If you’ve been a DeFi enthusiast, you may have heard about Yearn.Finance (YFI). If you have not used the platform, you may have read about it on crypto news. The platform is one of the popular and profitable DeFi platforms that provide a good amount of returns to Decentralized Finance investors.
It makes lending and trading activities easy and autonomous. The best part lies in the incentives that users take home from the platform. Also, Yearn.Finance keeps users autonomous and free from third-party interference in their financial transactions.
So, if you don’t know about YFI or haven’t had the chance to explore it, this review provides you with the opportunity to know everything about it. This article is a complete review for you to understand what makes Yearn.finance unique and so popular in the DeFi space.
Yearn.Finance is one of the decentralized projects running on the Ethereum blockchain. It is a platform that facilitates lending aggregation, insurance, and yield generation for users. Yearn.Finance is completely decentralized and users can transact without control or limitations from intermediaries.
This DeFi project depends on its native coin holders for its governance. It also relies on independent developers to maintain and support its operations.
Every decision-making process on Yearn.Finance lies in the hands of YFI holders. So, to say that this protocol is a good interpretation of decentralization, is not an understatement.
A special characteristic of this protocol is to maximize the APY (Annual Percentage Yields) of crypto which users deposit into DeFi.
Andre Cronje created Yearn.Finance and released the platform in the middle of 2020. The idea to create this protocol came to him during his work with Aave and Curve on iEar protocol. From the launch of YFI until now, its developers’ have displayed a high level of confidence about the protocol.
Cronje deposited the first funds ever to appear on the platform. His idea stemmed from the fact that many DeFi protocols were too complex for a layman to understand and utilize. So, he decided to create a platform that DeFi enthusiasts can use without complaints.
It may have started small, but the protocol has recorded a whopping $1billion plus at one particular time. According to Cronje’s plans, Yearn.Finance would become the safest protocol that everyone can trust.
There are many features of Yearn.Finance that you should know to understand what you gain by using the protocol. The developers keep adding more and more functionalities to the projects to ensure an enhanced user experience.
Some of the core features of the protocol include:
This is one of the features of Yearn that facilitate shorting of cryptocurrencies. You can choose to short or long stablecoins that have 1000x leverage. Crypto shorting means to sell your crypto with the intention to buy it back when the price falls.
Long trades involve buying crypto and expecting to sell it higher when the price rises. All these are possible on Yearn.Finance through the ytrade.Finance feature.
It is a feature that supports flash loans in the money market, Aave. Flash loans help users to liquidate their funds faster and efficiently whenever they need them. These loan transactions take place without the need for collateral since they’re expected to be paid back in the same transaction block.
Many DeFi enthusiasts enjoy the fact that they can swap between crypto without any hassle. With this feature, Yearn Finance creates a platform where its users can deposit their funds and also swap them from one protocol to another.
Crypto swapping is the simplest method of exchanging crypto for other cryptos on one particular wallet. This method is free of transaction fees and it is a faster way of settling payments or debts.
This feature tokenizes users’ debts in another DeFi protocol through Aave. After tokenizing the debt, a user can utilize it in other protocols thereby creating a new liquidity stream.
Tokenizing debt makes it possible to reduce the time for long settlements. Also, it removes the manual processes that drag down the issuance. By tokenizing the debts, users can automate the process instead of bearing the delays.
5. YFI Token
This is the governance token for the protocol. It facilitates almost all the processes that take place on Yearn.Finance everything about how the protocol operates and runs relies on YFI token holders. The most interesting thing about the token is that the total supply is only 30,000 YFI tokens.
Image Credit: CoinMarketCap
Moreover, these tokens were not pre-mined and as such, anybody aiming to get them must either trade to earn or provide liquidity to a Yearn.Finance liquidity pool. You can also buy the tokens from any of the exchanges where it is listed.
The platform works by moving funds from one decentralized lending protocol to another depending on the returns on investment. The protocol switches users’ funds between platforms like Aave, Dydx, and Compound to increase APY. This is why it is reputed as an APY-maximizing protocol.
