YO Labs, the development team behind YO Protocol, has raised $10 million in a Series A round to expand its crypto yield optimization platform.
Venture capital firm Foundation Capital led the round, joined by Coinbase Ventures, Scribble Ventures and Launchpad Capital.
The San Francisco-based company plans to use the funding to expand its yield optimization protocol to more blockchains and improve its infrastructure.
The YO protocol is designed to help users earn yield on crypto assets by automatically rebalancing capital across multiple decentralized finance (DeFi) protocols while accounting for risk. It currently offers users access to yield products based on USD, EUR, BTC and gold.
Unlike most DeFi yield aggregators that operate within a single blockchain, YO’s system operates across multiple chains. Its vaults – yoETH, yoUSD, yoBTC, yoEUR and yoGOLD – dynamically allocate capital where the risk-adjusted return is most favorable, according to a press release shared with CoinDesk.
This is powered by Exponential.fi, a platform built by the same team to assign transparent risk scores to DeFi protocols. The protocol’s main innovation lies in its calculation of “risk-adjusted return,” a metric derived from the team’s experience establishing risk assessments for DeFi pools, the protocol’s co-founder and CIO Mehdi Lebbar told CoinDesk in an interview.
Rather than looking for the highest advertised percentages, the system calculates a probability of default based on thousands of risk vectors, ranging from the age of a protocol to the audit history of its code.
To mitigate security vulnerabilities often associated with moving assets between blockchains, YO Labs uses a unique architecture that minimizes the reliance on bridges, Lebbar said. Instead of constantly moving funds between chains, the protocol establishes what the team describes as “embassies”: independent vaults holding native assets on each blockchain.
“If you bridge a pool, you’re exposed to bridge risk…We needed to create these ’embassies’ across multiple planets, these vaults across multiple chains that hold native assets,” Lebbar said. “If you have USDC on Arbitrum, it’s the same USDC as on Ethereum, and you don’t have the bridge in the middle anymore… it’s a lot more secure.”
Beyond the architecture, the system uses a “DeFi Graph” to manage active risks in the event of market volatility or protocol failures, what Lebbar calls “Armageddon scenarios.” This system monitors dependencies up to five levels deep, allowing the protocol to trigger automated withdrawals if a pool is indirectly exposed to a failing asset, Lebbar said.
The funding round brings YO Labs’ total raised to $24 million, including a previous funding round led by Paradigm. With the new capital, the company positions YO as a core infrastructure for fintechs, wallets and developers looking to integrate sustainable yield into their products.
