an all-time high of $6.4 billion.

Yearn aligns with Ethos Reserve’s safety-first strategy. Ethos Reserve’s use of Yearn Vaults will further validate the case for Decentralized Finance where safety and transparency matter most.

Proposal Specifics

In addition to the strategies below, Yearn is distributing OP incentives for another ~4 months in an effort to help bring value to the Optimism ecosystem.

The following are the proposed potential yield strategies:

  • Aave Optimizer

    Supplies USDC, USDT, DAI, WBTC, or WETH to AAVE v3 to generate interest, earn OP tokens, and rewards. Earned tokens are harvested, sold for more USDC, USDT, DAI, or WETH which is deposited back into the strategy.

  • Sonne Finance Lender Borrower

    Supplies and borrows USDC, USDT, DAI, WBTC, or WETH on Sonne Finance simultaneously to earn SONNE. Earned tokens are harvested, sold for more USDC, USDT, DAI, OP, or WETH which is deposited back into the strategy.

  • Sonne Finance Lender Borrower

    Supplies and borrows USDC, USDT, DAI, or WETH on Sonne Finance simultaneously to earn SONNE. Earned tokens are harvested, sold for more USDC, USDT, DAI, OP, or WETH which is deposited back into the strategy.

Team Experience

Yearn is DeFi’s premier yield aggregator giving individuals, DAOs, and other protocols a way to deposit digital assets and receive yield. Yearn was created in the Summer of 2020 and quickly became known for the best risk-adjusted returns in DeFi with their core product Yearn Vaults.

In addition to Yearn Vaults, Yearn contributors have created the DAO management tool Coordinape, the audit firm yAcademy, and assisted with the development of software tools like Ape-Safe, Apeworx, Vyper, Brownie, Gnosis, Robowoofy, ERC-4626, Weiroll-py, Disperse, Allowlist, yPriceMagic, and Serpentor. Yearn has also contributed to funding Gitcoin, LexPunk, and Nomic Labs.

Yearn has presented on risk management and strategy creation at ETHCC, ETHDenver, ETHDubai, ETHAmsterdam, The Stanford Security Summit, and has been mentioned in research from Messari and Ark Invest.

Yearn also contributes as a whitehat to SEAL 911, an experimental Telegram bot created by samczsun which anyone can use to seek help during a hack.

Yearn is maintained by a team of full-time contributors and is governed by the YFI token.

Key Objectives & Success Metrics

Yearn seeks to be a safe source of yield for Ethos Reserve’s actively managed assets through three Yearn vaults (Aave Optimizer, Sonne Finance Lender Borrower Strategies) to provide the highest risk-adjusted return possible.

Length of Engagement & Budget Breakdown

While the current allocation of OP incentives only lasts for another ~4 months, we are happy to extend this engagement as a perpetual arrangement as we will not be deprecating any Optimism vaults. Should this program attract enough attention and value, we may consider applying for an additional period of incentives with the Optimism Foundation.

Community Support

Collaborative efforts between Yearn and the Ethos Reserve team have assessed integration feasibility (verified by both teams). The Ethos Reserve team expresses their support for the proposed initiative and is open to gathering input from the community on the Yearn vault integration proposal.


Yearn currently holds an OP grant awarded from Optimism governance. Renowned as a security focused protocol across many networks, Yearn aims to establish a working partnership with the Ethos Reserve team (and larger OATH community).

Risk Assessment


Yearn Vaults are capital pools that automatically generate yield based on opportunities present in the market. Vaults benefit users by socializing gas costs, automating the yield generation and rebalancing process, and automatically shifting capital as opportunities arise. End users do not need to have proficient knowledge of the underlying protocols involved or DeFi, thus the Vaults represent a passive-investing strategy. In 2021, Yearn Vaults had over $6 billion in contracts.

Yearn Vaults are comprised of up to 20 strategies and are considered “up-only”, as they take no directional risk and have no unhedged exposure to impermanent loss. Additionally, strategies are able to accept large deposits with little slippage and they must pass the Yearn Risk Framework.