The best part is that YFI will be monitoring the funds on these exchanges, to make sure that they’re in the liquidity pools that pay the highest ROI. Presently, the protocol supports cryptocurrencies such as sUSD, Dai, TUSD, USDC, and USDT.
As soon as you make a deposit into the protocol with a stablecoin, the system converts your coins into ytokens of the same value.
These ytokens are also known as “yield optimized tokens” on Yearn.Finance. After converting your coins, the protocol moves them to a high yield liquidity pool in either Aave, DyDx, or Compound to ensure more yields for you.
So what will the system gain for all this work? Yearn.Finance charges a fee that enters its pool. But the only people who can use the pool are holders of the YFI tokens.
Yearn.Finance has four main products. These products include:
These are staking pools that Yearn Finance offers to its users to gain through yield farming. Vaults offer lots of opportunities for users to earn passive income. It socializes gas costs, generates yields, and shifts the capital to meet every opportunity that arises.
All these functions are carried out in vaults without the input of the investors. Thus, all it takes is to invest in Yearn vaults and sit back to maximize returns automatically.
However, the people who utilize Yearn Finance vaults are mainly risk-tolerant DeFi users. Once you provide the funds into the vault, it gets to work exploring every yield farming strategy it can utilize to increase your returns. The strategies might generate returns such as liquidity providers rewards, trading fee gains, interest returns, etc.
This process is known as a “lending aggregator” that helps users attain the maximum amount of earning from coins such as USDT, DAI, sUSD, wBTC, TUSD.
These coins are supported on the platform. Through the Earn product, the system can shift them between other lending protocols such as Compound, AAVE, and dYdX that are based on Ethereum.
The way it works is that if a user puts DAI into the Earn pool, the system will deposit it into any of the lending pools, Compound, AAVE, or dYdX.
The process follows an already written program to remove funds from one of the lending protocols and add to another protocol once there’s a change in interest rates.
Through this automatic and programmed process, Yearn Finance users utilizing the Earn product, will be making interest all the time through their DAI deposits.
Earn contains four yTokens namely- yUSDT, yDai, yTUSD, and yUSDC. These four tokens are always working to ensure that users get the highest amount of interest through their DAI deposits.
Yearn Zap is a product that facilitates asset swaps. It allows users to swap crypto into pooled tokens with attractive interest. Through the Zap product, users can complete the process without hassles and issues.
On Yearn Finance, users can easily “Zap” assets like USDT, BUSD, DAI, TUSD, and USDC. This product enables what’s known as “bi-directional” swaps that occur between DAI and Ethereum.
This is the core insurance cover that Yearn.Finance users enjoy. The Cover product protects them against financial losses on the protocol. Engaging in smart contracts can be risky on any of the Ethereum-based protocols. But with this product, users can be sure of their funds.
Nexus Mutual is the writer of the smart contract cover. Cover has 3 components namely claim Governance, Cover Vaults, and Covered Vault.
Claim governance represents the totality of the arbitration process. Cover Vaults are in charge of claim payment while Covered Vaults houses all the assets which the holders want the network to cover.
There are many technologies that facilitate the operations of Yearn Finance. One of the core areas of YFI’s specialization is to eliminate the issues of centralization in the DeFi space. The protocol operates in a purely decentralized manner to reflect the core principles of Decentralized Finance.
Some of the indications of its support for decentralization include not hosting an ICO, and never offering pre-mined YFI tokens. These characteristics and other factors have earned the protocol’s popularity as a hard-core decentralized DeFi system.
Other solutions by Yearn.Finance to DeFi include:
DeFi supporters often face risks associated with tokens in the space. Many of them buy tokens with the aim of reselling them when the prices increase.
Due to this arbitrage trading method, the market becomes risky and volatile. However, with Yearn Finance products, users can swap between assets and also utilize different pools to earn maximum interest.
Before the mechanisms of Yearn.Finance, many DeFi users take a little home in terms of their ROI. The reason sometimes is that many protocols reduce the investors’ rates in a bid to lower the transaction fees. With such low returns, many people shy away from the whole idea of Decentralized Finance.
