Launched in February 2020, Yearn Finance is an open source decentralized finance (DeFi) lending protocol based on the Ethereum blockchain, which allows users to maximize their own returns (or APY), on crypto assets through lending and trading services.
It functions as a yield aggregation platform to maximize user investment by automatically moving user funds between Defi lending protocols (such as Compound, Curve or Aave).Currently, Yearn is one of the most popular and decentralized Defi projects in the cryptocurrency sector and is considered the most famous project in the world of Yield Farming.
If you want to know what Yield Farming is and what it has to do with decentralized finance and Yearn.finance, don’t miss the post dedicated to it.
Yearn.finance is therefore a kind of liquidity manager that automatically searches for the best APY (annual percentage yield), always taking into account the level of risk with which the client is willing to work.
Indeed, platform users have the right to cast a vote on the direction of the protocol that most favors their intention.
APY (Annual Percentage Yield) is a tool that searches the various lending protocols used by Yearn and provides the user with an estimate of how much interest they can expect to earn annually on a certain amount of principal.
Yearn.Finance is designed to automatically and autonomously move users’ funds to the most profitable providers by identifying the protocol that offers the best annual percentage yield (APY).
The protocol’s clients provide liquidity that is automatically diverted to different sectors of decentralized finance to find the best returns.
Depending on the risk, the platform will decide to provide liquidity where it is most profitable, optimizing the search for the best possible return and moving funds when a DeFi project, with the same risk, will have higher APYs.
Yearn.Finance allows users to deposit ERC-20 stablecoin such as DAI, USDC, USDT, into the protocol. In return, users receive an equivalent amount of yToken (e.g., yDAI, yUSDC, yUSDT) that is equivalent to any other ERC-20 token.
Therefore, the Yearn Finance platform automatically converts tokens into a protocol with the maximum throughput to maximize the user’s benefit.
One of the most interesting aspects is that the network only charges a small fee deposited in the platform pool and distributed among YFI token holders as dividends.
Below I will briefly describe the features of Yearn Finance’s main products:
Vault strategies are aimed at maximizing the return on an asset in the vault but are not based on simply lending coins, as is the case in the standard Yearn protocol. Most vault strategies are more active in maximizing returns and include: providing collateral, borrowing other assets (such as stablecoins), providing liquidity, farming other tokens and selling for profit.
The profits generated by the vaults are used to buy more underlying assets.
YFI is Yearn.finance’s native cryptocurrency that differs from most cryptocurrencies in that it is a governance token with no intrinsic value and has an independent protocol.
Also, unlike other cryptocurrencies, it cannot be mined.
YFI is distributed to those users who provide liquidity to any of the platforms that use yTokens and its purpose is to give the entire governance of the yEarn system to the community, as it allows holders to vote on decisions that affect Yearn.
This means that platform users have the right to vote on the protocol management that best suits their needs.
Regarding YFI supply, there are only 30,000 YFI tokens and, to date, 29,969 YFIs have already been minted and distributed (only 31 tokens remain to be issued).
This is probably one of the reasons for its incredible rise in value.
In fact, at the end of August 2020, the YFI token surpassed the all time high of BTC and nearly doubled that milestone reaching $39,238. At the time of writing, the price of YFI is $32,762 while that of bitcoin is $32,784.
You can store your YFI tokens in any of the most popular wallets such as Trezor, Ledger, MyEtherWallet, Coinomi, Atomic Wallet.
If you want to invest YFI in one of the platforms that belong to the DeFi space, but have not yet obtained their tokens, you can buy YFI on one of the exchanges that support this type of cryptocurrency. Among them we find:
Yearn Finance, as you have seen, is one of the trending projects in the decentralized finance and Yield Farming landscape which, given its mergers and partnerships with other protocols, heralds a very promising future.
If you have found what I have told you interesting and want to get more information about decentralized finance and the most successful platforms of the DeFi ecosystem, don’t miss the articles dedicated to these interesting topics.