Proposal: Enabling USD+ Pools (by Overnight Finance) in Yearn Finance as Collateral for MIM

TL;DR: Allow USD+ pools in Yearn Finance in form of yvTokens as collateral for MIM to boost the liquidity in Optimism Chain.


This proposal aims to diversify the collateral of Magic Internet Money (MIM) by incorporating USD+ (by Overnight Finance) pools in Yearn Finance (as yvTokens) as an acceptable form of collateral. This would further strengthen the robustness and versatility of our DeFi ecosystem and promote wider participation and increase the liquidity of MIM in Optimism.

Proposal Details

Asset Introduction:

  1. USD+ by Overnight Finance
    USD+ is a DeFi product that offers users the opportunity to invest in a diversified basket of stablecoins. The main goal of USD+ is to optimize yield generation by allocating funds across various yield-bearing protocols and platforms in the DeFi ecosystem. In essence, users deposit their stablecoins into the USD+ pool and receive interest-earning USD+ tokens in return.

  2. USD+ Pools in Yearn Finance (yvTokens)
    USD+ pools in Yearn Finance signify a diversified basket of stablecoins that is supported by different delta neutral strategies via Overnight Finance seeking to generate maximum yield. Including these pools as eligible collateral implies a significant expansion of our value base and opens up opportunities to attract a broader variety of users and investors.

About Overnight Finance: is a protocol focusing on asset management, with a specialization in neutral-risk strategies. At the heart of its product line is USD+, which is a yield-driven stablecoin, fully backed by collateral. This collateral for USD+ is rooted in DeFi strategies that generate returns. These strategies encompass lending to platforms like Aave, and include both stablecoin-to-stablecoin and neutral-risk strategies.

Core Use-case:

  • Treasury management
  • Liquidity provision on Dexes (e.g. currently USDC/USD+ on Velodrome)

About Yearn Finance:
Yearn.Finance is a leading decentralized finance (DeFi) protocol, designed with the objective of optimizing and automating yield generation for users in the DeFi ecosystem. It has become a go-to platform for users searching for the most profitable yield farming opportunities, and offers several key features that streamline and enhance the DeFi experience.

One of the Key Features of Yearn.Finance include:

yVaults: A core component of the protocol, yVaults automatically deploy users’ funds into various yield farming strategies, maximizing profits while mitigating risks associated with manual strategy selection and frequent asset manipulation. Users can deposit tokens into yVaults and receive yvTokens in return, which represent their share of the vault and appreciate in value as profits are generated.

Collateral Ratio

  • This proposal suggests setting an initial collateral ratio of 70% for USD+ pools. Over-collateralization is crucial for maintaining the stability of MIM, and it is important to regularly revise this ratio according to market conditions and the performance of USD+ pools as a collateral type.
  1. Interest Rate Model
    A dynamic interest rate model for borrowers using USD+ pools as collateral can be designed to ensure fair distribution of borrowing costs while incentivizing the provision and use of this new form of collateral.
  2. Risk Parameters
    For effectively managing and mitigating risks, there can be liquidation and stability fees to be imposed.

Risk Assessment

The introduction of USD+ pools from Yearn Finance as collateral comes with certain risks that need to be assessed:

  • Market Risk: Broadening of the asset base with USD+ pools exposure implies greater market risk primarily due to the increased diversity of stablecoin assets.
  • Liquidity Risk: Constant monitoring of USD+ pool liquidity may be required for maintaining efficient collateral liquidation processes whenever necessary.
  • Smart Contract Risk: The diversified nature of USD+ pools necessitates a thorough audit of the underlying smart contracts to detect and remedy potential vulnerabilities.
  • Platform Risk: USD+ depends on the performance of the platforms where the underlying investments are made. If any of these platforms were to experience issues or become insolvent, it could negatively impact the returns of the USD+ pools and the value of USD+ token. This is largely mitigated by different risk management strategies and collateral are only placed on top notch yield farming protocols and is backed mostly by delta neutral strategies.

Next Steps for Community Consideration

  • Encouragement for community involvement in the debate surrounding this proposal and participation in voting.


In conclusion, allowing USD+ pools on Yearn Finance to be accepted as collateral for MIM (Magic Internet Money) could bring multiple advantages.

The diversified nature of USD+ pools contributes to enhanced stability and reduces the risk associated with any single stablecoin, making it a potentially secure form of collateral. This process could result in more users feeling confident about participating in lending or borrowing transactions.

Moreover, the yield generation properties of USD+ pools could offer additional financial incentive to stakeholders. The stablecoin-based revenue stream that these pools are designed to create may add further economic value to the entire system.

Taking into consideration the passive income potential, the stability, and the diversified investment strategy of USD+ pools, integrating them into the Yearn Finance ecosystem as collateral for MIM could potentially encourage greater user participation, enhance the system’s stability, and support the overall growth of the DeFi ecosystem.

However, given the unpredictable and evolving nature of DeFi environments, such a move should be preceded by comprehensive risk mitigation strategies, combined with clear, reliable infrastructural and developmental support to ensure safety and optimal functionality.

Through this proposal, we aim to spark discussion and communal action towards the advancement of our DeFi ecosystem and TVL/Liquidity on Optimism.


Discord: USD+ ┃Overnight Finance
Telegram: @wmermus

I worry about how we would liquidate when negative rebases happen. I believe there was recently a >20% loss on zksync that took effect in a one-time negative rebase. While limiting the LTV would mitigate some of this risk, the suddenness with which the value of the collateral can fall makes it tough to support as a collateral IMO.

LTV addresses the issue, the benefit is that liquidation is 1:1 with USDC as rebase drives collateralization to 100%. Also, the issue is less important on OP, as the chain is more mature and projects are of higher quality.