SoK: Yield Aggregators in DeFi

TL;DR

This paper provides a comprehensive analysis of yield aggregators in DeFi, including their strategies, performance simulations, and empirical data analysis of major platforms, highlighting benefits and risks.

Contribution

It offers a systematic framework for understanding yield farming strategies and empirically analyzes major yield aggregators using on-chain data, which is novel in the field.

Findings

Identified key sources of yield in DeFi protocols

Compared strategies and revenue models of major yield aggregators

Linked data anomalies to historical events in yield farming

Abstract

Yield farming has been an immensely popular activity for cryptocurrency holders since the explosion of Decentralized Finance (DeFi) in the summer of 2020. In this Systematization of Knowledge (SoK), we study a general framework for yield farming strategies with empirical analysis. First, we summarize the fundamentals of yield farming by focusing on the protocols and tokens used by aggregators. We then examine the sources of yield and translate those into three example yield farming strategies, followed by the simulations of yield farming performance, based on these strategies. We further compare four major yield aggregrators -- Idle, Pickle, Harvest and Yearn -- in the ecosystem, along with brief introductions of others. We systematize their strategies and revenue models, and conduct an empirical analysis with on-chain data from example vaults, to find a plausible connection between data anomalies and historical events. Finally, we discuss the benefits and risks of yield aggregators.