Here’s a question that I have around Defi and staking. Let’s say I had some AVAX which I placed in a DeFi pool on YieldYak to receive rewards. In return for my deposit I get an amount of YRT tokens. These YRT tokens are YieldYak’s receipt token which both represents my stake in the pool and is what I use to get the original AVAX back out. These tokens can’t be traded on any market so have no monetary value, however, if I lost them then I would essentially lose the underlying AVAX which these tokens are receipt for.
OK some questions,
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Is this deposit seen as a trade? Unlike UNI the YRT tokens have no dollar value and can not be sold/traded on an exchange. They are essentially my ‘key’ to getting the tokens back.
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When I unstake the AVAX (ie: swap the YRT back for AVAX) is the AVAX I receive considered newly acquired and therefore will it reset the ‘purchase date’ for capital gains stax (short vs long).
If the IRS considers the (1) a trade that would make (2) a short term capital gain and I would then have to hold the returned AVAX for a year before selling if I wanted to not be hit with a short term capital gains tax.
I could see this really hurting DeFi as it essentially makes it only good for short term traders and pointless for long term savers.
Thoughts?