FEEL THE RUMBLE...
— Y2K Finance (@y2kfinance) May 4, 2023
DeFi is a tumultuous roller coaster. Most know they shouldn’t try it but most often can’t resist. It is only when you’re on the roller coaster that you realize the consequences you are about to face. The world of DeFi is laden with risks ranging from hacks and exploits to extreme price swings, and not forgetting the not-so-stable, stablecoins…
Come on, be honest, that USDC depeg recently had you a little scared didn’t it?
I mean you’d think an asset called stablecoins would be that one safe haven for us DeFi users, but no, we can’t even have that. Billions have been lost to depegs, and up until recently we could do nothing about it.
Thanks to Y2K we now have a way to speculate on stablecoins and hedge against their risk. The protocol has achieved great feats in the past six months. And now, they are coming out with a huge bang with their v2 which offers a lot more features to users. Before we dive into the greatness of v2, let’s understand what all the protocol has managed to achieve in such a short period of time…
Y2K - Recap Time.
In just six months, Y2K has achieved more than most projects dream of. It's like the little engine that has helped thousands of users protect their so-called, pegged assets.
You might remember our previous deep dive into Y2K, but today we're here to reflect on its remarkable growth since then, marvel at how it has empowered its users, and understand how its v2 iteration is redefining the very concept of DeFi-native insurance.
So buckle up and let's take a joyride through the Y2K saga.
Arbitrum Launch: Where Dreams Take Flight
One giant leap for Y2K was its release on Arbitrum. Since that fateful day, it has become one of the biggest structured product DeFi protocols, allowing users to speculate on the risks of pegged assets like stablecoins. The project launched on mainnet on October 31, 2022 (yes, on Halloween, because who doesn't love a good scare?). And boy, oh boy, has it taken off!
The total deposit volume has skyrocketed to a jaw-dropping $123 million, and the total Earthquake payout has touched a whopping $13 million. That's a lot of zeros, my friend.
On top of that, the protocol has generated over $756,000 worth of fees from those transactions. Cha-ching!
And let's not forget the depeg events that shook the market and sent tremors through the hearts of investors. Y2K managed to amass over $410,000 in fees from the Earthquake caused by two depeg events.
How This Happened -
First, there was the great $MIM depegging on November 8, 2022, when its price plummeted to $0.964. The hedgoors were handed a total payout of 1,750 ETH. Talk about a rollercoaster ride!
Then, just two days later, on November 10, 2022, $USDT had its own depegging disaster, with its price plummeting to $0.987. This time, hedgoors got a total payout of 2,100 ETH. It's like watching a magic trick, but instead of rabbits, it's raining ETH!
One of the standout moments was when a lucky hedgoor received a whopping 74.79 ETH on an 8.638 ETH deposit during the $MIM depegging. It's like winning the lottery while getting a piggyback ride from a unicorn. Pure magic!
If that wasn’t enough, the unthinkable then happened… *ominous music plays*
— Y2K Finance (@y2kfinance) May 29, 2023
The USDC depeg which nobody saw coming following Circle’s deposit exposure to the now-bailed out Silicon Valley Bank led to USDC reaching $0.85… This triggered an Earthquake event resulting in a select few hedgooors getting paid 40x on their money,
Pay Out Transaction Receipt -
Because such an event was not thought of to be ever possible, the disproportionate amount of users that bet on the USDC holding peg were sadly mistaken and paid out fat bags to those who bet on the demise of the largest stablecoin by market cap at the time.
DeFi Insurance: Not Just a Fashion Statement
In the wild world of DeFi, insurance has become more than a necessity. That's one of the reasons why Y2K managed to amass over $10 million in Total Value Locked (TVL) just 10 days after its launch.
The launch on Arbitrum was done through an initial farm offering (IFO). It's like a flash mob where early depositors get rewarded with Y2K tokens for providing liquidity and driving adoption. These Y2K rewards can be accumulated through the Earthquake vaults. It's like winning a golden ticket to the DeFi chocolate factory!
The emissions for $Y2K were designed to cover "protocol revenue sharing, governance, and emissions direction." It's like a well-oiled machine, where everyone gets a piece of the pie while having a say in how the bakery operates.
The protocol even managed to generate $338,000 in revenue in less than a month of launching. Talk about making money moves! And it's all thanks to those depegging events that rocked the boat for $MIM and $USDT. Who knew depegging could be so lucrative?
