What Is Yearn Finance & How Does It Work? Who Created YFI? (2024)

What Is Yearn Finance (YFI)?

Yearn Finance is a holistic collection of Decentralized Finance (DeFi) products that provide services such as lending aggregation, yield generation, and insurance on the Ethereum blockchain.

The protocol is maintained by various independent developers and is governed by YFI holders, allowing all of Yearn’s features to be provided in a decentralized manner.

How Does Yearn Finance Work?

Yearn Finance consists of four different core products:

1. Vaults – staking pools that generate returns based on opportunities present in the market. Vaults benefit users by crowdsourcing gas costs, automating the yield generation and rebalancing process, and automatically shifting capital as needed.
2. Earn – yearn’s first product. Earn is a lending aggregator where funds are shifted between dYdX, AAVE, and Compound automatically as interest rates change between these protocols, ensuring users take advantage of the best rates at all times.
3. Zap – this product enables users to swap in and out of liquidity pools on Curve.Finance using five stablecoins (BUSD, DAI, USDC, USDT, TUSD).
4. Cover – insurance that allows users to obtain coverage in the event of financial losses for various smart contracts and protocols across the Ethereum network.

The amount of YFI a user earns is determined by the amount of cryptocurrency locked in Yearn Finance contracts running on the Balancer and Curve DeFi trading platforms, using the yearn.finance platform.

Yearn Finance generates the majority of its activity thanks to a practice commonly known as “yield farming”, where users lock up their cryptocurrency in a Decentralized Finance (DeFi) protocol in order to generate interest – typically in the form of more cryptocurrency. The more crypto a user locks in one of the supported platforms at a time, the more tokens they are awarded.

In its first month, the yearn.finance platform saw roughly $800 million in assets locked, making it one of the fastest-growing DeFi projects to date.

Who Are the Founders of Yearn Finance? (History of Yearn Finance)

Yearn Finance was created and launched by Andre Cronje. Incredibly rare in the cryptocurrency space, Cronje raised no private or public funding for the yearn.finance protocol – and reserved no tokens for himself.

Cronje is certainly a veteran of the cryptocurrency space and has become synonymous with DeFi.

Since going live in July of 2020, Yearn has held just over $1 billion in assets at a single time.

What Makes Yearn Finance Unique?

Yearn Finance has the unique vision of simplifying DeFi investment and activities such as yield farming, in an effort to make it more accessible for the uninitiated.

Yearn makes use of various custom-built tools to act as an aggregator for DeFi protocols such as Curve, Compound, and Aave. The platform has built-in mechanics to shop interest rates, bringing those who stake cryptocurrency the highest possible yield.

Yearn Finance profits by charging withdrawal fees, currently a reasonable 0.5%. There is also a 5% gas subsidization fee that varies depending on Ethereum network congestion. Thanks to its decentralized governance model, these rates can be changed by consensus of users at any time.

What Gives Yearn.Finance (YFI) Value?

YFI is the ERC-20 crypto token that governs and incentivizes the Yearn Finance platform.

Holders of YFI tokens can vote on the rules of using yearn.finance by voting on proposals. In order to pass and be implemented into yearn.finance’s codebase, a proposal needs to have more than 50% of votes. Anyone may make a proposal whether they hold YFI or not, but only YFI holders may actually vote to determine if the proposal should pass.

YFI had an initial fixed supply of 30,000 tokens, but this supply is increased if YFI holders deem that to be the best course of action. Currently, the maximum supply is .

YFI holders are able to receive revenue collected by the protocol in the form of fees. Yearn charges a fee of 5% for its Vault service and 0.5% on the Earn feature, offering generous incentives for those holding YFI

Yearn Finance users earn YFI when they provide liquidity and participate in the ecosystem, and their YFI token holdings dictate their voting power on community proposals affecting the future of the platform.

How Many Yearn.Finance (YFI) Tokens Are in Circulation?

The Yearn Finance protocol’s native token YFI began with a maximum supply of 30,000 tokens. Yearn held no pre-mine before launching, and its developers did not receive any starting funds whatsoever – the circulating supply at launch was 0 YFI.

Since launch, the majority of the supply has entered circulation (and the max supply has inflated). The success of Yearn Finance is reflected in its high token price and active user base.

Other Technical Data

Yearn Finance’s most complex product is also one of its most powerful and popular: Vaults. Yearn Finance Vaults allow users to follow custom-built, live investment strategies by using the protocol’s autonomous code. This essentially makes Vaults cutting-edge live-managed mutual funds, offering incentives to those participating.

Vaults are on the more complicated end of the Yearn Finance spectrum, because the Vault strategies are expressed in the Solidity programming language. This means users interested in creating their own Vaults will need to be familiar with coding in order to understand how Vaults actually operate.

