Permissionless Yield Basis Pools
Summary
This proposal discusses the creation of permissionless Yield Basis pools that source crvUSD liquidity from voluntary liquidity providers rather than protocol-issued credit lines.
The objective is to address the primary constraint limiting the growth of Yield Basis: access to crvUSD capacity without stressing crvUSD’s peg strength.
Author
Hi, I’m James Nexus, a full-stack blockchain developer, crypto trader, and DeFi enthusiast. I’m the creator of CurveYield, a DAO-controlled liquidity infrastructure protocol for AMMs, vaults, credit markets, and protocol-owned liquidity, inspired by and partially built on Curve smart contract architecture.
Abstract
Yield Basis has demonstrated strong demand since launch. However, the protocol’s ability to scale is constrained by the amount of crvUSD credit that can be allocated to Yield Basis pools.
Existing pools have consistently operated at or near their capacity limits. While additional pools can be created, each new pool requires additional crvUSD capacity. Expanding credit allocation indefinitely is not a sustainable solution, as excessive credit expansion risks placing additional pressure on the crvUSD peg.
This proposal discusses a permissionless pool architecture in which the required crvUSD liquidity is supplied directly by market participants. Rather than expanding Yield Basis through additional credit issuance, the protocol would expand through externally supplied liquidity.
Motivation
At present, the limiting factor for Yield Basis growth is not demand, strategy availability, or asset selection. The limiting factor is access to crvUSD capacity.
Every Yield Basis pool ultimately relies on crvUSD liquidity. As demand for Yield Basis increases, additional capacity must be sourced either through larger credit allocations or through an alternative mechanism.
Permissionless Yield Basis pools would provide such an alternative.
Under this model, users seeking yield on volatile assets would continue to interact with Yield Basis as they do today. The difference is that the required crvUSD liquidity would be provided by users who choose to supply crvUSD or scrvUSD in exchange for a share of generated yield.
This approach allows Yield Basis capacity to scale alongside market demand for crvUSD exposure rather than remaining constrained by protocol-issued credit.
In addition, the model creates a new source of utility for crvUSD and scrvUSD holders while increasing demand for both assets.
Specification
Pool Structure
Permissionless Yield Basis pools would consist of two classes of participants.
Asset Depositors
Users deposit a supported asset into a Yield Basis pool and receive the standard Yield Basis experience.
From the depositor’s perspective, interaction with the pool remains largely unchanged:
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Deposit an asset.
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Earn yield generated by the strategy.
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Maintain exposure to the deposited asset.
crvUSD Liquidity Providers
A separate class of users supplies:
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crvUSD
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scrvUSD
to provide the liquidity required by the pool.
In return, these liquidity providers receive a portion of the yield generated by the strategy.
Liquidity providers may choose between two approaches:
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Providing liquidity directly to a specific Yield Basis pool.
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Depositing into a shared liquidity vault that automatically allocates capital across all permissionless Yield Basis pools according to demand and available yield opportunities.
Users seeking exposure to a specific asset or strategy may choose to allocate liquidity directly to an individual pool. Users seeking a more passive experience may instead utilize the shared vault.
The shared vault would continuously allocate liquidity where it is most needed, helping balance pool utilization, optimize yield rates, and improve capital efficiency across the system.
Yield Allocation
Pool yield would be distributed between asset depositors and crvUSD liquidity providers.
The precise allocation mechanism could be determined by utilization, allowing pools with higher liquidity demand to offer greater rewards to liquidity providers and thereby attract additional capital.
This creates a market-driven mechanism for distributing crvUSD liquidity throughout the Yield Basis ecosystem while allowing liquidity providers to choose between active allocation and passive participation.
Supplementing the Cost of Borrowing crvUSD
Yield Basis emissions could be directed toward permissionless Yield Basis pools through veYB voting in order to supplement the cost of sourcing crvUSD liquidity.
Under this model, veYB holders would determine which permissionless pools receive YB emissions. These emissions could be used to offset the cost of compensating crvUSD liquidity providers, reducing borrowing costs for individual pools while directing liquidity toward the assets most desired by the community.
This mechanism would also establish a natural use case for veYB gauge voting and bribes. Projects seeking additional liquidity for their permissionless Yield Basis pools could incentivize veYB voters, creating an additional revenue stream for veYB holders while enabling market-driven liquidity allocation throughout the Yield Basis ecosystem.
Conclusion
Yield Basis has demonstrated that demand for the product exists. The challenge is scaling capacity without relying on ever-increasing crvUSD credit allocations.
Permissionless Yield Basis pools offer a potential solution by allowing market participants to supply the required crvUSD liquidity directly. This would create a path for continued expansion while simultaneously increasing the utility and demand for crvUSD and scrvUSD.