Hey guys :) I’m back with another comprehensive Q&A piece, this time for the lucrative yield aggregator platform that automates yield-maximizing profit switching opportunities for liquidity providers and yield farmers – Yearn Finance (YFI).
Yearn Finance is taking the DeFi world by storm. It’s one of the fastest appreciating cryptos of 2020 and it’s currently ranked as the 6th most popular DeFi application with more than $740M of value locked in its protocol.
Now, before we dive in, the following piece is similar to my latest articles on Swipe (SXP), DeFi Money Market (DMM), and UMA (UMA), so if you haven’t already seen those, be sure to check them out as well.
Hope you enjoy!
The list of Q&A is kind of long so first comes the list of questions that I have prepared the answers to:
- What is Yearn Finance?
- Who and When Created Yearn Finance?
- What is $YFI Token Used for?
- What is the Main Problem that Yearn Finance Solves?
- What Services does Yearn Finance Offer?
- How is Yearn Finance Governed?
- Where to Store $YFI?
- Where to Buy & Sell $YFI?
1. What is Yearn Finance?
Yearn Finance Earn Product
Yearn Finance, otherwise known as yEarn Finance or yearn.finance, is a simple yield aggregator of lending platforms that rebalances yield farmer portfolios for the highest yield.
In other words, Yearn Finance optimizes your token lending by periodically rebalancing your deposited tokens to the most profitable lending service. Whether it's Aave, Compound, Dydx or Curve, Yearn Finance will optimize your returns by choosing the most profitable lending service(s).
A simple explanation of how it works is:
When you deposit a ERC-20 stablecoin (such as DAI, USDC,USDT,TUSD or sUSD) into the yearn.finance protocol, you receive a corresponding number of yTokens (ie. yDAI, yUSDC, yUSDT, yTUSD, ysUSD), and the underlying stablecoin is made available to lend. At Yearn Finance, yTokens are the proof of ownership and they are transferable just like any other ERC-20 token.
The protocol then chooses the most profitable lending service(s) to lend out your tokens to the aforementioned platforms (whichever one offers the highest yield). Users then start earning the highest available interest on their tokens.
2. Who and When Created Yearn Finance?
Yearn Finance creator, Andre Cronje
Yearn Finance was single-handedly developed by Andre Conje who created and launched the protocol in February 2020.
Prior to founding Yearn Finance, Conje studied law at Stellenbosch University and later finished a computer science program and went to work in FinTech. He quickly became obsessed with distributed ledger technology and cryptocurrencies and has been involved with the crypto space since 2013.
Here is a quick video of him from late 2018 when he was explaining his vision and solutions to the blockchain problems in under one minute.
Before Andre became famous
After being involved in the cryptocurrency/blockchain/FinTech sector for a number of years, Conje became fascinated with DeFi (Decentralized Finance). He quickly earned respect among members of the DeFi space by dissecting the code of various DeFi platforms and expressing his thoughts and ideas via Twitter.
During his exploration and dissection of various DeFi protocols, he realized that DeFi was far too complicated for the average user and began developing his own tools and software to make it easier.
In doing this, Conje came up with his first iteration of Yearn Finance, which he built as an experiment for himself:
Being the respected DeFi analyst and coder that he is, many people flocked to Conje’s software to experiment and provide feedback. From there, Yearn Finance gained traction as it provided better returns in aggregate than any of the standalone lending platforms it used.
As Yearn Finance continued to gain traction, Conje handed full control of the protocol over to the community, including governance and the ability to mint new YFI.
That said, Yearn Finance is a fully decentralized DeFi protocol born through the widespread collaboration of its open-source software. The protocol had zero fundraisings and is strictly run by a growing community of DeFi enthusiasts.
3. What is $YFI Token Used for?
Yearn Finance $YFI token logo
The Yearn Finance ecosystem is controlled by the YFI token. YFI is the Yearn Governance Token and only 30,000 YFI have been minted and fully distributed. YFI started as a worthless token with no ICO or premine, yet it has managed to reach a price higher than Bitcoin (BTC). Of course, it's worth highlighting that their supplies differ a lot.
YFI is an ERC-20 token that governs the yearn.finance ecosystem. YFI token holders have the power to vote on and submit proposals for protocol upgrades/changes. The Yearn Finance protocol distributes YFI to liquidity providers (LPs) who supply certain yTokens.
Andre Conje, the founder of Yearn Finance, recommends that people earn the YFI token by using the protocol rather than buy it off an exchange. He never intended for the YFI token to have any $value whatsoever, but DeFi investors thought otherwise.
That said, YFI’s intended purpose is solely as a governance token where 1 YFI = 1 vote. YFI token holders can vote on issues, upgrades, and proposals regarding all the protocols in the yearn.finance ecosystem.
Worth mentioning that Andre did not get himself any YFI tokens at all when going public in order to maintain a fair launch of the platform.
4. What is the Main Problem that Yearn Finance Solves?
Yearn Finance aims to simplify the process of earning interest on your idle crypto assets by providing a better user experience that offers higher returns.
