On Yield Aggregators and What Benefits They Have for You

3 min readApr 18, 2023

This blog post aims to look at the basic functionality of Yield Aggregators and what benefits they contribute to growing a crypto ecosystem.

It will also give a first impression of how Stargazer will help DeFi on Cardano to grow and attract more users.

Introduction: What are Yield Aggregators

So, Yield Aggregators are tools to optimize Yield Farming which is the investment strategy to provide liquidity to dApps like DEXes or Lending Protocols in order to get a reward in return.

Generally speaking, Yield Aggregators make providing liquidity much more efficient (higher returns) and can include automated strategies to make this investment more secure. Those strategies range from simple reinvesting of rewards to leveraged yield farming.

Benefits of Yield Aggregators

As mentioned, yield farming gets more efficient through, e.g., bundling the reinvesting transaction. This allows a Yield Aggregator to reinvest the rewards a lot more frequently and spares a user from doing this process manually.

Next to the maximization of profits, a Yield Aggregator can also minimize the risk of a hacked smart contract which can be achieved by using diversification: Splitting up the money and providing liquidity for different dApps at once instead of providing it for one dApp alone, minimizes the impact of an exploit in an underlying dApp.

Furthermore, Yield Aggregators also make it easier for newcomers to invest in the DeFi landscape, since one doesn’t have to research the newest yield farms and constantly have to worry whether it is legit.

Potential Risks of Yield Aggregators

I don’t want to keep this topic untouched, since the crypto ecosystem is in general far away from being safe, and also Yield Aggregators have potential attack vectors.

Because Yield Aggregators are also smart contracts by their nature, they also have potential bugs and overall security issues coming along with smart contracts, e.g., oracle manipulation.

Security issues also increase with the rising complexity of a system. Concerning Yield Aggregators, this means that highly complicated yield strategies might be harder to fully understand for a normal end-user in terms of functionality and potential risks associated with it. (refer to an older version of Yearn Finance being recently hacked through misconfiguration)

Popular Examples of Yield Aggregators

Popular examples of Yield Aggregators are Yearn Finance with a current TVL of $460M and Beefy with a TVL of $379M.

Both of them contribute to the flourishing of DeFi ecosystems and make them more attractive to incoming investors.

Conclusion

In summary, yield aggregators offer several benefits to users, such as the maximization of profits, risk diversification, and simplification of the investment process. They also make it easier for newcomers to invest in the DeFi landscape.

Yield aggregators also have the potential to revolutionize the traditional banking system. They offer a decentralized counterpart to traditional savings accounts, which often have low-interest rates. Yield aggregators provide users with the opportunity to earn high yields on their investments while retaining control over their funds. As the DeFi ecosystem continues to grow, yield aggregators are likely to become more popular and play an increasingly important role in the world of finance.

Stargazer will start from here and bring Yield Aggregator to the Cardano ecosystem and many more! Stay tuned for more.

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