ERC-5115 - SY Token

Abstract

This standard proposes an API for wrapped yield-bearing tokens within smart contracts. It is an extension on the ERC-20 token that provides basic functionality for transferring, depositing, withdrawing tokens, as well as reading balances.

Motivation

Yield generating mechanisms are built in all shapes and sizes, necessitating a manual integration every time a protocol builds on top of another protocol’s yield generating mechanism.

ERC-4626 tackled a significant part of this fragmentation by standardizing the interfaces for vaults, a major category among various yield generating mechanisms.

In this ERC, we’re extending the coverage to include assets beyond ERC-4626’s reach, namely:

• yield-bearing assets that have different input tokens used for minting vs accounting for the pool value.
• This category includes AMM liquidity tokens (which are yield-bearing assets that yield swap fees) since the value of the pool is measured in “liquidity units” (for example, $\sqrt k$ in UniswapV2, as defined in UniswapV2 whitepaper) which can’t be deposited in (as they are not tokens).
• This extends the flexibility in minting the yield-bearing assets. For example, there could be an ETH vault that wants to allow users to deposit cETH directly instead of ETH, for gas efficiency or UX reasons.
• Assets with reward tokens by default (e.g. COMP rewards for supplying in Compound). The reward tokens are expected to be sold to compound into the same asset.
• This ERC can be extended further to include the handling of rewards, such as the claiming of accrued multiple rewards tokens.

While ERC-4626 is a well-designed and suitable standard for most vaults, there will inevitably be some yield generating mechanisms that do not fit into their category (LP tokens for instance). A more flexible standard is required to standardize the interaction with all types of yield generating mechanisms.

Therefore, we are proposing Standardized Yield (SY), a flexible standard for wrapped yield-bearing tokens that could cover most mechanisms in DeFi. We foresee that:

• ERC-4626 will still be a popular vault standard, that most vaults should adopt.
• SY tokens can wrap over most yield generating mechanisms in DeFi, including ERC-4626 vaults for projects built on top of yield-bearing tokens.
• Whoever needs the functionalities of SY could integrate with the existing SY tokens or write a new SY (to wrap over the target yield-bearing token).
• Reward handling can be extended from the SY token.

Use Cases

This ERC is designed for flexibility, aiming to accommodate as many yield generating mechanisms as possible. Particularly, this standard aims to be generalized enough that it supports the following use cases and more:

• Money market supply positions
  • Lending DAI in Compound, getting DAI interests and COMP rewards
  • Lending ETH in BenQi, getting ETH interests and QI + AVAX rewards
  • Lending USDC in Aave, getting USDC interests and stkAAVE rewards
• AMM liquidity provision
  • Provide ETH + USDC to ETHUSDC pool in SushiSwap, getting swap fees in more ETH+USDC
  • Provide ETH + USDC to ETHUSDC pool in SushiSwap and stake it in Sushi Onsen, getting swap fees and SUSHI rewards
  • Provide USDC+DAI+USDT to 3crv pool and stake it in Convex, getting 3crv swap fees and CRV + CVX rewards
• Vault positions
  • Provide ETH into Yearn ERC-4626 vault, where the vault accrues yield from Yearn’s ETH strategy
  • Provide DAI into Harvest and staking it, getting DAI interests and FARM rewards
• Liquid staking positions
  • Holding stETH (in Lido), getting yields in more stETH
• Liquidity mining programs
  • Provide USDC in Stargate, getting STG rewards
  • Provide LOOKS in LooksRare, getting LOOKS yield and WETH rewards
• Rebasing tokens
  • Stake OHM into sOHM/gOHM, getting OHM rebase yield

The ERC hopes to minimize, if not possibly eliminate, the use of customized adapters in order to interact with many different forms of yield-bearing token mechanisms.

