Please review Disclaimer: Risk of Using Protocol and Terms of Service before using the Yeti Finance and/or interacting with YETI or YUSD. Yeti Finance & YETI/YUSD are not avaliable in the U.S.
Yeti Finance decentralized borrowing protocol that allows users to borrow up to 11x against LP tokens, staked assets, and base asset — and up to 21x on yield-bearing stablecoins at 0% interest.
Yeti Finance offers cross-collateralized borrowing. Multiple assets can be put together in one debt position which greatly reduces the risk of liquidations due to asset volatility and flash crashes. Users retain all farming and staking rewards when these assets are deposited onto Yeti Finance’s platform, opening up numerous leveraged farming strategies.
It is most often compared to Abracadabra + Liquity, combining the best of both protocols while innovating with key features like cross-margining, improved risk mechanisms, and lower minimum collateral ratios.
Our native stablecoin, YUSD, is also hard pegged with multiple mechanisms to keep the price of YUSD as stable as possible. Yeti Finance has gone through an extensive auditing process for any potential vulnerabilities and exploits.
In short, Yeti Finance has 0% interest fees on borrowing, borrowing against your entire portfolio, and high leveraging like no other protocol.
The ability to redeem YUSD for collateral at face value (i.e. 1 YUSD for $1 of collateral) and the minimum collateral ratio of 110% create a price floor and price ceiling (respectively) through arbitrage opportunities. We call these "hard peg mechanisms" since they are based on direct processes. YUSD also benefits from less direct mechanisms for USD parity — called "soft peg mechanisms".
One of these mechanisms is parity as a Schelling point. Since Yeti Finance treats YUSD as being equal to USD, parity between the two is an implied equilibrium state of the protocol. Another of these mechanisms is the borrowing fee on new debts. As redemptions increase (implying YUSD is below $1), so too does the baseRate — making borrowing less attractive which keeps new YUSD from hitting the market and driving the price below $1.
Safety ratio is related to how “risky” a collateral is. Yield bearing stables have a safety ratio up to 1.05, while all non stablecoin collateral will have a safety ratio between 0 and 1. (i.e Highly liquid and trusted collateral will have a safety ratio of 1.0 while more risky collateral will have a safety ratio of 0.8 or 0.5.). It is a factor of liquidity on Avalanche, market cap, and oracle type.
As for how the team comes up with these numbers, the team models and specifies the safety ratio themselves with economic modeling firm, 3σ labs led by @OxVerif. Yeti Finance also has the firm on retainer for any future collateral safety ratios. Down the line, assigning safety ratios will be controlled by governance but as for now it is controlled by the team to allow for a smoother launch.
One of the most common problems people face when trying to open up a Trove is that a minimum debt of 2000 YUSD + fees is required. Therefore, you must deposit more than 2000 dollars worth of collateral in order to open a Trove.
Keep in mind that your Trove's collateral ratio must be above 110% to open a Trove too.
To avoid liquidations, try to keep your Trove's collateral ratio above 150%. Anyone can liquidate a Trove as soon as it drops below the minimum collateral ratio of 110%. Therefore, it is critical to keep your Trove's collateral ratio above 110%, and above 150% to avoid recovery mode.
When the system's Total Collateral Ratio drops below 150%, the system will enter recovery mode, meaning that Troves with collateral ratios below the TCR are eligible for liquidations.
Just to be safe, we recommend to keep your Trove's collateral ratio above 150% and at healthy ratios if you want to avoid liquidations.