Reviewing Cream IronBank 0 collateral loans using this flagship strategy.

Spoiler: It's not all unicorns and rainbows.

Thread: https://twitter.com/_/status/1351194511049895942

0 collateral loans will provide Yearn vaults additional funds for yield farming strategies without locking vault funds as collateral.

In this flagship strategy, for every 1 DAI deposited by vault LPs another 0.90 DAI is provided by Cream IronBank depositors to farm yield.

So vault LPs are farming yield as if they had ~2x their initial deposit? Double the yield with no additional risk!

The risk has actually been shifted to Cream depositors.

As a Compound or Aave DAI depositor your only risk is Compound/Aave SC failure or borrower collateral going 0 really fast.

With Cream IronBank, your DAI is exposed to additional risk for every SC involved in the borrowing Yearn vault strategy.

If losses occur the Cream depositors are repaid first, but if the vault loses >50% of total funds? Cream depositors lose too.

This is a much different risk profile to depositing your DAI in Aave/Compound.

So Cream DAI depositors should expect to be compensated for the additional risk through a higher savings rate. This will cut into vault APY of course.

How much Cream DAI depositors decide this risk is worth is up to them but again it is completely different to depositing their assets for borrowing with other providers.

If your money is going to be exposed to yield farming why not just do it yourself?

So really, IronBank turns Cream depositors into co-partners with vault LPs.

The size of the pie (profit from yield farming) did not increase, we just added a partner with different terms.