Cryptocurrencies have played a vital role in strengthening the resolve for a future with decentralized finance. Blockchain programmability with the help of Ethereum served a crucial part in the growth of decentralized apps for financial services. Within a couple of years, decentralized finance (DeFi) has become a key phrase among applications of blockchain. One of the notable DeFi platforms which have gained worldwide popularity is Yearn Finance, also referred to as yearn.finance. The constantly growing interest in DeFi solutions also draws some eyes towards the top players like yearn.finance.
With almost $70 billion worth of assets locked in all DeFi protocols, it is only a matter of time before DeFi achieves mainstream recognition. As one of the significant names in the existing DeFi landscape, yearn.finance has developed a niche reputation. The following discussion offers you an introductory guide on Yearn DeFi protocol and answers to some commonly asked questions.
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Definition of Yearn Finance
The obvious question on anyone’s mind right now must be ‘what is Yearn Finance’ and how does it deliver the benefits of DeFi? Yearn Finance is a comprehensive assortment of DeFi or decentralized finance offerings. It is actually a collection of different protocols which offer services like insurance, lending aggregation, and yield generation on Ethereum.
The backbone of the protocol involves independent developers alongside facilitating governance through YFI token holders. The basic infrastructure of the protocol enables the availability of all the features of Yearn through decentralized mechanisms. You can imagine Yearn as a collection of DeFi protocols that help crypto asset owners in optimizing their earnings through trading and lending services. Just like other DeFi protocols, Yearn enables simpler access to financial services without the need for intermediaries.
The protocol aims at offering products with intuitive and simple interfaces across the whole DeFi ecosystem. With a native token for the platform, Yearn Finance has also ensured promising functionality of governance. The DeFi protocol has a total of 36,666 tokens, with more changes coming up in future proposals.
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Origin Story for Yearn
Any guide on how to use Yearn Finance would also point to the origin story of the protocol. The founder of Yearn is a South African software developer and entrepreneur, Andre Cronje. Andre created the Yearn protocol in February 2020, following an evaluation and comparison of DeFi protocols offering the best APY. He made the comparison on different DeFi protocols for expanding his earnings in crypto. Some of the notable DeFi protocols Andre considered include dYdX, Compound, Fulcrum, and Aave.
During the comparisons, Cronje identified that the process followed in the existing DeFi protocols is comparatively boring and monotonous. Thus began the journey of creating the earliest version of Yearn. Now, the project focuses on automating the process for leveraging the best optimization in well-performing strategies. One of the primary concerns of the project focused on delivering the best annual percentage yields for different stablecoins.
He has also stated that he successfully created the Yearn protocol without any public or private funding. On top of it, Andre also claims that he did not reserve any YFI tokens for himself at the time of launch. The subsequent step in the roadmap of Yearn protocol involved the development of a team for building the protocol. The protocol introduced an “Earn” feature in February 2020 and has showcased formidable growth. With the launch of its token, it has climbed up the ranks of the largest cryptocurrencies in terms of market capitalization.
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Working of Yearn Protocol
The next question regarding Yearn protocol would obviously point to its working. Interestingly, you can find an answer to “how does yearn finance work” through an overview of the four significant products in its portfolio. Here is an overview of the products which serve the technological foundation underlying yearn.finance.
VaultsVaults work as the staking pools in Yearn protocol, which help in generating viable returns for investors in accordance with the market opportunities. Users could access better value-based opportunities with vaults through different processes, such as automation of yield generation and rebalancing processes. In addition, people interested in guides on ‘how to buy yearn finance’ would also discover the benefits of crowdsourcing for gas fees and automatic redirection of capital according to their requirements. You can think of vaults as the selected assortment of investment strategies developed particularly for ensuring optimal returns from DeFi projects.
One of the core products associated with the Yearn protocol, the Earn feature, defines another notable benefit of the protocol. As a matter of fact, the Earn feature was the first offering in the Yearn protocol and worked as a lending aggregator. It works by moving funds among different DeFi protocols, including Compound, dYdX, and Aave. The continuous shift between different protocols follows the constant fluctuations in the interest rates in different protocols. As a result, anyone seeking a guide to sell yearn finance can leverage the feature of taking advantage of interest rates at different times. It is a valuable offering that can help in identifying the optimal interest rates for lending or selling assets.
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The next important offering in the yearn finance product portfolio is Zap. It helps yearn.finance users for swapping assets in and out of liquidity pools across the CurveDAO platform. The Zap feature supports five distinct stablecoins such as USDC, USDT, TUSD, DAI, and BUSD. The working of Zap practically helps in bundling different trades in one click, thereby ensuring better savings on labor and user costs.
Another notable product in a description for ‘how does yearn finance work’ would refer to Cover, an insurance product. As the name implies, Cover helps users obtain necessary coverage in event of financial losses. The scope of insurance coverage is applicable for different smart contracts and protocols associated with the Ethereum network.
