Shall we start with a little joke? Yam is literally a plant species (and it’s different from sweet potatoes). Ok, this is actually not a joke at all – you can check the information on this piece of flora in any reliable source.
Now, we have to continue the discussion and stop seeming crazy. If you used to think that the piece of very useful botanical information we have just provided will not help you to get any more knowledge of the cryptocurrency space, you might be wrong. The Swapzone team is here to talk about yams and yield farming. In the following article, we will be breaking down the notions of the protocol, the currency, how is it all connected to DeFi, and some more.
What is YAM protocol?
YAM protocol was built by a team of people who are deeply integrated into Decentralized Finance and everything connected to it. The protocol itself is an experimental solution connecting programmable money and governance (all the notions we love sincerely).
The project has become quite a hype on Crypto Twitter in summer 2020, as half of the community was talking about massive possible returns, while the other half was concerned with possible drawbacks. To understand why all the craze happened, let’s take a closer look at what YAM actually is.
Similarly to Ampleforth that hyped up a little earlier, YAM offers an elastic supply token. This means that the offer becomes larger or smaller depending on the current conditions of the market. The initial target is around 1 USD per YAM token. So, we can say that YAM is a pegged currency.
With no pre-mine or pre-sale, YAM tokens have been dropped to the main YAM staking pools. Holders of tokens can stake COMP, LEND, LINK and other assets and earn YAMs.
An interesting fact – at launch, the tokens were stated to have no inherent value. So, all the value that the token might have is actually decided through the community of holders.
One of YAM token features also lies in governance. The right to vote and decide on the protocol changes, new features and updates is retained by YAM holders.
This community-oriented approach offers quite an interesting choice – after all, there is always a chance to raise the capital through investments, token presales and other ways of gathering the funds. The team’s choice to go this way and work with the token holders directly makes YAM a remarkable example of a stability protocol.
What is yield farming and why is everyone talking about it?
For those not familiar with the notion, “yield farming” is something not correlated with cryptocurrency at all. The truth, however, is that it most certainly is. Yield farming is liquidity mining. In simple words, it’s a way to earn more money on cryptocurrency assets. You lock your coins – you get rewards. You might have already heard of staking – farming is a similar concept, but has a more complex background.
In yield farming, there are Liquidity Providers (a.k.a. the users) and Liquidity Pools. Providers send their funds to the pools (that are actually smart contracts containing the crypto), and get rewards in return. Most commonly, yield farming is done with Ethereum-based tokens, though some other options are available here, too.
The list of protocols and platforms used for yield farming consists of some well-known DeFi names – Aave, Uniswap, Compound, Synthetix and more. The rules for farming are different from platform to platform and may change over time, so it is important to do your research before starting off with yield farming.
Is YAM an experiment or a project truly changing the space?
Both Shapeshift CEO Eric Woorhes and Messari’s CEO and analyst Ryan Selkis slammed YAM for being a possible scam and a “pump and dump setup”. They are not alone thinking like this. YAM is being killed on Crypto Twitter, CEO’s and developers call it a scheme and fraud, but is it all that bad? Recently, there was a bug found in YAM’s code. The fact that YAM went live without a proper project audit and code review is a massive red flag to the whole DeFi space. Nowadays, YAM is considered a lesson of caution and an almost-forgotten tale of space (yes, the cryptocurrency field changes very fast).
As the dust settles and everything becomes more clear, many users see the bug story and YAM collapse as a good thing for DeFi. The main thing empathized is the importance of being careful, not running after the hype, and playing a long game. This is exactly where we come back to the main principle of decentralization. Trust, but verify.