Yield Basis Flags Fee-Bypass Route in WETH Market, Puts Fix to Governance Vote
Key Takeaways
- •Yield Basis revealed on Oct. 28 that a deposit-and-withdraw path allows traders to pull value from its WETH market without paying appropriate fees, and it put the remedy to a governance vote rather than applying an immediate patch.
- •The affected market holds a 2x leveraged position in Curve's WETH/crvUSD pool, which the team valued at roughly $32 million on Oct. 21, and value extracted through the route would come from the same pool backing yb-WETH depositor shares.
- •The company has not estimated any losses, confirmed whether the route was ever used, or stated how long it existed, and it plans to publish technical details only after every pool receives the fix.
- •The proposed safeguard would require new liquidity deposits to add debt matching their minted collateral within one basis point, while swap fees would be set using signed Pyth Pro ETH/USD reports, with discounted swaps paying a 0.50% base fee capped at 1.75% instead of the current 1.36%-2.82% range.
- •Yield Basis proposal 60, with voting ending Oct. 29, can execute only after Curve vote 1508 passes, and a successful WETH deployment would be followed by separate votes for the cbBTC, WBTC and tBTC pools.
Yield Basis Flags Fee-Bypass Route in WETH Market, Puts Fix to Governance Vote
Yield Basis disclosed on Oct. 28 that traders can extract pool value through a deposit-and-withdraw route “without paying proper fees,” and said a proposed upgrade to its WETH market would close it. Any rollout still requires governance approval, so the fix lands only after votes across two governance platforms clear, not through an immediate patch.
The announcement did not quantify a loss, confirm whether anyone had actually used the route, or specify how long it had been available. “We will publish the details after all pools have the fix,” the team said, as reported by The Defiant.
The affected WETH market holds a 2x leveraged position in Curve’s WETH/crvUSD pool and issues yb-WETH shares to depositors, so value extracted through the route would come out of the same pool that backs those shares. Research published by the team valued the underlying pool at about $32 million on Oct. 21.
The corresponding Curve governance proposal identifies a specific safeguard: new liquidity-token deposits would have to add debt proportional to their newly minted liquidity-provider collateral, within one basis point. The proposal describes that constraint as protection against value extraction through a deposit followed by a withdrawal.
Pyth-Linked Fees, Governance Pending
The safeguard accompanies a broader change to how the pool charges for arbitrage. Existing swap fees range from 1.36% to 2.82%, and the pool re-centers liquidity toward an average of its own trade prices, according to the team’s research.
The proposed policy would instead use signed Pyth Pro ETH/USD reports — market-price reports from the Pyth oracle network — to set swap fees and guide where the pool concentrates liquidity. Curve’s pool formula would still determine trade prices, rather than the external report setting them directly.
Swaps that move the pool toward a freshly reported market price without crossing it would pay a base fee of 0.50% — below the current range’s 1.36% floor — plus 67.5% of the trader’s edge above 0.50%, capped at 1.75%. The edge measures the trade’s price advantage at the reported market price. All other swaps would pay 1.75%, and the discount would disappear after five minutes as the stored report ages.
Yield Basis proposal 60 remained active at the time of reporting, with voting scheduled to end on Oct. 29. It states that it can execute only after Curve vote 1508 has been executed, and the Curve proposal notes that votes on both platforms are needed for the parameters to take full effect — a two-vote dependency that sets the pace for how quickly the safeguard can go live.
Yield Basis plans to begin with WETH, then seek separate votes for its cbBTC, WBTC and tBTC pools after a successful WETH deployment. Until every pool is upgraded, the team’s technical details of the route remain unpublished, making the vote outcomes and the promised post-fix disclosure the items to track.
