💎Yield Bearing Collateral

What is a Yield Bearing Asset?

Yield bearing assets are assets that earn yield. Some examples are LP tokens, Yearn Vault Tokens, aTokens, cTokens, and more.

Why does Palm Finance allow Yield Bearing Assets as Collateral?

On Avalanche, there are already well-developed lending markets to borrow against base-level assets such as WETH But for many yield-bearing assets, there is no place to borrow against them and lever up. Borrowers on Palm continue earning yields on their collateral while also now being able to lever up on these assets.

What Yield Bearing Assets will PalmFinance Accept?

Palm Finance will be accepting a variety of highly liquid collateral from the largest projects in the Avalanche ecosystem. This includes:

• Staked assets XXX

• Trader XXX and Curve LP tokens

• Deposited collateral on the Aave

Palm Finance will also accept base-level tokens such as WETH, WBTC、XXX as collateral. Yield-bearing collateral will continue to earn the farming rewards they otherwise would have. For example, Trader XXX LP tokens are staked on behalf of users to continue earning XXX rewards. Similarly, Curve LP tokens used as collateral continue earning any farming rewards and Ethereum rush incentives. The same is true for collateral from the lending markets listed above.

How does auto-compounding/farming yield work?

We automatically auto-compound farming rewards for your collaterals deposited in Palm. What that means is when you deposit through Palm, you maximize your yield earned on assets.

On most collaterals, we take a cut of the farming reward at the time of the auto-compound. This is true for Curve and Trader XXX LP tokens as well as XXX.

However, for lending market collateral (deposited collateral on Aave), we also take a cut of the intrinsic yield generated by the collateral.

Our philosophy is we want to make the best farming experience possible while building a sustainable economic model around it. We realize that the best way to do this is to align incentives. The one-time fees will be a one revenue stream, but the primary way we make money is auto-compound/cut of yield. And it's incentive-aligned in the sense that the protocol only makes money if our users do.

Our site displays yield opportunities net of Palm's cut of yield, which varies depending on the collateral type.

Collteral	Autocompound/Farm Mechanism
XXX LP Tokens	XXX tokens deposited on Palm earn XXX rewards through the Trader Joe Master Chef Contract. XXX rewards are sold (auto-compounded) for more LP tokens and the Palm treasury takes a cut of XXX here.
Curve av3CRV LP Tokens	av3CRV LP tokens deposited on Palm are deposited in a Curve gauge to accrue WETH rewards from Ethereum Rush incentives as well as CRV rewards. The rewards are sold (auto-compounded) so each av3CRV depositor acquires more LP tokens. The Palm treasury takes a cut of the WETH and CRV rewards on auto-compound.
XXX	XXX deposited into XXX accrue USDC yield. This yield auto-compounded for more XXX tokens which are deposited into XXX. The Palm treasury takes a cut of the USDC on each auto-compound.
Aave Deposited Collateral	Aave deposited assets earn WETH rewards (from Ethereum Rush) along with an intrinsic interest rate. The WETH is periodically auto-compounded for more aTokens and the Palm treasury takes a cut on auto-compound. The treasury also takes a cut of the intrinsic yield on these assets.
XXX Deposited Collateral	Benqi deposited assets earn QI, and WETH rewards (from Ethereum Rush) along with an intrinsic interest rate. The QI and WETH is periodically auto-compounded for more qiTokens and the Palm treasury takes a cut on auto-compound. The treasury also takes a cut of the intrinsic yield on these assets. It's not possible to utilize XXX as collateral on both XXX and Palm Finance at the same time.

How do fee discounts work?

More details will be coming soon as we finalize this. Fee discounts will not be live when mainnet launches. But post-launch you will be able to put your accumated vePALM toward reducing the protocol's cut of your farming yield.

We want to reward longer-term stakers with the opportunity to access even more favorable farming strategies.