Optimal Auto-Compounding
Yield Yak leverages Yak Swap's smart routing to maximise every single reinvest
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Yield Yak leverages Yak Swap's smart routing to maximise every single reinvest
Last updated
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Historically, auto-compounding platforms use fixed routing when reinvesting the socialised rewards in an auto-compounding pool. An example:
User deposits in an ETH-USDC pool that accumulates $ARB rewards. When enough rewards accumulate for a reinvest, the auto-compounder would be configured to use a fixed Decentralised Exchange, such as Uniswap, which upon every reinvest would swap half the ARB rewards for ETH, and half for USDC.
In most cases this does not cause a problem as the liquidity source is deep enough. However, what happens if liquidity is removed from the Uniswap pool or another DEX offers a better price? Users in the pool sacrifice returns and lose out on potential yield.
Enter Yield Yak.
Yield Yak has uniquely integrated its zero-fee DEX aggregator, Yak Swap, into its reinvest functionality. Every time a reinvest is triggered, Yield Yak's smart contracts use Yak Swap to check that rewards are optimised for pool depositors.
Using the same example of an ETH - USDC pool earning $ARB rewards:
Yield Yak:
Checks for the best $ARB - $ETH price across all available liquidity. I.e. The swap may be routed through Trader Joe, instead of Uniswap, if Trader Joe offers best price.
Checks for best $ARB - USDC price. The swap may be routed through WooFi, instead of Uniswap, if WooFi offers best price.
Other Auto-Compounders:
Sells all $ARB rewards on Uniswap, regardless of price.
While on any given transaction, the additional rewards may be small, overall these small optimisations add up.
Yield Yak users simply earn more.
Using Yak Swap for reinvests does incur higher gas fees, so in some cases where a rewards-pair has deep & reliable liquidity, routes may be fixed to this liquidity source if the gas-savings are greater than the benefit of using Yak Swap.
