{"id":65575,"date":"2022-08-10T07:00:00","date_gmt":"2022-08-10T04:00:00","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=65575"},"modified":"2025-09-06T20:45:33","modified_gmt":"2025-09-06T17:45:33","slug":"erc-4626-how-the-new-standard-could-revive-the-defi-segment","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/erc-4626-how-the-new-standard-could-revive-the-defi-segment\/","title":{"rendered":"ERC-4626: How the New Standard Could Revive the DeFi Segment"},"content":{"rendered":"<p>The DeFi boom, sparked by the COVID-19 crisis, reached its peak <a href=\\\"https:\/\/defillama.com\/\\\">at the end of 2021<\/a>. The DeFi ecosystem\u2019s <span data-descr=\\\"the value of assets locked in the smart contracts of decentralized applications\\\" class=\\\"old_tooltip\\\">TVL<\/span> began to decline. The drop was accelerated by <a href=\"https:\/\/u1f987.com\/en\/news\/terras-death-spiral-how-and-why-luna-and-ust-collapsed\">the Terra crash<\/a>, which weighed on the entire crypto industry.<\/p>\n<p><!--more--><\/p>\n<p>Many market participants are banking on the forthcoming <a href=\"https:\/\/u1f987.com\/en\/news\/the-merge-what-to-expect-from-ethereums-largest-update\">The Merge upgrade<\/a>. In the medium to long term, Ethereum could become more attractive as an investment. The upgrade should also aid scaling solutions, with rollups and sharding taking a prominent role, and <a href=\"https:\/\/u1f987.com\/en\/news\/vitalik-buterin-explains-the-role-of-zk-rollups-in-ethereum-scalability\">Rollups<\/a>.<\/p>\n<p>The market and the DeFi ecosystem in particular could benefit from a new token standard \u2014 <a href=\\\"https:\/\/eips.ethereum.org\/EIPS\/eip-4626\\\">EIP-4626<\/a>. It aims to improve interaction among <span data-descr=\\\"decentralized applications\\\" class=\\\"old_tooltip\\\">dapps<\/span> and expand opportunities for <a href=\"https:\/\/u1f987.com\/en\/news\/yield-farming-theory-and-practice\">yield farming<\/a>.<\/p>\n<div class=\\\"wp-block-text-wrappers-keypoints article_keypoints\\\">\n<ul class=\\\"wp-block-list\\\">\n<li>Many DeFi platforms lack a single standard of implementation. This complicates development and integration of applications, exposes security vulnerabilities and hampers scalability.<\/li>\n<li>EIP-4626 aims to address these problems, opening the next chapter in DeFi 2.0 development <a href=\"https:\/\/u1f987.com\/en\/news\/what-is-defi-2-0\">DeFi 2.0<\/a>.<\/li>\n<li>The new standard is being actively adopted by well-known projects, including yEarn, Alchemix, Balancer and Fei Protocol.<\/li>\n<\/ul>\n<\/div>\n<h2 class=\\\"wp-block-heading\\\">Advantages and drawbacks of yield farming<\/h2>\n<p>The DeFi segment is gradually moving toward standardisation as users want to transfer assets between various blockchains as simply and securely as possible.<\/p>\n<p>Interoperability is aided by <a href=\"https:\/\/u1f987.com\/en\/news\/what-are-cross-chain-bridges\">cross-chain solutions<\/a>, many of which require <a href=\"https:\/\/u1f987.com\/en\/news\/wbtc-renbtc-and-hbtc-what-bitcoin-on-ethereum-is-and-why-it-matters\">wrapped tokens<\/a>. Using wrapped tokens entails additional steps and gas costs.<\/p>\n<p>Moreover, not all cross-chain bridges are safe. For instance, recently <a href=\"https:\/\/u1f987.com\/en\/news\/nomad-offers-hackers-90-of-stolen-funds-to-return-assets\">hackers drained Nomad of about $190 million<\/a>. Analysts at Chainalysis <a href=\"https:\/\/u1f987.com\/en\/news\/chainalysis-estimates-2bn-in-losses-from-cross-chain-protocol-hacks-so-far-this-year\">estimated $2 billion<\/a> worth of assets stolen since the start of the year across 13 cross-chain protocol attacks.<\/p>\n<p>Notwithstanding the risks, the DeFi sector continues to grow \u2014 many users are chiefly interested in the prospect of relatively high returns compared with traditional markets.<\/p>\n<p>Yield farming (or farming) opens up wide opportunities for profitable investment. Its essence is simple: participants provide tokens to a platform and receive a reward in return. The process resembles a bank deposit, but it involves no onerous KYC\/AML procedures or other bureaucratic frictions.