Vaults were introduced in v2 of Yearn Finance.
From Andre's Medium Post:
yVaults are simple token containers and function like y Tokens. They track your share of an ever growing pool.
LearnYearn yVault Easy Explainer:
Are you late to yield farming? Having trouble figuring it out? Unsure what coin goes where?
You're not alone! Yield farming is confusing as hell.
Plus... the best yields (aka optimal strategy) is continually changing.
It's too much to keep up with for most people!
That's why Yearn created the yVault.
Think of yVaults like a Roboadvisor such as Betterment or Wealthfront.
The yVault will follow a strategy designed to maximize your returns and minimize your loss all while charging a low fee.
The first yVault was setup to take the stablecoin USDC.
The second yVault uses yCurve tokens and has a very aggressive strategy shown below.
Before we go further the following disclaimers apply:
Highly experimental, do not use unless you reviewed the contracts
0.05% withdrawal fee
Strategy has weekly rewards distribution
We will not be reporting APR to avoid attracting users
Do not risk your funds
(img credit olivier vdb)
The yCRV vault farms the Chinese fork of $YFI known as $YFII.
The diagram above is may seem confusing but the functionality is fairly easy to explain:
1.) You deposit yCRV into the yVault
2.) The yVault uses your yCRV to farm more $YFII
3.) The yVault dumps the $YFII and invests the returns
4.) You leave with more $yCRV than you started out with
When you exit the yVault you pay a 0.5% fee in $yCRV tokens. This fee is then distributed proportionately to people staking $YFI into the V2 of Governance Contract.
This is perhaps the most exciting part!
Eventually we'll see yVaults for other assets like $LINK.
It's the same setup:
You deposit your $LINK into the yVault and receive $yLINK back.
The yVault will follow a strategy set by the community maximize returns.
This allows you to KEEP YOUR EXPOSURE to the asset. You don't have to switch to a stablecoin.
Again.. when you withdrawal your $yLINK and convert back to $LINK you'll pay a 0.5% fee.
This fee is then distributed back to people staking $YFI.
Good times ahead.