What is dYel — Bottom Up

Published in

Coinmonks

7 min readMar 22, 2022

This article is written with prerelease information about dYel. Things may change a little on the final product.

dYel is a multichain DeFi index. Simply speaking you will be able to buy dYel on a swap and it will follow DeFi value as a benchmark, or an index.

The inner working are a bit more complicated and involves $BIG token, $BANG token ad a treasury; for this reason I came to idea to write two article about it: one bottom up and one top down. They will explain the same concepts but one (this) will start from the bottom going up to the token, the other will start from the token going down to the bottom.

In this article we will start from $BIG, to $BANG to $dYEL, in the other we will go from $dYel to $BANG to $BIG.

$BIG

$BIG is a token you can buy on a swap or you can mint. If you choose to mint you will get $BIG token with a discount compared to the DEX price, but you will need to wait some time for the minting to happen. (How much you have to wait is still to be decided at the time of writing).

The utility of $BIG is to stake it to get $BANG, and the utility of $BANG is to wrap it to get dYel.

If you want to mint $BIG you need to deposit some collateral, you can do this on five chains: Ethereum, Polygon, Avalanche, Fantom and BSC.

You can deposit as collateral the chain native token, stables, or a selection of LP of the main protocols on the chain, here is the initial list of enabled collateral you can deposit:

Each type of collateral will have a different discount: with the same dollar value you will have more or less $BIG depending on which collateral you choose to deposit. These discount values are not static: they will change dynamically based on what dYel protocol needs more every time in the treasury.

So you can swap $BIG at market price on a DEX, pay more and get it now, or you can mint it with a discount and get it with a time delay.

$BIG is a token with no availability cap: it will be printed infinitely each time someone mint it, and on top of this you can stake it for an fixed APY (fixed in $BIG, not in Dollar value). (Fixed APY still to be decided at the time of writing).

There is one $BIG token for each chain, and $BIG is not multichain ($BIG on Avalanche is not the same $BIG on Ethereum).

$BANG

You can get $BANG token by staking $BIG tokens. If you keep your $BIG unstaked they will lose value over time because there is a constant emission, but if you stake them $BANG token will be rebased three times per day with new $BIG emissions. You will get stable APY (not in Dollar value, but in $BIG) so each $BANG will be worth more and more $BIG each time it refresh its value in the staking pool.

You can also swap directly $BANG in the DEX, and withdraw back $BIG from the $BANG staking pool.

The main reason to get $BANG is to wrap it to get dYel, but you can also trade it or sell the harvest.

There is one $BANG token for each chain, and $BANG is not multichain ($BANG on Avalanche is not the same $BIG on Ethereum).

$dYel

You can get $dYel buying it on a DEX, or wrapping some $BANG.

$dYel is the final goal of $BIG and $BANG tokens, it is multichain (so you can bridge it) and it's bot limited and unlimited supply: let me explain this because it's complicated and key.

All the collateral used to mint $BIG tokens goes in a treasury, a set of assets made of tokens, LPs, staked LPs, stables, and it is possible to burn dYel to get back a piece of this treasury. We need to make a simple example and then to complicate it to understand it.

First example

Imagine we have the treasury only in $USDC, and that there are 10,000.00 $USDC in the treasury. In this example there are 10 dYel minted, so if you redeem a dYel on yel.finance you get 1,000.00 (that is the 1/10 of the treasury because there are a total of 10 dYel, and the treasury value is divided by all the dYel in circulation).

There are two way to buy a dYel: you go on a swap and swap it, and the price will be 1,000.00 USDC or more, because if the price is lower someone will just buy on the swap and redeem his 1,000.00 USDC on the site;
or you can buy 1,000.00 USDC of $BIG, hence you are adding 1,000.00 USDC to the total value of the treasury, stake $BIG to get $BANG, wrap $BANG to get a new minted dYel. In this case you will get a new dYel of the value of 1,000.00 USDC, there will be 11,000.00 USDC in the treasury and a total of 11 dYel. The value of dYel is not changed, but the size of the treasury is increased, and it's increased also the total circulation of dYel.

Second example

Now let's make things a bit more complicated: the treasury is not in $USDC but it's in ETH. You do the same round trip: deposit $ETH, get $BIG, get $BANG, wrap $dYel.

In this example the treasury can increase value when someone deposits new $ETH, and in this case like the previous example $dYel price is not going to change because there will be proportionally more dYel to spread the treasury among; but the treasury can also increase value because $ETH increase in value. In this case the total number of dYel is not changing, but the price of each of them is going to be higher because each one of them can redeem a token ($ETH) that has increased value.

Third example

Let’s make things again more complicated: the treasury this time is bot $USDC and ETH: you can deposit what you like. Except that you do the same round trip: deposit $ETH or $USDC, get $BIG, get $BANG, wrap $dYel.

In this example we have a variable we cannot control: if 100% of people will deposit $USDC the treasury will never change value, if they deposit 100% $ETH it will just follow $ETH value. The fix is in the fourth example:

Fourth example

In this example we have the deposit in $ETH and $USDC, but we give an incentive to people to deposit what we need more to reach a treasury composition we like. For example if we want 50% USDC and 50% ETH in the treasury we but currently we have 20% $USDC and 80% $ETH we will incentive the deposit of $USDC (to grow from 20% to 50%) and disincentive the deposit of $ETH (to get from 80% to 50%). How can we do it?

With the discount bounding.

We will make the price of minting BIG more convenient if users deposit the collateral we need more. For example with the same dollar value one could get 1,000 $BIG if they mint big with $USDC and only 950 $BIG if they mint the same value of $ETH. Other than this the mechanics are the same as in the previous example.

By doing this we get dYel to be a index with a backed wallet of DeFi assets.

Fifth example

This is the last one!

The real dYel has a lot of collateral assets you can use, and it's multichain. So you have to factor in also the possibility of arbitraging that will level and stabilize the value of dYel among all the chains, hence creating a real DeFi index with backed minimum value.

Conclusions

Since the composition of dYel treasury assets are in big part LPs and staked LPs the treasury will collect swap fees and farming rewards, making the total value of the treasury constantly grow.

When I say constantly grow I mean that in the condition of stable market and stable prices it will grow. If the prices will go down in a bear market dYel index will indeed follow the market, but the revenues from swaps and farming will make it perform better than the market.

Depending on the percentage of stables, and leased stables, it may be better than the market even in a bull market. For sure it will be less risky, as it has a composition of many assets spread on many chains.

Hi, I’m -DvD-. I’m a community manager on Yel.finance and Changer.io — this is why I invested on Yel.finance.
Being on those communities realized which are the most misunderstood concepts of DeFi and I try to simplify them here.

I believe that knowledge should be free and accessible for all, but if you wish to offer me whatever beverage is good in your culture you can tip me at: 0xebDBbca4744C66E3aE39F997fD5fB7dE29874ce5, I’ll be super happy to know I helped someone! Cheers!

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