<\/p>\n<p>Because of its composability, DeFi resembles a kind of financial LEGO. The interaction of different applications unlocks a vast range of complex profit-maximising strategies, demanding a fairly deep understanding of the processes and research into the \\&#8221;pitfalls\\&#8221;.<\/p>\n<p>To ease life for farmers, yield aggregators \u2014 platforms offering automated yield farming \u2014 have been created. They implement complex strategies themselves, saving time, effort and transaction costs. For interacting with such platforms a user needs only a few clicks.<\/p>\n<p>In a separate category are <a href=\"https:\/\/u1f987.com\/en\/news\/financial-alchemy-how-to-boost-income-with-uniswap-v3-liquidity-managers\">concentrated-liquidity-position optimisers<\/a> such as Popsicle Finance. Such platforms aim to improve the efficiency of liquidity providers on Uniswap v3 and reduce <a href=\"https:\/\/u1f987.com\/en\/news\/what-is-impermanent-loss-il\">impermanent loss<\/a> risks.<\/p>\n<p>Yearn Finance by Andre Cronje \u2014 one of the first yield aggregators in DeFi. Let\u2019s consider the platform\u2019s workings using the example of the yvETH vault.<\/p>\n<p>Users can deposit ETH into the yvETH vault and receive yETH in return. The smart contract then places the funds in the lending protocol <a href=\"https:\/\/u1f987.com\/en\/news\/what-are-makerdao-mkr-and-the-dai-stablecoin\">MakerDAO<\/a>, creating <a href=\"https:\/\/u1f987.com\/en\/news\/what-are-stablecoins\">DAI<\/a>. The stablecoin is deposited in Curve\u2019s Y Pool, generating income in CRV tokens. The latter are converted back into ETH to be periodically distributed to yETH holders.<\/p>\n<figure class=\\\"wp-block-image size-full\\\"><img loading=\\\"lazy\\\" decoding=\\\"async\\\" width=\\\"837\\\" height=\\\"483\\\" src=\\\"https:\/\/u1f987.com\/wp-content\/uploads\/strategy.png\\\" alt=\\\"ERC-4626: how the new standard could revive the DeFi segment\\\" class=\\\"wp-image-181371\\\" srcset=\\\"https:\/\/u1f987.com\/wp-content\/uploads\/strategy.png 837w, https:\/\/u1f987.com\/wp-content\/uploads\/strategy-300x173.png 300w, https:\/\/u1f987.com\/wp-content\/uploads\/strategy-768x443.png 768w\\\" sizes=\\\"auto, (max-width: 837px) 100vw, 837px\\\" \/><figcaption>Data: yearn.finance, <a href=\\\"https:\/\/research.huobi.com\/#\/ArticleDetails?id=293\\\">Huobi Research<\/a>.<\/figcaption><\/figure>\n<p>Similar aggregators and vaults have proliferated. However, before ERC-4626 there was no universal standard for implementing such solutions, which led to various risks and complexities.<\/p>\n<blockquote class=\\\"twitter-tweet\\\" data-conversation=\\\"none\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">2\/ Here\u2019s the tldr on ERC-4626: <\/p>\n<p>Yield-bearing tokens are a mess<\/p>\n<p>Yield aggregators, vaults, lending markets and native yield tokens like <a href=\\\"https:\/\/twitter.com\/search?q=%24xSUSHI&#038;src=ctag&#038;ref_src=twsrc%5Etfw\\\">$xSUSHI<\/a> are often implemented with slight variations<\/p>\n<p>\u2014 yearn (@iearnfinance) <a href=\\\"https:\/\/twitter.com\/iearnfinance\/status\/1511444222041280520?ref_src=twsrc%5Etfw\\\">April 5, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\\\"\\\" src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script><\/p>\n<blockquote class=\\\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\\\">\n<p>\u00abYield tokens are in complete disarray. Yield aggregators, vaults, lending markets and native yield tokens like xSUSHI are often implemented with small variations\u00bb, \u2014 noted the developers of yEarn.<\/p>\n<\/blockquote>\n<p>Much time was also spent on platform development. Also, technical differences gave rise to interoperability and scalability issues, exposing vulnerabilities.<\/p>\n<blockquote class=\\\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\\\">\n<p>\u00abTo create a single DeFi yield-token-based application you would have to write dozens of complex, error-prone adapters able to handle every unique variation\u00bb, \u2014 added representatives of Cronje\u2019s platform.