But Yearn.Finance brought diverse earning-maximization opportunities that helped to reverse the adverse effects of these actions on DeFi ecosystem. Investors now see that they can make more passive income through the Yearn.Finance offerings.
Decentralized Finance hasn’t been a soft nut to crack for most newbie investors. It was a novel idea at first and many people were struggling to understand how it works.
Due to the complexities in the system, it wasn’t easy for newbies or other enthusiasts to navigate it easily. All these informed Cronje’s decision to create a system that people can understand and utilize easily.
If you’re interested in earning YFI tokens, you have three options to do it. You can deposit your yCRV to yGOV pool in the protocol to earn the token.
The next option is to deposit a 98%-2% DAI and YFI to the Balancer protocol to acquire BAL which is its native token. Once you get the BAL tokens, deposit them into yGov and get YFI in exchange for them.
The last method requires a user to deposit a combination of yCRV and YFI into the Balancer protocol to get BPT tokens. Then deposit it into yGov to make YFI tokens. The way the token distribution works is that every pool contains 10,000 YFI tokens available for users to earn.
So the total YFI in circulation is in the Yearn.finance 3 pools. Users can stake their Curve Finance & Balancer tokens to earn YFI in Yearn protocol.
There are three places or platforms to buy YFI token. The first exchange is Binance, the second is BitPanda while the third is Kraken.
Binance – this is a popular exchange where countries such as Canada, UK, Australia, and Singapore residents can buy Yearn.Finance tokens. Also, many countries of the world can buy this token on Binance but USA residents are not permitted to buy it here.
BitPanda: If you’re currently residing in Europe, you can easily buy Yearn.Finance token on BitPanda. But every other country outside Europe can’t buy the token from the exchange.
Kraken: If you’re living in the USA and want to buy the YFI token, Kraken is your best and available option.
There are many wallets that Ethereum supports which you can use to hold your YFI tokens. However, your decision to choose any wallet should be dependent on the total token you want to acquire and your purpose for acquiring them.
Why? If you’re all for trading small amounts of tokens, using any of the wallets like the software, exchange wallet, etc. But when it comes to storing huge amounts of YFI tokens, you need to get a hardware wallet.
The hardware wallet is the most secure option to ensure the safety of your investment. While hackers can compromise other forms of wallets, the hardware guys are hard nuts to crack.
They keep your tokens protected and away from cybercriminals. Some of the best hardware wallets today include the Trezor wallet or the Ledger Nano x wallet. These options are great but they’re usually expensive to buy.
Also, sometimes, many people find them hard to understand and use. So, unless you’re an advanced player in the crypto industry or investing huge amounts of money, reconsider the other options.
The software wallet is a good option and using it is usually free. You can download a suitable one on your computer or smartphone.
Also, they come in two options, custodial or non-custodial. The first option is where the provider manages the wallet private keys, while the second option is where you store the keys on your computer or smartphone.
These types of wallets ensure seamless transactions but when it comes to security, hardware wallets take the lead. So, newbies who’re testing the water could start by using the software wallets at first and upgrade later to cold storage when they’ve improved.
If the software wallets are not for you, consider the hot wallets, exchange wallets, or online wallets. These are the wallets that you can access on several exchanges through your web browser.
The issue with online wallets is that they can be hacked and all your funds lost. The whole security of your funds lies with the exchange that manages the wallets.
These wallets are good for small YFI token holders who make trades all the time. So, if you must use these wallets, get a reputable and secure service to at least protect your investment.
You have another option in Kriptomat. This is a storage solution that facilitates stress-free storage and trading of YFI tokens. So, if you’re searching for a user-friendly option with industry-grade security, this is your best option.
Yearn Finance offers a lot of opportunities for a user to maximize their earnings. The principles, products, and operations simplify the Defi message so that every interested person can join. It represents the core aim of decentralized finance which is decentralization.
Also, the whole network is user-friendly and profitable. So, if you’ve yet to start utilizing the protocol, now is the right time. We’ve enumerated everything you need to know about Yearn.Finance. It’s time to be a part of its community.
As for the future of Yearn Finance, the founder aims at making it the safest DeFi protocol in the industry.
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