Automated Yield Farming
While the Cambrian explosion of new lending and automated market maker pools has fueled total value locked (TVL), it has also made it increasingly challenging for yield farmers to manually allocate capital in efficient and optimal ways.
Yearn has demonstrated that smart contracts can automate the rebalancing of funds across various strategies to optimally earn lending interest, market-making fees, and rewards tokens. Over time, new strategies will be deployed that maximize returns while minimizing risk and dependencies.
OUSD uses the following high-level strategies for generating yield:
OUSD is able to generate higher yields than competing protocols due to a combination of important design decisions that amplify the rewards that are returned to OUSD holders:
Exit fees are returned to the pool, rewarding long term holders
Price oracles favor the collective over the individual, again rewarding long term holders
Smart contracts must manually opt-in to earn yield. This allows the protocol to put more capital to work than would be otherwise possible.
Smart strategies balance risk and reward more effectively than deploying capital in any single underlying strategy.