15. June 2024
What is Yearn Finance?

What is Yearn Finance (YFI) – Should you buy YFI ?

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Welcomed as one of the most prominent decentralized projects in cryptocurrency, Yearn Finance protocol is only interested in simplifying Defi. As we know that Defi automatically provides its users as much of the highest annual percentage yield (APY) as possible, depending on their deposit of cryptocurrencies. But what exactly is Yearn.Finance (YFI) and how does it work?

What is Yearn Finance (YFI) – An introduction

How Yearn Finance works

It has been developed as an ecosystem of a protocol that is built on Ethereum. This system’s primary purpose was to ease the users’ interaction process with Defi protocols and eventually maximize the annual percentage in cryptocurrencies.

As Yearn.Finance gained more popularity; it began to move users’ funds between Defi lending protocols such as Compound, Aave, and Dydx to maximize APY. The whole Yearn.Finance system was wholly generated through community development and community governance via the YFI token.

Andre Cronje, the founder of Yearn.Finance. Andre Cronje, a programmer, was its founder, and he is the one who had vast experience in the private sector, insurance, fintech, big data, and distributed ledger technologies (centralized blockchains).

He was of the view that investing in cryptocurrencies could be a risky thing. Yet the fascination behind decentralized finance protocols and the considerable yields were enough to push him to invest in stable coins on these platforms.

He successfully devised a specific program that helps in an automatic switching between Defi protocols to optimize yield. After shaping it into a more refined form with Curve Finance and Aave, he launched it publically. This system, later on, came to be known as iEam.

Considered as an influential person for his crypto reviews, he tried to introduce a more straightforward way to understand Defi to new users. This effort of him was later on rebranded yearn. Finance (AKA yEarn) was introduced in February this year. He also claimed to make it a more safe Defi protocol system. 

Yearn.Finance explained

Yearn Finance Defi

Let us now explain to you in detail the protocols for the Yearn.Finance ecosystem. These are the platforms allowing users to be long or short any amount of stablecoins with 1000x leverage.

The procedure takes place through liquidating finance. It is a system that uses flash loans in Aave for liquidating users’ funds. Swap Exchange works as an independent source through which users can deposit funds manually. It works in different Defi protocols.

Lastly comes iborrow.finance. This is a system of tokenizing debt in other protocols. It is done with the help of Aave to work as additional Defi protocols. Presently, only two exchanges are working yearn.finance and exchange of yswap. At the same time, the others are still in the testing phase.

Understanding YFI cryptocurrency

YFI is introduced as an ERC-20 token. It acts as a supervisor for the protocols within the yearn—Finance ecosystem. By interacting with these protocols, users can earn YGI tokens. It has an ample supply of 30 000 YFI tokens without ICO or pre-mine. You just need to provide liquidity to any of the yearn-finance’s platforms. You can still buy tokens from an exchange. The active community of Yearn.Finance is working meticulously to ensure the new supply of YF11 tokens, which will promise an incentive to the users who provide liquidity to Yearn.Finance ecosystem. YF11 Is basically of the fork of YF1, which provides a maximum supply of 60,000.

How does Yearn.Finance work?

It is true that Yearn.Finance is a complex system to understand. This is so due to the absence of documentation about this protocol. But the actual working of Yearn.Finance is quite simple as compared to other Defi projects.

As we have discussed earlier that yearn. Finance deals in stable coins funds and moves them between Compound, Aave, and DyDx. This solely depends on a particular stablecoin asset pool, which is providing the highest APY. Presently it is supporting the coins like DAI, USDC, USDT, TUSD, and sUSD.

Yearn.Finance is a thoroughly supervised community. And d it might change the list of its supporting cryptocurrencies with the changing trends in the market. It so happens that when a particular user deposits some amount of stablecoins into Yearn.Finance, it converts them into an equal amount of yTokens. These are also known as yield optimized and could be used to earn YFI tokens.

Considering security issues yearn. Finance keeps safe the original funds into the protocol and shuffles them automatically between Compound, Aave, and DyDx pools with the highest yield. In return, the protocols deduct a small amount deposited Into the yield—finance pool holder, which is only accessible to YFI token holders.

Three ways to earn YFI cryptocurrency

There are three ways to earn YFI cryptocurrency. The first way is about the deposit of yCRV into the yGov pool in Yearn.Finance. Second comes the method where you have to deposit around 98%-2% mix of DAI and YFI into the protocol for BALANCER in exchange for BAL (Balancer protocol) tokens.  Your Bal tokens will then be deposited into yGov in an exchange for YFI.

Now we explain the third and the last way. The method is where the users have to deposit a mix of YFI and yCRV into Balancer in exchange for BPT (Balancer pool) tokens. These tokens, after this process, would be deposited into yGov and accrue YFI tokens.

Yearn.Finance (YFI) – Should you buy it?

He was correct when Cronje said DeFi has become too complex for the ordinary person. Everyone who can streamline the process and deliver a better user experience would have a greater chance of achieving mass acceptance.

And while any Yield Farming strategy entails a high degree of risk, this year yEarn has delivered some pleasant returns with relatively small risk. However, if a user plays on yGov with BPT tokens, layers of derivatives underneath the underlying asset are enabled.

That means that with only one link in that chain, something can go wrong which makes it difficult to call it a low-risk strategy. While Cronje is the sole creator, around yEarn a community has developed. And their contribution to governance within the group is outstanding.

YFI is a token that is strongly crafted and highly sought after. Changes to the protocol are made through proposals on-chain and by voting.

Where to buy Yearn.Finance (YFI)?

You can buy YFI since 10.08.2020 on the worldwide biggest Exchange Binance. With our actual promo-link you save 5 % transaction fees on Binance lifetime.


So this is all the necessary information about the operations and functions of yearn-finance-protocol. You might find it difficult to understand initially, but it will become easy to understand if you view it through a proof of stake lens.

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Photo Source: Photo by Nick Chong on Unsplash

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