Though operating a Vault is complex, investing in a Vault is as straightforward as can be. To invest in a chosen Vault, the Yearn Finance user interface allows a user to deposit stablecoins such as DAI and USDC directly into any strategy/Vault they choose, with each one advertising its historical return on investment (ROI).

How Is the Yearn Finance Network Secured?

Yearn Finance users can sometimes face a moderate risk of losing money due to market conditions changing rapidly and opportunistic entities attempting to profit from less-experienced participants.

In an effort to maintain transparency about the platform’s potential risks, creator Andre Cronje made it clear in the community that even after independent code audits, Yearn Finance could not be guaranteed to be 100% safe at all times. This is simply a fact of decentralized finance: DeFi involves inherent risk.

How To Use Yearn Finance

Yearn Finance offers various products users can take advantage of to fulfill all of their DeFi needs.

The Yearn Finance platform uses its native YFI token as both a rewards mechanism for liquidity providers and YFI holders, as well as a governance token used for voting on community-submitted proposals that may affect the future of the protocol.

How To Choose a Yearn Finance Wallet

YFI is an ERC-20 token, so any Ethereum-supporting wallet can be used to store YFI. The type you choose will likely depend on the amount of YFI tokens you have and what you intend to do with them.

Hardware wallets (aka cold wallets) like Ledger or Trezor offer the most secure option with offline storage and backup. However, they tend to be more expensive and difficult to understand so are probably more suitable for those with experience and large amounts of YFI tokens to store.

A simpler – and usually free – option is software wallets. These can be downloaded to your smartphone or computer and may be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. Software wallets are more convenient for making transactions but less secure than their hardware counterparts, meaning they’re better suited to inexperienced users with smaller amounts of YFI tokens.

Finally, there are online wallets or exchanges, known as hot wallets, which can be accessed with a web browser. These are less secure than the alternatives and require users to place their trust in a platform to manage their YFI tokens. These are best for those who are holding small amounts of YFI coins or making frequent trades. Just make sure to pick a service with strong security measures and a good reputation.

Kriptomat offers a secure storage solution, allowing you to both store and trade your YFI tokens without hassle. Storing your YFI coins with Kriptomat provides you with enterprise-grade security and user-friendly functionality.

Buying and selling YFI, or exchanging them for any other cryptocurrency, is done in mere moments when you choose our secure platform as your storage solution.

Staking Yearn Finance

Yearn Finance users and holders of the YFI token can stake their holdings in multiple ways.

One option is to simply hold the token and earn a percentage of the Yearn Finance platform fees. Alternatively, a user may opt to invest their YFI into a Vault (or Vaults). Investing in a Vault typically provides the user with a higher yield or interest rate – but does come at an increased risk due to the volatile nature of Vaults.

Conclusion

Yearn Finance and its suite of decentralized financial products will be of great interest to anyone who wishes to earn passive interest on their cryptocurrency holdings – without the need of a custodian or intermediary.

Yearn Finance’s native YFI tokens may also be an appealing investment if you believe that the DeFi sector, and more specifically Yearn, will continue to grow and engage more and more users interested in earning passive income on their crypto holdings.

Yearn Finance FAQ

What Is a Vault Strategy?

Vault strategies are custom-designed smart contracts applied to each Vault, telling it what assets to borrow, which assets to farm, and where it should sell those farmed assets.

What Is a YIP?

A YIP – or Yearn Improvement Proposal – is the procedure used to implement changes to the Yearn ecosystem. Any community member may start a proposal on the Yearn Finance forum, discuss it with the community, and gauge whether the proposal is worth pursuing or not. If many users agree with the proposal, it may be put up for official voting via YFI governance staking.

How To Buy Yearn Finance Tokens

Buying YFI is as easy as visiting Kriptomat’s how to buy Yearn Finance page and choosing your preferred method of payment.

How To Sell Yearn Finance Tokens

If you already own Yearn Finance (YFI) tokens and hold them on a Kriptomat exchange wallet, you can easily sell them by navigating the interface and choosing your desired payment option.

Yearn Finance Price

Several factors influence the Yearn Finance price, including exchange inflows and outflows, sentiment, technical and fundamental developments, the news cycle, and the general economic environment.

YFI price is also directly impacted by the demand for it by those participating in staking and governance of the network.

Ultimately, the price of YFI is decided at any given moment by the cumulative buying and selling of millions of participants worldwide. You can keep up to date on the latest price action using crypto exchanges like Kriptomat or one of the many different cryptocurrency tracking services.

The current Yearn.Finance (YFI) token price is EUR.

The 24-hour trading volume of YFI is EUR. YFI is currently ranked of all cryptocurrencies by total market capitalization, with a market cap of EUR. It has a circulating supply of YFI.

Register now to begin your journey into the world of YFI and cryptocurrencies with Kriptomat!

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