*obligatory not financial advice*
What is Yearn.finance?
Decentralized finance, short DeFi, offers many different ways to earn interest on various different cryptocurrencies. There are many different lending protocols and liquidity pools that all offer a different yield, this has caused many crypto investors to always chase for the highest yield a task that can at times be much more difficult and time consuming than it is worth it, this is why the self-taught programmer Andre Cronje developed a yield farming bot to automate the chase for the highest yield in the ever changing world of DeFi. This yield farming tool quickly became popular in the crypto world and soon big DeFi players like AAVE and Curve partnered with the project and thus Yearn.finance was born.
Basically, Yearn will always move provided funds to most lucrative DeFi protocol. If Compound pays you 5% APY for USDC and Aave pays you 4.5%, then Yearn move your USDC to Compound. If Aave raised its APY to 6% then it will move your funds to Aave. Of course you could just move your cryptocurrency yourself, but you would not only have to monitor all the different lending protocols yourself but you would also have to pay huge gas fees. If you hold $100 worth of crypto on Compound, then it would make no sense at all to move it to Aave just because there is a slightly higher APY, the fees would kill your profit. But with Yearn.finance this isn't a problem because thousands of users pool their crypto together and share the gas fees. You see Yearn makes chasing higher yields much more easy and efficient.
This is the main feature of Yearn and it currently only supports stablecoins and wrapped Bitcoin. There are features as well like the Yearn Vaults, that are a little bit more complex and offer various automated yield farming strategies, or Cover, that lets you get an insurance on your invested cryptocurrencies in chase a black swan event happens.
The YFI Token
YFI, or "Waifu" as the Yearn.finance creator likes to call it as a homage to anime fans, is the governance token of Yearn. It has a rather small max supply of 30,000. Because of this small supply there were times when 1 YFI was more valuable than 1 Bitcoin. There was no pre-mine, no early investors and the developers didn't keep any tokens for themselves reserved, and instead the entire supply was given to Yearn users as a reward. This makes it the fairest initial token distribution since Bitcoin because it is very rare that the developers don't keep a huge amount for their own bag.
The primary use case is governance, any YFI holder can vote on possible changes to the protocol. To incentivise participation in governance, YFI holders earn rewards for voting. Yearn.finance collects fees from its users in a treasury that can hold at max 500K USD, anything beyond that is paid out to YFI holders that are actively voting. This means that YFI holders will want to vote for the best options because the better Yearn becomes the more users it will have and the more rewards they can earn.
The value of the token ultimately depends on how many people are using Yearn.finance, since DeFi is on the rise and Yearn offers an easy way to earn high interest it will likely grow to become much more popular than it already is.