Specification

Generic Yield Generating Pool

We will first introduce Generic Yield Generating Pool (GYGP), a model to describe most yield generating mechanisms in DeFi. In every yield generating mechanism, there is a pool of funds, whose value is measured in assets. There are a number of users who contribute liquidity to the pool, in exchange for shares of the pool, which represents units of ownership of the pool. Over time, the value (measured in assets) of the pool grows, such that each share is worth more assets over time. The pool could earn a number of reward tokens over time, which are distributed to the users according to some logic (for example, proportionally the number of shares).

Here are the more concrete definitions of the terms:

GYGP Definitions:

• asset: Is a unit to measure the value of the pool. At time t, the pool has a total value of TotalAsset(t) assets.
• shares: Is a unit that represents ownership of the pool. At time t, there are TotalShares(t) shares in total.
• reward tokens: Over time, the pool earns $n_{rewards}$ types of reward tokens $(n_{rewards} \ge 0)$. At time t, $TotalRewards_i(t)$ is the amount of reward token i that has accumulated for the pool up until time t.
• exchange rate: At time t, the exchange rate ExchangeRate(t) is simply how many assets each shares is worth $ExchangeRate(t) = \frac{TotalAsset(t)}{TotalShares(t)}$
• users: At time t, each user u has $shares_u(t)$ shares in the pool, which is worth $asset_u(t) = shares_u(t) \cdot ExchangeRate(t)$ assets. Until time t, user u is entitled to receive a total of $rewards_{u_i}(t)$ reward token i. The sum of all users’ shares, assets and rewards should be the same as the total shares, assets and rewards of the whole pool.

State changes:

1. A user deposits $d_a$ assets into the pool at time $t$ ($d_a$ could be negative, which means a withdraw from the pool). $d_s = d_a / ExchangeRate(t)$ new shares will be created and given to user (or removed and burned from the user when $d_a$ is negative).
2. The pool earns $d_a$ (or loses $−d_a$ if $d_a$ is negative) assets at time $t$. The exchange rate simply increases (or decreases if $d_a$ is negative) due to the additional assets.
3. The pool earns $d_r$ reward token $i$. Every user will receive a certain amount of reward token $i$.

Examples of GYGPs in DeFi:

Standardized Yield Token Standard

Overview:

Standardized Yield (SY) is a token standard for any yield generating mechanism that conforms to the GYGP model. Each SY token represents shares in a GYGP and allows for interacting with the GYGP via a standard interface.

All SY tokens:

• MUST implement ERC-20 to represent shares in the underlying GYGP.
• MUST implement ERC-20’s optional metadata extensions name, symbol, and decimals, which SHOULD reflect the underlying GYGP’s accounting asset’s name, symbol, and decimals.
• MAY implement ERC-2612 to improve the UX of approving SY tokens on various integrations.
• MAY revert on calls to transfer and transferFrom if a SY token is to be non-transferable.
• The ERC-20 operations balanceOf, transfer, totalSupply, etc. SHOULD operate on the GYGP “shares”, which represent a claim to ownership on a fraction of the GYGP’s underlying holdings.

SY Definitions:

On top of the definitions above for GYGPs, we need to define 2 more concepts:

• input tokens: Are tokens that can be converted into assets to enter the pool. Each SY can accept several possible input tokens $tokens_{in_{i}}$

• output tokens: Are tokens that can be redeemed from assets when exiting the pool. Each SY can have several possible output tokens $tokens_{out_{i}}$

Interface

interface IStandardizedYield {
    event Deposit(
        address indexed caller,
        address indexed receiver,
        address indexed tokenIn,
        uint256 amountDeposited,
        uint256 amountSyOut
    );

    event Redeem(
        address indexed caller,
        address indexed receiver,
        address indexed tokenOut,
        uint256 amountSyToRedeem,
        uint256 amountTokenOut
    );

    function deposit(
        address receiver,
        address tokenIn,
        uint256 amountTokenToDeposit,
        uint256 minSharesOut,
        bool depositFromInternalBalance
    ) external returns (uint256 amountSharesOut);

