New standard promises to clean up the ‘mess’ in yield tokens


The mess in yield-bearing tokens is about to be cleaned up. At least, that’s the plan.

ERC-4626, a new token standard for yield-generating chests on Ethereum, has been finalized.

It is designed to facilitate the integration of yield tokens, such as aTokens from Aave or xSUSHI from SushiSwap, with DeFi protocols. The standard was first proposed in December by Fei Protocol co-founder Joey Santoro.

silver legos

The token standard will allow dapps supporting a single ERC-4626-based vault to support all yield bearer tokens built to the same specifications. Without the standard, protocols looking to integrate yield-bearing assets must develop custom code for each individual token. This requires costly code audits and also risks creating new security vulnerabilities.

The token standard is expected to accelerate the creation of so-called “currency legos” within DeFi. Open source development within DeFi allows teams to build on existing products, protocols, and standards to design new innovations by leveraging interoperability and composability.

Yearn Finance described the current state of yield tokens as “a mess” in an April 6 Twitter thread.

“To build a single application on top of DeFi’s yield-bearing tokens, you need to write dozens of complex, error-prone adapters that can handle every single variation. ERC-4626 makes that a thing of the past,” Yearn said.

“Imagine if Uniswap developers had to rewrite and audit exchange contracts every time they wanted to deploy a new pair,” Jet Jadeja, co-author and developer of ERC-4626 at Rari Capital, told The Defiant in January.

Token standard

Yearn said he is working to implement the standard in his v3 vaults. Last month, Santoro Noted that Balancer, Alchemix, Maple Finance, OpenZeppelin, and Midas Capita1, among other teams, are also working on integrating the new token standard.

santoro tweeted that the completion of ERC-4626 marks the happiest day of their lives.

ERC-4626’s progress has received praise from the crypto community on Twitter. 0xevolve, formerly of Agora Market, said, “Let’s move the space forward together. Composability is the key to innovation in DeFi.

Dtsetso emphasized that the new standard will strengthen permissionless composability without compromising security. “DeFi innovation will only accelerate,” they added.


About Author

Comments are closed.