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Strategy Risks

Yearn earns income from lending, liquidity mining and trading fees. This income is often increased using leverage.


Collateralized lending is when an asset is lent in return for a yield paid by the borrower. The borrower has to lock up a greater amount of collateral than the value of the loan to incentivize the repayment of the loan.

GovernanceAdmin key holders change lending protocol adversely, e.g. change the interest rate model in such a way that discourages borrowing
TechnologicalSmart contract risk of interacting with lending protocols
MarketLow demand for borrowing the asset causes low lending yields
Collateral price falls causing the lending protocol to become undercollateralized
Lent assets become unavailable to withdraw because the utilization ratio becomes too high
OperationalDelays or inability to withdraw assets from the lending protocol in an emergency

Liquidity Mining

Liquidity mining involves interacting with a protocol to earn the protocol’s native tokens. The interaction can be as simple as staking an asset in a protocol’s staking contract, or more complicated such as staking SNX to mint sUSD in Synthetix to earn SNX rewards.

In most cases the liquidity mined token is exchanged for the Want token on an AMM.

GovernanceAdmin key holders change protocol adversely, e.g. introduce penalties for withdrawals
TechnologicalSmart contract risk of rewards contract
Smart contract risk of AMM used to exchange the liquidity mined token for the Want token
MarketFall in price of token being farmed
Liquidity of liquidity mined token on AMM is reduced or removed
Operational RiskDelays or inability to withdraw liquidity in an emergency

The Safe Farming Committee decides which protocols are secure.

Trading Fees

Trading fees are earned in Automated Market Makers (AMMs) by providing liquidity.

GovernanceAdmin key holders change protocol adversely, e.g. reduce rewards paid to liquidity providers
TechnologicalSmart contract risk of AMM (e.g. Curve Finance, Sushiswap or Uniswap)
MarketTrading volumes reduce leading to lower fees
Impermanent lossImpermanent loss due to the pool’s token prices changing relative to each other
Operational RiskDelays or inability to withdraw liquidity from the AMM in an emergency


GovernanceAdmin key holders change the lending protocol adversely
TechnologicalSmart contract risk of lending protocol (Aave, Compound Finance, Maker, Unit protocol)
MarketRisk that the debt is liquidated due to a price fall
Risk that income is lower than the cost of the flash loan
OracleIncorrect price feed
liquidation penalties
Operational RiskOperational risk of managing debt positions