Volatility Clustering: The Unanswered Question
Y2K's team pondered the mysteries of volatility clustering, but alas, nobody seemed to have the answers. Should the strike price be reduced after the first depegging event? Or should it remain the same, considering the increased risks of depegging after the first event? It's like trying to solve a riddle wrapped in an enigma, dipped in a bowl of alphabet soup.
The Great TGE (Token Generation Event)
Picture this: December 20, 2022—a day etched in Y2K history. The Token Generation Event (TGE) for $Y2K took place, and users eagerly locked their $vlY2K to share protocol fees, gain extra governance power, and participate in gauges.
vlY2K: The Key to Unlocking Treasure
After the successful completion of YIP:1 (Yearn Improvement Proposal 1), the $Y2K and $vlY2K tokens were born into the world. $Y2K became the governance token, ready to make decisions and flex its power, while $vlY2K opened the gates to a treasure trove.
Locking $Y2K tokens for $vlY2K is like upgrading your status to VIP. You get a higher share of governance power and a percentage of the protocol fee revenue. Plus, you get Balancer Pool Tokens (BPT) in return for providing liquidity to the Y2K:wETH token pool. We have the cake and eat it too in Y2K land.
The locked $vlY2K holders get a whopping 50% of all the protocol fees generated, while the remaining 50% goes to the DAO Treasury.
Y2K V2: The Sequel We've All Been Waiting For
The Y2K protocol has proven itself to be a real superhero in the world of pegged asset insurance. Now, it's back with a vengeance in its v2 version, bringing a whole new set of features to the table.
The v2 upgrade introduces an improved user experience and opens up new earning opportunities for depositors. But hey, the protocol isn't selfish—it's opening its doors to builders and developers, allowing them to build on top of Y2K.
Let's unwrap the shiny features of v2.
The carousel feature lets you automatically roll over your deposits for the next epoch. It's like having your own personal assistant who takes care of everything. You can start earning $Y2K as soon as the epoch starts, without waiting for vault openings. And if you change your mind, you can withdraw at any point before the next epoch begins. Just remember, the Carousel Keepers charge a small fee for their services.
Improved Flexibility of Y2K
Vaults now support all Oracle providers for price feeds, expanding the range of pegged assets that can be insured. It's like unlocking the door to a treasure room filled with even more valuable assets. You can deposit those long-tail pegged assets that need the most insurance. The vault also supports more ERC-20 tokens than just $WETH like $ARB.
Holders of $vlY2K tokens enjoy several benefits, including the newly introduced "information tax." As the epoch gets closer to starting, the deposit fee linearly increases. It's like a countdown to a rocket launch, where those who deposit closer to the start pay a higher fee. This levels the playing field and reduces information asymmetry between early and late depositors.
Y2K - 24/7 Deposit Queues
For early deposits, the Y2K team has a deposit queue where users can deposit to any market and position for the next epoch. The queued deposits are subject to the Information Tax, however, they are executed within the first blocks when the direct deposit opens.
The protocol also incorporates Keepers. These are bots that help execute deposit queues and rollovers; they are completely automated and are deployed by the Y2K team. If a user wishes to roll over their deposit, then they also need to pay what is known as the “Keeper fee” which is paid for on-chain transaction execution. Users can roll over until the position is liquidated or delisted from the rollover.
Y2K Open Builder Platform
The Y2K codebase is now ready for builders to create applications on top of it. It's like a LEGO set that lets you build amazing structures, except this time, the structures are DeFi applications. By increasing composability, Y2K becomes an integral part of the DeFi ecosystem, bringing innovation and enhancing the user experience.
With v2, depositors can start earning rewards with just one click. No more hassle of withdrawing and staking vault shares elsewhere. In addition, the Earthquake vaults are not only open for stETH but are expected to welcome other liquid staking tokens too.
Closing Thoughts: A Bright Future for Y2K
The v2 upgrade propels Y2K into an unstoppable growth trajectory within the DeFi ecosystem. With its new features, it improves user experience, integrates with the wider DeFi landscape, and secures holders of stablecoins and pegged assets. It’s your guardian angel guiding you through the DeFi roller coaster.
Additionally, with the recent uptick in liquid staking derivatives (LSDs) Y2K seems to be in a great position to be a picks-and-shovels play around ETH-peg insurance. The more LSDs that come on to the market (and there are a whole load of them coming) the more opportunity for profit or protection that Y2K provides.
As the market for liquid staking tokens continues to rise, Y2K stands at the forefront, offering insurance and peace of mind. It's like having a reliable safety net to catch you when you're balancing on a tightrope. So, buckle up and enjoy the ride, because Y2K is here to stay.