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What is Yearn.Finance(YFI)?

BitForex Editor
Nov 16, 2020

The centralized finance institutions have been receiving blows to their monopoly on financial services after cryptocurrency became popular in the 2010s and Yearn. Finance is yet another punch on the chin to these institutions.

What is Yearn.Finance? you ask, here is some background information for you to get some perspective on what YFI is, where it came from and how it came about;

What is Yearn.Finance?

For the experts, Yearn.Finance is an Etherium based protocol that is focused on the provision of access to the highest yields of altcoins, ether, and stable coins for its users. To the newbies, Yearn.Finance is simply a portal to several DeFi products. It is a community-driven Robo-advisor for yield that trades on assets produced by other companies and theirs. This is one of the major selling points of the platform which is causing a lot of buzzes right now.

Launched in early 2020, Yearn.Finance was created by Andre Cronje, a South African based financial technology. He took the initiative to build Yearn.Finance after inconsistencies were found by him in the yields that other different DeFi applications offer.

In a nutshell, Yearn.Finance is a suite of products that are DeFi based which provides yield generation, insurance, and lending aggregation on the Etherium blockchain. The protocol is developed and maintained by several independent contributors throughout the crypto world.

It functions by taking user funds and then distributing them to other DeFi-based platforms like Compound and Aave. Although this process is risky, the yields are also increased during this process as different yield farming systems have varying earning ratios.

Features Of Yearn.Finance

1. Vaults

They are Capital pools which automatically generate yield depending on opportunities present in the market. Their benefits include; automatically shifting capital as opportunities arise, socializing gas costs, and automating the rebalancing process and yield generation.

The end users don't need to have expert knowledge of DeFi or the underlying protocol involved thus vaults are a passives investing strategy.

2. Zap

This is a tool that enables users to swap between several liquidity pools available on Curve Finance. The technique is called Zapping. Users can currently use five stable coins(DAI, BUSD, TUSD, USDC, and USDT) and two pools which they can zap between at will.

3. Earn

Yearn's first product was a lending aggregator. As interest rates change, funds are automatically shifted between AAVE, compound, and dYdX. This process ensures that end users are getting the highest interest rates at all times.

4. Cover

This is insurance that enables users to get coverage for several smart contracts and protocols on the Etherium blockchain against financial loss. This cover is underwritten by Nexus Mutual.

Meet YFI

Although the post claimed the coins had no intrinsic value, it sold far beyond expectations. After the launch, a 30,000 coin maximum supply interning to keep it scarce and valuable. Unsatisfied users who didn't agree with this decision then forked the project to produce DFI.money or YF2.

Why is YFI Important?

Although its price action is a "big deal", the major importance of this protocol is how it marked a shift in the way protocols incentivize adoption.  Because anyone could participate in its generation at equal prices, YFI is widely regarded by the crypto community as the fairest launch since Bitcoin.

Rather than use an ICO for launch, they ensured that all users must participate in the protocol. Thus, through the use of the governance token a community was built quickly around the project. This ensured that even after initial price volatility, it boasts one of the most active communities in the DeFi space.

Yield Farming

Yield farming is a way to use your crypto to gain more crypto, this involves the process whereby money is lent from one person to another through the use of computer programs called smart contracts. Fees are then paid to the lender in the form of crypto. There are three(3) processes of farming YFI, these include:

Pool 1: The balancer pool

This pool supports deposits in YFI and yCRV tokens to generate rewards called BPT which are balancer pool tokens. YFI tokens are acquired by staking BOT into the yGov pool. It is important to note that every pool is allocated 10,000 YFI tokens.

Pool 2: The balancer protocol

This pool allows for YFI and DAI tokens to be staked with DAI accounting for about 89% while YFI accounts for 2% into the Balancer network. In exchange for this, yield farmers receive BAL, the platform's native token. BAL is deposited into yGov pool to get YFI with fees capped at 0.15% for every trade.

Pool 3: The pioneer pool

This, the first pool launched on the Yearn.Finance protocol supports TUSD, USDC, USDT, and DAI stable coins. Staking on this pool gives the platform the go-ahead to disperse funds between Aave, DyDx, and Compound. This pool has a daily APY of 30%.

Products Offered By Yield.Finance

Although the Yield.Finance platform specializes in yield farming and liquidity mining, they still spread their service umbrella over various other products, these include;

• Yliquidate.finance: This is a system developed by Yield.Finance for Aave protocol to provide automatic liquidation procedures.

• Ytrade.finance: ytrade.finance is a platform for the trade of leverage, it offers a ×1000 leverage as its maximum. It supports sUSD, USDT, TUSD, USDC, and TAI.

• Yswap.exchange: is a platform that is powered by the making of an automated market.

• Leverage.finance: It provides leverages trading between USDC and DAI with an estimated profit of 16 percent and maximum leverage of ×5.

Conclusion

The launch of YFI denoted a perspective-shifting period in the crypto market regarding how cryptocurrency projects distribute its coins. Although it is making great strides in the market, the fact that its launch was masterminded by Cronje makes its relevance relatively shaky as his moves are always scrutinized for screw-ups.

It is a unique protocol building a futuristic product trade system and a huge database of loyal users, the future is surely bright for this protocol.

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