Yearn Vaults use a 6-of-9 multi-signature wallet, made up predominantly of public figures in the DeFi community, along with two core Yearn team members. Yearn controls are not a requirement for your vault. However, you may want Yearn to have permissions for Operations Procedures including emergency situations.

The Yearn Risk Framework

The Yearn Risk Framework (explained at the Stanford Security Summit) is modeled after risk management process in the aviation industry and uses eight key metrics for evaluation: TVL Impact, Third-party Audit Quality, Internal audit, Complexity, Longevity, Protocol Safety, Team Knowledge, and Testing.

Yearn consistently receives top scores from third-party rating organizations like DeFi Safety.

Yearn core contracts have been audited by multiple third-party firms. A full list of Yearn Strategy third-party audits is also available. Should users desire to verify/audit contracts for themselves, all code is verified on Etherscan or other explorers, GitHub repositories for all production code are public, and Yearn developers are always happy to answer questions as needed.

Even with Yearn’s extensive preparation for hacks and loss of funds through documentation and war room simulations, there is always a chance that funds are not recoverable. Yearn does not offer a guarantee on funds of any kind. Yearn is purely on-chain DeFi and risk must be managed accordingly.


The Yearn team doesn’t need much introduction - I think this proposal gives our team a lot of breathing room on the Reaper end of things while we continue to polish our vault product and Ethos V2. Based on feedback, it should also add an extra level of comfort for users of ERN.

Fully support!


I am also on board with this integration / proposal. Yearn has been the industry leader in yield aggregation. I don’t see a world where this can be construed as negative.

Really appreciate the Yearn team and all the conversations we’ve had so far (been awesome from my end).


Full support from me as well. :saluting_face:

1 Like

Yearn managing the underlying assets would help add a badge of legitimacy to Ethos Reserve and give more confidence to new users. While Reaper’s leveraged strategies are very performant, this would be an unexpected but fantastic addition to diversity of assets managed which reduces pressure on Reaper to solely provide services for Ethos Reserve.

The only downside for OATH is giving up some of the positive effects on Reaper’s growth, though I think this doesn’t compare at all to the many immediate benefits Yearn would bring by getting involved in the project which would likely help break Ethos through to a new plateau sooner and have greater flow-on effects to Reaper still.

@bebis perhaps you can share more details or thoughts on what ratio of assets would make sense split between Yearn and Reaper? EDIT: I understand better now that Yearn will be added to the strategy catalogue for Ethos, perhaps this is not a set amount but would instead be flexible to earn the most yield?

Collaborations wins during these market conditions. Overall in favour of finding a path to success with Yearn.


I’ll be voting yes


i like to imagine a world where the % allocated to Reaper and Yearn multi-strategies will be determined by their risk adjusted yield at any point


Makes sense, thanks for confirming.


Im all for Yearn. High Lindy and feel safu


I support this proposal, Yearn vaults are a benchmark in defi. It’s a win-.win opportunity for both teams


Highly supportive of this proposal. Been a big fan of Yearn for as long as I’ve been in DeFi and their work is top notch and, almost as importantly, well renowned.

I echo Samson’s sentiment about it being a big net positive even if Reaper growth slows a bit.

Would also love to host an AMA with @omgcorn and @bebis to discuss more of the details with the community! Regardless it’s a big yes from me


I’ll vote yes!


Happy to join and chat


One quick question: By implementing Yearn Vault we won’t also lose the fee that would go towards rebuying $OATH for $BOATH stakers right?

1 Like

very supportive but would like to take time to identify threat vectors and responsible mitigations to ensure successful integration. i dont think either team has done this before afaik.


Big collaboration; all for it!

1 Like

What is being proposed is that Ethos Reserve adds a Yearn-strategy to the vault which would allow an optimal % of holdings to be deposited into Yearn, where it will then compound any OP alongside capital growth. If Yearn can access a higher yield than the existing Ethos Reserve strategies, then this will lead to more capital to purchase OATH.

So there is no change to the actual core vault infrastructure of Ethos Reserve, rather it would be an adaptor to deposit and withdraw from Yearn, and compounding the OP while it is available. Hope that is clear.

My Opinion: Proposal Ready for GPRC Review

GPRC member chiming in: ready for review. Sick.

keen for GPRC review