Yearn Finance’s ecosystem of protocols successfully maximizes annual percentage yields (APY) for its users by automatically rebalancing their deposited tokens for the highest yield (ie from Aave to Compound) without having to do it manually and saving you gas fees and time.
That said, Yearn Finance helps take some of the risk out of yield farming while also maximizing returns. And it does all of this through simplified user experience, making DeFi and yield farming easier for most users.
5. What Services does Yearn Finance Offer?
Yearn Finance website homepage
Yearn Finance offers the following DeFi products/services:
- Earn - Yield aggregator for lending platforms that rebalances your assets for highest yield.
- Zap - Convert supported tokens with just one contract interaction to reduce transaction costs.
- APR - Shows you the current APR for some yearn-supported tokens across lending platforms.
- Vaults - Automated DeFi strategy that processes and provides the highest (risk-adjusted) yield available via lending, providing liquidity, or farming strategies.
- Cover (coming soon) - utilizes Opyn to offer insurance on your crypto holdings
Earn is the primary product of Yearn Finance and it’s the most commonly used product by Yearn Finance users who are seeking the best returns on the market.
With Earn, you simply deposit DAI, USDC, USDT, TUSD, or sUSD and the protocol automatically lends your deposited tokens to the highest lending rate on these platforms: Compound, Dydx, Aave, Ddex, and Fulcrum.
Zap allows you to get into a DeFi position in one transaction – it’s called “zapping in."
For example, Zap lets you “zap” into Curve Finance to aggregate stablecoin lending from DAI/USDT/USDC/TUSD with one simple transaction. It’s a great method to get into a DeFi position or liquidity pool fast.
APR is simply a table that shows you the current APR for some yTokens across lending platforms. The highest APR for each yToken is the provider that Earn is lending these coins to at the moment.
Vaults are a more advanced version of the Earn product. Instead of simply lending out coins for the highest APY, Vaults use sophisticated DeFi farming strategies to generate higher profits than simple lending.
Using Vaults is better than DeFi farming yourself because it helps you save on gas, keeps you at a good collateral/debt ratio so you don't default, and auto optimizes for highest yielding stablecoin strategies even when you are sleeping.
More products such as Insurance https://twitter.com/AndreCronjeTech/status/1300428528438128645
6. How is Yearn Finance Governed?
Yearn Finance Governance website
Yearn Finance is governed through YIPs (Yearn Improvement Proposals) in which Yearn Governance Token (YFI) holders submit and vote on via staking.
A YIP or Yearn Improvement Proposal is how features, upgrades, and changes are added to the Yearn Finance ecosystem. Users can start a proposal on a forum, discuss it, and gauge the sentiment of whether or not it would be accepted. If a lot of users are interested in it, the proposal can be posted on-chain for everyone to vote on.
For a proposal to go through, a minimum of 20% of the staked YFI needs to vote and it has to have at least 50% of the votes for yes. 1 YFI = 1 vote and the YFI must be staked for a minimum of 3 days to vote.
Anyone can post a proposal on the forum for discussion as well as on-chain for possible implementation. All VIPs can be viewed on the voting dashboard, which is also where users can stake their YFI tokens so they can cast their vote on-chain. Also, stakers (voters) can get rewarded for participating in Yearn Finance’s governance process if yearn’s treasury is at or above $500K USD.
Moreover, in addition to YIPs and voting, Yearn Finance has a yDAO which is used to fund value-added contributions to the yearn ecosystem. Anyone can join the yDAO if they want to donate funds to various projects and developments happening in the Yearn Finance ecosystem.
7. Where to Store $YFI?
The Yearn Finance Token (YFI) is an ERC-20 token residing on top of the public Ethereum blockchain. That said, you can store YFI in any ERC-20 token supported wallet.
However, the best wallets for storing YFI are non-custodial Web3 wallets that provide seamless access to the latest DeFi applications. DeFi wallets are the best for storing YFI because the token is widely used and supported in the Ethereum-DeFi ecosystem.
Popular Yearn Finance (YFI) Wallets:
- Argent (mobile)
- Metamask (web)
- MyEtherWallet (MEW) (web)
In addition to the above-listed wallets, Yearn Finance (YFI) can be stored on a wide variety of other reputable wallets supporting ERC-20 tokens.
8. Where to Buy & Sell $YFI?
Yearn Finance (YFI) can be bought and sold on a peer-to-peer (P2P) basis but the most popular way to buy, sell, or trade YFI is through cryptocurrency exchanges.
You can buy YFI with cryptocurrency or fiat currency at the following top exchanges. In most cases, you will be able to buy YFI with BTC, ETH, fiat or stablecoins.
- Binance - BTC, USDT, BUSD, BNB
- Uniswap - WETH, HY, YFII, USDC
- Balancer - USDC, WETH, SNX, BAL, LEND, HY, LINK, DAI, + more
- 1inch Exchange - ETH, USDC, USDT, DAI, SNX, RENBTC, WBTC, +more
In addition to the exchanges listed above, Yearn Finance (YFI) is also traded on a variety of other exchanges and platforms that enable people to buy, sell, or trade cryptocurrencies.
Hope you enjoyed that read :) Let me know if I have missed something in the comments.