Yield Skimming Strategy
Yield Skimming Strategies (YSS) are smart‑contract vaults that accept a single ERC‑20 asset and capture all appreciation to a configured on‑chain address. Users can deposit directly into a strategy via the standard ERC‑4626 interface; the strategy holds the yield‑bearing asset directly (staking, liquid staking derivatives, etc.).
When the exchange rate appreciates, the system mints new value‑shares to the dragon router. When the exchange rate depreciates, the system burns dragon shares first to protect user value; only losses beyond that dragon buffer are socialized across all holders.
Who this is for
DeFi‑native engineers who want to author strategies that capture exchange rate appreciation. We assume:
- Ethereum‑mainnet context
- ERC‑20 / ERC‑4626 familiarity
- Foundry workflow for development and testing
The model in one paragraph
A YSS strategy is an ERC‑4626 vault where appreciation becomes dragon exposure instead of user yield. The dragon address holds value‑shares that are minted on rate increases and burned on rate decreases. Users maintain stable ETH‑value positions (1 share = 1 ETH value) while the underlying exchange rate fluctuates. If a depreciation exceeds the dragon buffer, the vault becomes insolvent and converts to proportional distribution mode.