APY is also one of the prominent products in the yearn protocol, which works as a data table. The data table offers a detailed impression of interest rates in different lending protocols across the DeFi landscape. The working of yearn finance primarily involves yield farming, with users locking their crypto assets in DeFi protocols for earning interest. Yield farming follows the simple principle of ensuring more rewards for users by locking up more crypto assets in supported DeFi protocols. The Yearn protocol successfully brought in almost $800 million in terms of locked assets in the first month, indicating the exceptional level of growth it has achieved.
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The uniqueness of Yearn Finance
The doubts regarding “how to use yearn finance” might have discovered some solutions in the products offered by the protocol. However, it is important to wonder about the special highlights in Yearn protocol. Access to different DeFi protocols in one platform appears to be a generic advantage, especially for people fluent in DeFi protocols. What is the unique highlight of Yearn that has helped it achieve impressive levels of growth? The biggest strength of Yearn is the vision for simplifying the experience of every DeFi user. It not only focuses on usability in terms of the interface but also on access to simplified DeFi activities. Therefore, it can also help beginners capitalize on the benefits of decentralized finance.
The uniqueness of Yearn Finance is also evident in the facility of different custom tools, which can work as aggregators for popular DeFi protocols. In addition, the Yearn platform also features in-built mechanisms for shopping interest rates, thereby enabling better prospects for higher yield. At the same time, Yearn also achieves the desired benefits through withdrawal fees, which are considered reasonable. The 0.5% might not hurt new DeFi users. However, it is important to look out for the 5% gas subsidization fees, which depend on the congestion in Ethereum. On the positive side, the decentralized governance model of Yearn can enable changes in the fees through the consensus of protocol users.
Token of Yearn Protocol
The native token of Yearn protocol i.e. YFI is also an important highlight for understanding the yearn.finance cryptocurrency. It is an ERC-20 token tailored for governance and the facility of incentives on the Yearn platform. The token holders have the privilege of voting on the rules for using the protocol through different proposals. Every proposal requires over 50% of the votes for ensuring the implementation in the codebase of yearn.finance. While any yearn protocol user could make a proposal, they could vote on passing proposals only if they have the yearn.finance token.
Any user seeking information on how to buy yearn finance token must know about the token’s economics. In the initial stage, the Yearn protocol planned a fixed supply of 30,000 tokens. However, the supply increased to 36,666 tokens depending on the consensus among the token holders. Subsequently, the token holders also enjoy the benefits of rewards from the revenue of Yearn from the transaction fees. As of now, Yearn has a 5% fee for the Vault service alongside a 0.5% fee for the Earn feature. YFI token holders can also have better value-added benefits in the form of generous incentives. Participation in the yearn.finance protocol alongside providing liquidity can help in earning the yearn token.
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Methods for using Yearn Finance
The introduction to yearn.finance protocol largely emphasizes the advantages it offers for accessing different DeFi services. Yearn Finance uses the native token in the form of a rewards mechanism or a governance token. You can start using the protocol by choosing a particular wallet.
Selecting the Yearn Finance Wallet
The native token of Yearn protocol is an ERC-20 token, thereby suggesting compatibility with any Ethereum-compatible wallet. You can select the type of wallet according to the number of tokens you want to have and their purpose. The different types of wallets, such as hardware wallets, software wallets, and online exchanges, are some of the choices you might want to consider.
The guides on ‘how to use yearn finance’ specify distinct scenarios for capitalizing on its advantages. For example, hardware wallets such as Trezor could offer better security with offline storage. Software wallets can provide flexibility with easy access through smartphone applications and websites. Furthermore, you can also look for online exchanges that would take custody of a particular amount of the Yearn token.
With the help of reliable wallets, you can buy and sell yearn finance tokens or invest them in staking. Token owners can stake their assets on the platform in different approaches. The first option would refer to holding the token and earning a share of the yearn.finance platform fees. On the other hand, token owners can also place their assets in the Yearn Vaults, which claim offers of higher yields. At the same time, the volatile nature of the vaults can impose more risk for the investors.
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Yearn Finance FAQs
1. How to use yearn finance?
You can use yearn finance by choosing a crypto wallet and investing your assets in the staking protocol for the protocol. Ownership of yearn.finance token offers the right to governance alongside better incentives with all the offerings on the protocol.
2. What are the methods to buy yearn finance tokens?
The easiest way to buy yearn finance is through your trusted crypto wallet. Most of the popular wallets have listed the YFI token and you can follow the simple steps for buying the token.
3. Which factors determine the price of yearn finance?
The notable factors that are responsible for determining the price of the yearn.finance token includes the general economic environment of the crypto market and exchange outflows and inflows. At the same time, the demand for the token in governance and staking in the Yearn network also affects the price of the token.
4. What are the methods to sell yearn finance tokens?
Any YFI token owner could sell their tokens from the crypto wallets, with flexible interfaces and payment options.
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The collection of DeFi products in Yearn Finance suggests the variety of value it brings to the table. It works as a credible candidate for accessing multiple value-based benefits of DeFi products. What could be better than accessing the benefits of yield farming through staking pools and a lending aggregator on a single platform? In addition, the working of Yearn protocol also offers the facility of insurance coverage as another valuable feature for users. The growth of yearn protocol has been impressive and showcases a definitive vision for the future of DeFi.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!