    function redeem(
        address receiver,
        uint256 amountSharesToRedeem,
        address tokenOut,
        uint256 minTokenOut,
        bool burnFromInternalBalance
    ) external returns (uint256 amountTokenOut);

    function exchangeRate() external view returns (uint256 res);

    function getTokensIn() external view returns (address[] memory res);

    function getTokensOut() external view returns (address[] memory res);

    function yieldToken() external view returns (address);

    function previewDeposit(address tokenIn, uint256 amountTokenToDeposit)
        external
        view
        returns (uint256 amountSharesOut);

    function previewRedeem(address tokenOut, uint256 amountSharesToRedeem)
        external
        view
        returns (uint256 amountTokenOut);

    function name() external view returns (string memory);

    function symbol() external view returns (string memory);

    function decimals() external view returns (uint8);
}

Methods

function deposit(
    address receiver,
    address tokenIn,
    uint256 amountTokenToDeposit,
    uint256 minSharesOut,
    bool depositFromInternalBalance
) external returns (uint256 amountSharesOut);

This function will deposit amountTokenToDeposit of input token $i$ (tokenIn) to mint new SY shares.

If depositFromInternalBalance is set to false, msg.sender will need to initially deposit amountTokenToDeposit of input token $i$ (tokenIn) into the SY contract, then this function will convert the amountTokenToDeposit of input token $i$ into $d_a$ worth of asset and deposit this amount into the pool for the receiver, who will receive amountSharesOut of SY tokens (shares). If depositFromInternalBalance is set to true, then amountTokenToDeposit of input token $i$ (tokenIn) will be taken from receiver directly (as msg.sender), and will be converted and shares returned to the receiver similarly to the first case.

This function should revert if $amountSharesOut \lt minSharesOut$.

• MUST emit the Deposit event.
• MUST support ERC-20’s approve / transferFrom flow where tokenIn are taken from receiver directly (as msg.sender) or if the msg.sender has ERC-20 approved allowance over the input token of the receiver.
• MUST revert if $amountSharesOut \lt minSharesOut$ (due to deposit limit being reached, slippage, or the user not approving enough tokenIn **to the SY contract, etc).
• MAY be payable if the tokenIn depositing asset is the chain's native currency (e.g. ETH).

function redeem(
    address receiver,
    uint256 amountSharesToRedeem,
    address tokenOut,
    uint256 minTokenOut,
    bool burnFromInternalBalance
) external returns (uint256 amountTokenOut);

This function will redeem the $d_s$ shares, which is equivalent to $d_a = d_s \times ExchangeRate(t)$ assets, from the pool. The $d_a$ assets is converted into exactly amountTokenOut of output token $i$ (tokenOut).

If burnFromInternalBalance is set to false, the user will need to initially deposit amountSharesToRedeem into the SY contract, then this function will burn the floating amount $d_s$ of SY tokens (shares) in the SY contract to redeem to output token $i$ (tokenOut). This pattern is similar to UniswapV2 which allows for more gas efficient ways to interact with the contract. If burnFromInternalBalance is set to true, then this function will burn amountSharesToRedeem $d_s$ of SY tokens directly from the user to redeem to output token $i$ (tokenOut).

This function should revert if $amountTokenOut \lt minTokenOut$.

• MUST emit the Redeem event.
• MUST support ERC-20’s approve / transferFrom flow where the shares are burned from receiver directly (as msg.sender) or if the msg.sender has ERC-20 approved allowance over the shares of the receiver.
• MUST revert if $amountTokenOut \lt minTokenOut$ (due to redeem limit being reached, slippage, or the user not approving enough amountSharesToRedeem to the SY contract, etc).

function exchangeRate() external view returns (uint256 res);

This method updates and returns the latest exchange rate, which is the exchange rate from SY token amount into asset amount, scaled by a fixed scaling factor of 1e18.

