Things are CRAZY right now. It is impossible to keep up-to-date with the latest happenings with DeFi going extremely parabolic. While the total value locked (TVL) in DeFi contracts approaches $8 BILLION, everybody seems to want to put their hands inside any type of DeFi pie.
Well, let me tell you this; The YFI hype is ON right now, and its clones, the projects that have forked YFI and tweaked it to improve the protocol, are also ready to go parabolic, whether you like it or not. The TVL for these YFI clones will only continue to rise as will the Dollar value of their respective native tokens.
Let me take you on a little journey about how things evolved and where is the best option for you to farm today as a late-comer.
The First Wave - $YFI
First, let's jump into a short story of $YFI to give you a better understanding why is it such a big deal and why it and its clones are so hyped (and some of them soon to be hyped).
The growth of Yearn Finance has been truly remarkable. Its token, $YFI has barely been out for a couple of months and has already doubled Bitcoin’s price. Of course, we have to consider the incredible low supply for YFI of only 30K (compared to BTC's 21M), but regardless of that, the coin has still managed to reach the top 30 ranked projects at a light-speed rate.
Yearn Finance is the baby of Andre Cronje, who coded the entire protocol himself. It was created from the case that he was struggling to manage his yield returns from swapping between differing lending protocols such as Aave and Compound to hop on the best APR rates.
Cronje was spending most of his time manually switching between pools to gain the highest yield from his stablecoin assets. On top of this, the fees he had to pay each time he swapped just started to mount and are pretty much eating the gains for many.
To combat this, he created Yearn Finance, a protocol that automatically finds the best yield for whatever token you have across all DeFi platforms. For example, if you are holding USDT, you can deposit this onto Yearn Finance, and you will receive yUSDT. While holding yUSDT, your holdings will automatically switch between lending protocols depending on the relative APR rates.
As a result, you are automatically earning interest from the highest yielding lending platform without having to monitor it yourself. In addition to this, the protocol moves the entire holdings when it switches between lending platforms. This results in significantly reduced fees for everybody as they are shared amongst all yUSDT (or whichever Yearn Asset).
You can see how this is a total shift in paradigm delivered by Cronje himself. Initially, he had no intention of releasing the product and wanted to use it privately. However, he eventually launched it to the public under the Yearn Finance branding.
This has led to an entire wave of “yield farmers” flooding into the Yearn Finance ecosystem as they rush to earn the highest possible yields on their holdings - causing YFI to increase at an astronomical rate. The parabolic nature of YFI was further spurred by the addition of the coin to the Binance exchange. Since being added to Binance, YFI has exploded significantly in value.
Well, at the end of August, Binance took things one step further and launched YFI on their futures exchange with 50x leverage;
The Second Wave - $YFII
(yes, the chart says DFI.money chart but it has a ticket $YFII - see it here
YFII (two I’s) is the first fork taken from Yearn Finance. It was created after YFI (the original) farming stopped briefly on July 26tth to prevent a sharp drop in the liquidity available on the pool. There was a proposal by the YFI community to introduce a weekly halving model for yield farming in YIP-8. Unfortunately, it was rejected even though 80% of the community voted for the proposal.
In response, some community members forked YFI to created YFII with the Yip-8 proposal already integrated to ensure a fairer distribution of the token. It allows for active participation while still allowing late-comers to earn rewards.
The Third Wave - $YFV
So, if you feel like you have missed the first and second wave, prepare your ships for takeoff because the third wave is already underway!
Time to put your money where your mouth is, stop complaining about what you missed out on, and take a look at this upgraded Yearn Finance fork;
I need to stress that YFV has not received any publicity relative to its colleagues (YFI & YFII). This will all change when people start to realize that YFV offers some additional benefits on top of its forked counterparts. In a nutshell - It is basically $YFI on steroids.
For one, those farming YFV are rewarded with two separate elastic supply tokens called vUSD and vETH. If you have been following my posts, you will know that I am a massive supporter of the elastic supply based token Ampleforth. The supply for AMPL is automatically adjusted depending on the current price to aim for stability at the CPI-adjusted 2019 US Dollar. The situation is similar for the two additional assets (vETH and vUSD) that YFV farmers automatically receive as they farm for YFV.
These two additional assets have elastic supplies designed to keep the price close to 1ETH for vETH and $1 for vUSD. It is important to note that YFV itself is not supply-elastic; however, these two additional assets that farmers receive are elastic.
In addition to this, YFV is designed to be attractive to small level farmers (you and I). Entering projects such as YFI today literally is not ideal for anybody with a small stash of cryptocurrency. The fees you will pay just to deposit into the protocol are likely to outstrip the returns you make from farming for a few weeks - at the very least. This means it would take weeks before you even made your money back from the fees.
Well, farmers of YFV can combat this by joining the stablecoin pool to farm YFV (and vETH and vUSD). Users are not exposed to the massive fluctuations of farming via altcoin-based pools and can be rest assured that they will be earning YFV while their initial deposit remains stable. The contract interaction fees seem to be 3x cheaper for YFV when compared with YFI. This combined with the fact that farmers receive vETH and vUSD, leads to the fact that small farmers are welcomed onto this protocol.
The fact that small farmers can enter the ecosystem also creates a structure where there are multiple times more holders. For example, YFI will be heavily dominated by whales. On the other hand, with multiple holders in YFV (and better distribution), it is unlikely that there will be this many whales to play with the price.
Furthermore, all of these “small scale farmers” are likely to spread the word, and, because there are more of them, they will reach more people. They can also take advantage of the Referral program that YFV has. If a farmer introduces another user to the platform, they can receive 1% of that person’s rewards - totally GAS free. Over a more extended period, this should create a strong network effect that continues to let the ecosystem grow.
Lastly, the fact that YFV has 21 million tokens in its supply (the same as Bitcoin) means that each individual’s price should not reach astronomical prices such as YFI. Although this is not important, most investors would be put off from investing in YFI because the price has already past the moon. On the other hand, the fact that YFV has such as large supply leads to people believing they can ‘afford’ to jump on board at the lower prices. We all know this is to do with the relative supplies; however, this has quite a strong impact for beginner investors on a psychological basis.
Oh, and they finally had their contracts audited toward the end of August - LINK.
So if you only have a few hundred bucks and are looking to yield farm, you need to look no further than YFValue.