Wintermute Trading Seeks YFI Token Loan from Yearn Finance
Wintermute Trading is currently attempting to secure a loan of YFI tokens from Yearn Finance for a duration of one year as part of its strategy to enhance yield opportunities. However, Yearn’s governance community is pushing back against the proposal, deeming it unfavorable.
The prominent market maker in the cryptocurrency space, Wintermute Trading, is facing challenges in its pursuit of yield within the decentralized finance (DeFi) landscape, an ecosystem that it actively supports by providing liquidity. The firm is seeking to borrow 350 YFI tokens, valued at over $2 million, in exchange for its commitment to bolster the markets for Yearn’s yCRV token. Yet, Yearn voters have widely rejected this offer, labeling it as unjust.
Wintermute’s Bold Moves and Opposition from Yearn Community
This situation underscores Wintermute’s increasingly audacious approach to extracting value from various cryptocurrency projects. Gaevoy, a representative from Wintermute, characterized the proposal as a mutually beneficial arrangement for both Wintermute and Yearn on X (formerly Twitter). However, in discussions on Discord, where Yearn community members communicate, he encountered significant resistance, with many perceiving the offer as excessively one-sided.
By acquiring YFI tokens from Yearn, Wintermute could potentially increase its yield in token-related dealings. The firm aims to obtain these tokens by utilizing its own holdings of CRV tokens at minimal risk to itself, but Yearn supporters argue that this arrangement offers little benefit to Yearn itself. An influential Yearn voter, known by the pseudonym 0x7d54, remarked, “The entire premise of the deal contradicts Yearn’s core principle: decentralization,” expressing concern over the implications of a potential agreement to loan out governance tokens to an external entity.
Wintermute’s Proposition and Yearn Voter Skepticism
Initially, Wintermute proposed an interest rate of 0.10% for the 12-month loan, opting not to provide crypto collateral—a standard expectation in most DeFi lending arrangements. Instead, Gaevoy offered the firm’s reputation as a guarantee. Wintermute is recognized as one of the most active players in DeFi lending and governance; just recently, it played a crucial role in rescuing Curve Finance.
Despite Gaevoy’s claims that the YFI loan would be a beneficial arrangement, Yearn voters expressed skepticism regarding the wisdom of trusting companies that have claimed reputability, especially in light of recent failures like FTX, Alameda, and Celsius. As a compromise, Wintermute agreed to post CRV tokens as collateral in a wallet that would be partially controlled by Yearn.
Wintermute’s Recent CRV Token Acquisition and Community Reactions
Wintermute recently bolstered its holdings of CRV tokens, acquiring 25 million at favorable rates during the recent industry-wide bailout involving Curve Finance’s founder, Michael Egorov. This acquisition was pivotal in helping Curve, and by extension, other DeFi platforms like Yearn, avoid potential systemic failures.
Yearn is among a select group of DeFi protocols competing for CRV deposits by offering attractive interest rates for those who deposit their assets into its yCRV vault. If Wintermute were genuinely interested in creating a beneficial partnership with Yearn, one voter suggested it could consider minting new yCRV tokens, which could yield long-term advantages for the decentralized autonomous organization (DAO). However, Wintermute has only committed to providing liquidity for Yearn’s yCRV markets, which, while valuable, falls short of the potential benefits of creating new yCRV tokens.
Indeed, Gaevoy has communicated to Yearn voters in the project’s Discord that Wintermute has no intention of minting new yCRV tokens, as it has already staked 6 million CRV tokens with competitor Convex Finance. He also indicated that Wintermute is open to further collaboration with Convex if Yearn does not accept the proposal.
Current Vote Status and Alternative Offers
As of the latest update, the voting process for the proposal, designated YIP-74, is leaning towards rejection, with 94% of votes opposing it. The vote is scheduled to conclude on August 30.
Wintermute’s struggle seems to have encouraged DWF Labs, another market-making entity, to approach Yearn with a potentially more favorable offer. DWF’s proposal includes a 1% interest payment every four weeks for the same 350 YFI tokens, albeit without collateral. This offer has yet to be put to a vote.
Both Yearn and Wintermute are mindful of public perception as they navigate these discussions. At one point, Gaevoy acknowledged his participation in often contentious governance discussions, where some users have labeled Wintermute as a “vulture” seeking handouts, indicating a desire to gauge how the firm is viewed within the community. The influential Yearn voter, 0x7d54, also noted that while there are potential advantages to having a well-known entity like Wintermute in Yearn’s markets, these benefits could be severely undermined by negative sentiment if Yearn accepts what many see as an unbalanced deal—an assessment that still applies even to the revised proposal.
Correction and Update
CORRECTION (Aug. 29, 10:40 UTC): Spelling of Gaevoy corrected throughout.
UPDATE (Aug. 30, 19:06 UTC): Clarifies Gaevoy’s description of the deal proposal.