<\/p>\n<\/blockquote>\n<h2 class=\\\"wp-block-heading\\\">ERC-4626 \u2014 the standard for tokenised vaults<\/h2>\n<p>In early April, the developers of yEarn announced the completion of ERC-4626 and the start of the \\&#8221;Great Vault Standardisation\\&#8221;.<\/p>\n<figure class=\\\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\\\">\n<div class=\\\"wp-block-embed__wrapper\\\">\n<blockquote class=\\\"twitter-tweet\\\" data-width=\\\"500\\\" data-dnt=\\\"true\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">You\u2019ve heard of ERC-20s, ERC-721s and ERC-1155s<\/p>\n<p>Soon you shall know ERC-4626s<\/p>\n<p>The Tokenized Vault Standard (ERC-4626) is final. And the Great Vault Standardisation begins now<\/p>\n<p>tl;dr \ud83d\udc47<\/p>\n<p>\u2014 yearn (@yearnfi) <a href=\\\"https:\/\/twitter.com\/yearnfi\/status\/1511444220850184197?ref_src=twsrc%5Etfw\\\">April 5, 2022<\/a><\/p><\/blockquote>\n<p><script async src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script>\n<\/div>\n<\/figure>\n<p>According to them, a vault built on the new standard can interact with any ERC-4626 tokens.<\/p>\n<blockquote class=\\\"twitter-tweet\\\" data-conversation=\\\"none\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">4\/ It\u2019s composability at its finest<\/p>\n<p>Build an app on top of one ERC-4626 vault, and it will work for all other ERC-4626 tokens<\/p>\n<p>\u2014 yearn (@iearnfinance) <a href=\\\"https:\/\/twitter.com\/iearnfinance\/status\/1511444224792834055?ref_src=twsrc%5Etfw\\\">April 5, 2022<\/a><\/p><\/blockquote>\n<p> <script async=\\\"\\\" src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script><\/p>\n<p>Work is underway on Yearn\u2019s V3 vaults. Well-known projects such as Alchemix, Balancer, Rari Capital, Fei Protocol, OpenZeppelin are also actively adopting the new standard.<\/p>\n<blockquote class=\\\"twitter-tweet\\\" data-conversation=\\\"none\\\">\n<p lang=\\\"en\\\" dir=\\\"ltr\\\">5\/ Yearn V3 + ERC-4626 = inevitable<\/p>\n<p>Contributors are already working hard implementing the standard for Yearn\u2019s V3 vaults<\/p>\n<p>So are devs at <a href=\\\"https:\/\/twitter.com\/AlchemixFi?ref_src=twsrc%5Etfw\\\">@AlchemixFi<\/a>, <a href=\\\"https:\/\/twitter.com\/balancer?ref_src=twsrc%5Etfw\\\">@balancer<\/a>, <a href=\\\"https:\/\/twitter.com\/RariCapital?ref_src=twsrc%5Etfw\\\">@RariCapital<\/a>, <a href=\\\"https:\/\/twitter.com\/feiprotocol?ref_src=twsrc%5Etfw\\\">@feiprotocol<\/a>, <a href=\\\"https:\/\/twitter.com\/OpenZeppelin?ref_src=twsrc%5Etfw\\\">@OpenZeppelin<\/a> and elsewhere<\/p>\n<p>Perhaps one day, we\u2019ll even see a Erc4626 tab on <a href=\\\"https:\/\/twitter.com\/etherscan?ref_src=twsrc%5Etfw\\\">@etherscan<\/a><\/p>\n<p>\u2014 yearn (@iearnfinance) <a href=\\\"https:\/\/twitter.com\/iearnfinance\/status\/1511444226566983683?ref_src=twsrc%5Etfw\\\">April 5, 2022<\/a><\/p><\/blockquote>\n<p> <script async src=\\\"https:\/\/platform.twitter.com\/widgets.js\\\" charset=\\\"utf-8\\\"><\/script><\/p>\n<blockquote class=\\\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\\\">\n<p>\u00abPerhaps one day we\u2019ll even see an ERC-4626 tab on Etherscan\u00bb, \u2014 suggested the developers.<\/p>\n<\/blockquote>\n<figure class=\\\"wp-block-image size-full\\\"><img loading=\\\"lazy\\\" decoding=\\\"async\\\" width=\\\"646\\\" height=\\\"745\\\" src=\\\"https:\/\/u1f987.com\/wp-content\/uploads\/Early-adopters.png\\\" alt=\\\"ERC-4626: how the new standard could revive the DeFi segment\\\" class=\\\"wp-image-181372\\\" srcset=\\\"https:\/\/u1f987.com\/wp-content\/uploads\/Early-adopters.png 646w, https:\/\/u1f987.com\/wp-content\/uploads\/Early-adopters-260x300.png 260w\\\" sizes=\\\"auto, (max-width: 646px) 100vw, 646px\\\" \/><figcaption>Early adopters of the new standard. Data: <a href=\\\"https:\/\/erc4626.info\/\\\">erc4626.info<\/a>.<\/figcaption><\/figure>\n<p>Developers at yEarn expressed confidence that ERC-4626 will become the \u201cgold standard for any yield token,\u201d and drew a parallel with ERC-721 in the NFT context.<\/p>\n<blockquote class=\\\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\\\">\n<p>\u00abStandardising vault implementations simplifies the integration of apps, modules and other tools\u00bb, \u2014 said the erc4626.info site.