• MUST return $ExchangeRate(t_{now})$ such that $ExchangeRate(t_{now}) \times syBalance / 1e18 = assetBalance$.
• MUST NOT include fees that are charged against the underlying yield token in the SY contract.

function getTokensIn() external view returns (address[] memory res);

This read-only method returns the list of all input tokens that can be used to deposit into the SY contract.

• MUST return ERC-20 token addresses.
• MUST return at least one address.
• MUST NOT revert.

function getTokensOut() external view returns (address[] memory res);

This read-only method returns the list of all output tokens that can be converted into when exiting the SY contract.

• MUST return ERC-20 token addresses.
• MUST return at least one address.
• MUST NOT revert.

function yieldToken() external view returns (address);

This read-only method returns the underlying yield-bearing token (representing a GYGP) address.

• MUST return a token address that conforms to the ERC-20 interface, or zero address
• MUST NOT revert.
• MUST reflect the exact underlying yield-bearing token address if the SY token is a wrapped token.
• MAY return 0x or zero address if the SY token is natively implemented, and not from wrapping.

function previewDeposit(address tokenIn, uint256 amountTokenToDeposit)
    external
    view
    returns (uint256 amountSharesOut);

This read-only method returns the amount of shares that a user would have received if they deposit amountTokenToDeposit of tokenIn.

• MUST return less than or equal of amountSharesOut to the actual return value of the deposit method, and SHOULD NOT return greater than the actual return value of the deposit method.
• SHOULD ONLY revert if minting SY token with the entered parameters is forbidden (e.g. exceeding supply cap).

function previewRedeem(address tokenOut, uint256 amountSharesToRedeem)
    external
    view
    returns (uint256 amountTokenOut);

This read-only method returns the amount of tokenOut that a user would have received if they redeem amountSharesToRedeem of tokenOut.

• MUST return less than or equal of amountTokenOut to the actual return value of the redeem method, and SHOULD NOT return greater than the actual return value of the redeem method.
• SHOULD ONLY revert if burning SY token with the entered parameters is forbidden.

Events

event Deposit(
    address indexed caller,
    address indexed receiver,
    address indexed tokenIn,
    uint256 amountDeposited,
    uint256 amountSyOut
);

caller has converted exact tokenIn tokens into SY (shares) and transferred those SY to receiver.

• MUST be emitted when input tokens are deposited into the SY contract via deposit method.

event Redeem(
    address indexed caller,
    address indexed receiver,
    address indexed tokenOut,
    uint256 amountSyToRedeem,
    uint256 amountTokenOut
);

caller has converted exact SY (shares) into input tokens and transferred those input tokens to receiver.

• MUST be emitted when input tokens are redeemed from the SY contract via redeem method.

"SY" Word Choice:

"SY" (pronunciation: /sʌɪ/), an abbreviation of Standardized Yield, was found to be appropriate to describe a broad universe of standardized composable yield-bearing digital assets.

Rationale

ERC-20 is enforced because implementation details such as transfer, token approvals, and balance calculation directly carry over to the SY tokens. This standardization makes the SY tokens immediately compatible with all ERC-20 use cases.

ERC-165 can optionally be implemented should you want integrations to detect the IStandardizedYield interface implementation.

ERC-2612 can optionally be implemented in order to improve the UX of approving SY tokens on various integrations.

Backwards Compatibility

This ERC is fully backwards compatible as its implementation extends the functionality of ERC-20, however the optional metadata extensions, namely name, decimals, and symbol semantics MUST be implemented for all SY token implementations.

Security Considerations

Malicious implementations which conform to the interface can put users at risk. It is recommended that all integrators (such as wallets, aggregators, or other smart contract protocols) review the implementation to avoid possible exploits and users losing funds.

yieldToken must strongly reflect the address of the underlying wrapped yield-bearing token. For a native implementation wherein the SY token does not wrap a yield-bearing token, but natively represents a GYGP share, then the address returned MAY be a zero address. Otherwise, for wrapped tokens, you may introduce confusion on what the SY token represents, or may be deemed malicious.

Copyright

Copyright and related rights waived via CC0.