Yam Finance has provided one of the most dramatic DeFi stories of the past few months.
Thousands of keen yield farmers ploughed over $400 million into the yam.finance protocol in the first 24 hours of its launch on August the 11th, with $90 million of that deposited in the first 90 minutes.
Despite the team’s warnings that the code was unaudited, and that it had been put together in just 10 days, excitement spread quickly about the high APY that could be received through the new protocol.
Yam token farming had such an instant appeal that it caused a rapid decrease in AUM for Balancer (16%) Curve, (24%) and Yearn (38%).[2]
Even the founder of Bitmex, Arthur Hayes got involved; tweeting
“I’m a fucking farmer now. Long live the #DeFi bull market” [3]
At its peak, only 30 hours after launch, yam.finance had over $606 million TVL, as users frantically deposited their capital in order to earn themselves some YAM.
However, euphoria was quickly halted once the Yam Finance Twitter handle announced that a bug had been found in the contract.
As part of the YAM Protocol, rebases were to be used which would adjust supply in an attempt to peg 1 YAM to 1 USD, however the price reached $167.66 at its peak [4].
This is the specific code that caused the bug:
Users were requested to remove their funds immediately from the yCRV pool, and there was a failed attempt to stop the excess funds being minted via a governance protocol.
However, the excess YAMS were eventually minted, causing the YAM market cap to fall from $63 million to 0 in just 35 minutes [5].
The developers are clearly distraught about the failure of their project:
However,the team didn’t give up, and a rescue attempt was launched:
YAM 2.0. [5]
As it is essentially a meme based version of the AMPL token, this project shows that in the short term, virality gets more attention than quality.
We admire the transparency and creativity of the Yam Finance team, however this story serves as a reminder of the risks involved for yield farming in unaudited protocols.