What is Yearn.Finance (YFI)?

After its launch in 2020, Yearn.Finance (YFI) quickly became one of the fastest-growing DeFi projects, attracting over $800 million in digital assets in its first month. In eight months, the total value locked (TVL) on the platform had grown to $1 billion. Yearn.Finance offers a range of lending and trading services that allow individuals to optimise their profits through automation and yield farming.

What is the Yearn.Finance platform?

Yearn.Finance (YFI) is a decentralised finance platform consisting of a group of protocols built on the Ethereum blockchain. These protocols allow users to maximise their digital asset earning potential through staking, lending aggregation and yield generation services.

The aim of the Yearn.Finance project is to make DeFi (decentralised finance) trading less complicated and more accessible to less technically-minded traders. The platform utilises automation to allow traders to maximise profits from yield farming.

Yearn Finance consists of four core products:

• Earn - establishes the highest interest rates that users can earn from lending crypto assets.
• Zap - groups together several trades in one click, reducing costs and labour.
• APY - comprehensive data table that analyses interest rates across various lending protocols.
• Vaults - investment strategies developed to yield the highest returns from other DeFi projects.

Through locking supported cryptocurrencies in Yearn.Finance smart contracts integrated into the Curve DeFi and Balancer trading platforms, users earn YFI tokens and can engage in yield farming practices. The more crypto assets that users lock into these protocols, the more tokens they receive.

To operate efficiently in a decentralised manner, Yearn.Finance built an impressive system of automated incentives rewarding participants who act in accordance with the outlined governance proposals with its YFI tokens. These proposals are voted in by YFI holders.

Who created Yearn.Finance (YFI)?

Yearn.Finance was launched in February 2020 by a prominent contender in the crypto space, Andre Cronje. Cronje led the launch of the platform having received no funding or reserving any tokens for himself, an exceptionally rare occurrence in the crypto assets and DeFi projects space.

On top of that, he also holds important roles at smart contract ecosystem Fantom and CryptoBriefing - a premier go-to resource for anyone interested in Initial Coin Offerings (ICOs) or crypto media market.

How does the Yearn Finance (YFI) platform work?

Yearn Finance offers users custom-built tools that act as an aggregator for other DeFi projects such as Aave, Compound, and Curve DeFi trading platforms.

Built on the Ethereum blockchain, Yearn.Finance deploys contracts on other compatible decentralised exchanges such as Balancer and Curve to maximise the earning potential for its users.

These contracts can be categorised into the four core products mentioned above, with most of the platform's services centred around lending or trading digital assets, and generating a passive income.

Earn

The earn product acts as a lending aggregator and searches across a selection of reputable lending protocols to find the best interest rates, allowing users to tap into the best rates when lending cryptocurrencies. Users can then deposit USDT, USDC, DAI, sUSD, or TUSD into liquidity pools directly through the Yearn.Finance platform to tap into those interest rates.

Zap

Saving time, costs and transaction fees, the zap product allows users to conduct several transactions in one click. For example, a user can trade DAI for yCRV in one smooth transaction, as opposed to several transactions on other DeFi projects.

APY (annual percentage yield)

Aggregates the earning potential on an annualised basis based on how much capital is invested by searching across the various lending protocols utilised by the Earn product.

Vaults

The more complex of the services offered by Yearn.Finance, the Vaults product allows users to tap into active investment strategies designed by the platform's own self-executing code. These essentially work as actively managed mutual funds with Yearn Finance being the financial intermediary.

Users looking to engage in this product, noting that it is still in experimental stages, would need to have some technical know-how to investigate how these strategies work as they are presented in Solidity (a smart contract-oriented programming language). Utilising the product, however, is less complicated, simply requiring users to deposit USDC or DAI in each strategy which then invests the funds in various liquidity pools.

What is the YFI token?

Launched in July 2020, the YFI token is based on the ERC-20 token standard and operates as a utility and governance token across the ecosystem. While anyone can make a proposal, only YFI holders are able to vote on proposals put forward regarding the governance and future development of the platform. The higher one's YFI token holding, the more voting power the YFI holders have. A proposal requires more than 50% of the votes in order to be passed.

The maximum supply of YFI tokens was 30,000, however, YFI holders voted to increase this. Following the successful proposal, the total supply is now 36,666 YFI tokens.

Holders are able to earn YFI tokens through revenue received through fees charged on the platform. These are generated through the 0.5% fees charged for using the Earn feature and 5% for the Vault service.