Yearn Finance Initiated V3 Proposal To Provide More Secure And Reliable Infrastructure

Key Points:

• The Yearn Finance aggregator is making recommendations to launch the Yearn V3 upgrade.
• The upgrade will fully decentralize protocol, providing a more secure and reliable infrastructure for on-chain capital allocation.
• V3’s vaults are similar to V2’s but with more improvements and flexibility.

The revenue aggregator DeFi Yearn Finance community initiated the YIP proposal to launch Yearn V3, intending to establish a complete V3 system, allowing anyone to deploy treasury and V3 strategies without needing a V3 strategy to ask for permission.

The proposal states that the core goal of V3 development is to provide a major upgrade to V2. The final state of V3 should be a fully decentralized protocol that provides a more secure and reliable infrastructure for on-chain capital allocation.

To achieve this goal, the Yearn contributors outline four essential requirements that V3 needs to meet:

1. Further decentralization at launch and progressive decentralization over time.
2. Simplify policy writing.
3. Better than Yearn’s V1 strategy product.
4. Better than Yearn’s V2 repository.

The first contract version of Yearn V3 “3.0. publicize other chains.

Regarding the basic structure of V3, budget and strategy are entirely independent, Vault is compatible with ERC 4626 in V3. The relationship between V3 vaults and their strategy has completely changed and is now completely separate.

This means that vaults can not only deploy funds to multiple strategies, but strategies can also accept funds from various vaults (as well as non-vault sources such as direct deposits from users).

V3 Vaults are debt managers that approve strategies to balance debt, and users will pay for debt management. In these respects, V3 vaults function exactly like V2 vaults but with more improvements and flexibility.

By complying with 4626, the strategy interface is instantly standardized with multiple protocols in DeFi. This allows any 4626-compliant protocol to connect to the V3 library now, requiring no new implementation or policy code. This dramatically reduces the complexity of budget accounting and also reduces gas costs.

Regarding the V3 fee structure, since the strategies themselves are now treasury-independent, fees in V3 will be charged at the meta-vault level as well as through the tokenized strategies. V3 also introduces a “protocol fee”. Protocol fees are set by Yearn administration and are calculated as a percentage of the total fees charged upon any V3 budget or strategy report.

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