Users can swap AVAX and receive yyAVAX on Yak Swap (yieldyak.com/swap). The price of yyAVAX to AVAX is monotonic, meaning that the value of yyAVAX will always increase vs AVAX based on the yields from the P-Chain progressively being distributed to yyAVAX holders. This means that you do not swap AVAX for yyAVAX at a 1:1 ratio as yyAVAX will always be worth more than AVAX on a 1:1 basis.
For example, after one year of 8% yield on yyAVAX, one yyAVAX will be worth 1.08 AVAX.
Put simply, yyAVAX is the interest-bearing version of AVAX. Simply holding yyAVAX means that yyAVAX is accruing value vs AVAX as the yields from the Avalanche P-Chain flow to yyAVAX holders. There is no need to stake or claim rewards for your yyAVAX to be earning yield. You can track the yyAVAX price per share vs AVAX as well as the yyAVAX APR on Yield Yak’s Liquid Staking page: yieldyak.com/liquid-staking
Here’s what the process will look like behind the scenes:
How yyAVAX works
yyAVAX holders benefit not only from the rewards reserved for security the Avalanche P-Chain, but also receive rewards generated by the Eden Network of Validators, which include supporting subnets.
Many liquid staking tokens require that you wait a 15+ day period to move from the liquid staking derivative back into native AVAX. Alternatively you could use an AMM and potentially suffer serious slippage and swap fees which eat into any gains and benefits of holding the derivative token. It is currently an under-reported problem that many users purchase and sell liquid staking tokens and unintentionally eat up all of their yield (and then some) when moving in and out of the token.
Imagine a Typical Liquid Staking Token with a daily yield around 0.02%. Swap fees cost 0.3% plus slippage you may lose 15+ days of yield per trade.
With yyAVAX, we expect losing closer to 2 days of yield per trade via its dynamic withdrawal pool.
The dynamic withdrawal pool uses a model similar to Curve and allows users to redeem yyAVAX for AVAX at minimal slippage. At launch, using this pool (which can be accessed via Yak Swap) will prevent users from being hurt by swap fees and slippage negating their gains. And no need to wait 15 days if you wish to return to native AVAX.
In the event of a significant amount of yyAVAX exits which could drain the dynamic withdrawal pool, AVAX from the P-Chain will be brought back to the C-Chain by our validator network to refill the pool. In this case, it may take a few days for the pool to be refilled as the various validators with different unlocking times retrieve AVAX for users.
yyAVAX smart contracts have been audited by CoinFabrik and its overall infrastructure reviewed by Ava Labs engineers.
10% from the Avalanche P-Chain staking rewards are taken in fees. Half of these go to the Eden Network for their Validator Network & Yield Generation services. The other half goes to Yield Yak to use to build adoption and incentivize DeFi utility for yyAVAX in the Avalanche ecosystem. The yyAVAX APR is net of fees.