<\/p>\n<\/blockquote>\n<p>As Huobi Research experts explained, ERC-4626 unifies the following parameters:<\/p>\n<ul class=\\\"wp-block-list\\\">\n<li><strong>cost savings. <\/strong>The new standard provides a universal framework for developers. To connect to new vaults using yield tokens, only a unified <span data-descr=\\\"Application Programming Interface, programming interface\\\" class=\\\"old_tooltip\\\">API<\/span> is required. There is no need to create special adapters, wrapped tokens or other tools that entail extra steps. Auditing costs will also be reduced;<\/li>\n<li><strong>further improvement of DeFi protocol composability<\/strong>. ERC-4626 eliminates barriers to the integration of decentralized applications. The synergistic effect increases the value of dapps;<\/li>\n<li><strong>increased capital efficiency<\/strong> thanks to widespread support for yield tokens. The latter can move freely between protocols like base assets;<\/li>\n<li><strong>promotion of the DeFi 2.0 concept<\/strong>. Huobi Research experts believe that, alongside yield aggregators, lending platforms will actively adopt the new standard. This should foster more sophisticated profit-generating strategies.<\/li>\n<\/ul>\n<p>The inventor of the standard, Joey Santoro <a href=\\\"https:\/\/twitter.com\/joey__santoro\/status\/1478489639119773699\\\">is convinced<\/a>, that ERC-4626 also saves development time, lends flexibility to integration, improves user safety when interacting with applications, and drives innovation.<\/p>\n<h2 class=\\\"wp-block-heading\\\">Conclusions<\/h2>\n<p>The DeFi segment and the crypto industry at large are developing rapidly. Venture investment, <a href=\"https:\/\/u1f987.com\/en\/news\/venture-investment-in-the-industry-in-the-first-half-tops-30-billion\">the volume of which is rising<\/a> even amid a bear market, helps drive this.<\/p>\n<p>Many DeFi apps would benefit from a single standard like ERC-721 in the NFT context. This gap is expected to be filled by ERC-4626, which will simplify protocol integration and enable broader interoperability.<\/p>\n<p>Applications built on ERC-4626 can easily interact with any other platforms that have adopted the new standard. This expands the range of yield strategies and eases developers\u2019 workloads. It is not unlikely that ERC-4626 will indeed become the \u201cgold standard\u201d for the DeFi segment of the new generation. Or, at least, a significant addition to the familiar <a href=\"https:\/\/u1f987.com\/en\/news\/what-are-erc-20-tokens\">ERC-20<\/a>.<\/p>\n<p>Read ForkLog\u2019s bitcoin news in our <a href=\\\"https:\/\/telegram.me\/forklog\\\" target=\\\"_blank\\\" rel=\\\"nofollow noopener\\\">Telegram<\/a> \u2014 cryptocurrency news, rates and analysis.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The new token standard\u2014EIP-4626\u2014could positively influence the DeFi ecosystem. It is designed to improve interaction for dapps and open new opportunities for yield farming.<\/p>\n","protected":false},"author":1,"featured_media":65576,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"1","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[1144],"tags":[1093,46],"class_list":["post-65575","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-longreads","tag-defi","tag-ethereum"],"aioseo_notices":[],"amp_enabled":true,"views":"32","promo_type":"1","layout_type":"1","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/65575","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/comments?post=65575"}],"version-history":[{"count":1,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/65575\/revisions"}],"predecessor-version":[{"id":65577,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/posts\/65575\/revisions\/65577"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media\/65576"}],"wp:attachment":[{"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/media?parent=65575"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/categories?post=65575"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/u1f987.com\/en\/wp-json\/wp\/v2\/tags?post=65575"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}