yearn.finance

What is Yearn.Finance (YFI)?

Yearn.finance, which stands for “you earn,” is a decentralized finance (DeFi) aggregator that helps cryptocurrency stakers find the highest sources of yield.

Rebranded from the original iEarn.finance, yearn.finance provides a vital service to time-strapped DeFi enthusiasts. The intricacies of DeFi can often be difficult to grasp, making it a domain mainly for serious traders or more technologically or mathematically talented users.

Yearn.finance simplifies DeFi and makes it easier for a broad range of investors to navigate and optimize their returns.

Yearn.finance is maintained by various independent developers and is governed by YFI token holders. It is a decentralized project and, according to its manifesto, does not have an official voice or early investors with background clout.

When Was Yearn.Finance Launched?

Yearn.finance launched in February 2020, then known as iEarn.finance, rebranding to Yearn in July with a token supply of 0 YFI. This fair launch was one of the reasons for its rapid success, since many projects are noted for opulently rewarding founders and early backers.

Yearn also took DeFi to the mainstream since it simplified a set of activities that put off the majority of enthusiasts for their complexity. By September 2020, Yearn already had over $1 billion in total value locked (TVL).

Who are the Founders of Yearn.Finance?

Yearn.finance was founded by crypto star Andre Cronje. A South African with a degree in law from Stellenbosch University, Cronje immediately moved into computers and information technology after his education.

He worked at Vodacom for two years as a mobile developer and several as CTO. After serving as head of technology at a deep learning firm, Freedom Life, he immersed himself in blockchain technology starting in 2017.

Cronje was a technical advisor to the Fantom Foundation between 2018 and 2022 and, in fact, rejoined Fantom in November 2022 after leaving earlier in the year. He has also worked as a DeFi architect at Ethereum since 2020.

However, his first DeFi project, Yearn.finance, shot Cronje to fame. Following his founding of Yearn in February 2020, Cronje began work on KP3R, also known as Keep3rV1. He then went on to found Solidly Exchange, a B2B AMM for DeFi that focused more on fees than liquidity.

Cronje told interviewers that he spent over $40,000 of his own money developing Yearn.finance. He had to take out loans on his own house to finance this endeavor.

On the 6th of March 2022, Cronje’s Fantom colleague Anton Nell announced that the pair would leave the crypto space immediately. Nell said around 25 DeFi applications would be “terminated” starting on the 3rd of April.

This led to panic in the markets, including severe losses in tokens like YFI and FTM. However, these losses were pared as most of the affected projects continued, most of them backed by strong developer teams.

How Does Yearn.Finance Work?

Yearn.finance has three core products in its ecosystem called Vaults, Earn, and Zap.

The Vaults are capital pools that automatically generate yield for users by socializing gas costs and automating the rebalancing process. They also shift capital around automatically as opportunities arise.

Therefore, Vaults provide users with a way to almost passively invest in DeFi by depositing their funds and letting the automation of the Vaults go to work for them.

Earn, meanwhile, was the first Yearn.finance product. A lending aggregator smart contract, Earn ensures depositors are earning the highest interest rates possible across platforms like dYdX, AAVE, and Compound.

Finally, Zap lets users swap into and out of various liquidity pools on Curve.finance. Users can “Zap” into liquidity pools, earning them fees and liquidity provider rewards. They can also Zap back out of these pools and into stablecoins like BUSD, DAI, USDC, USDT, and TUSD.

Yearn.finance has an extensive documentation section on the website that hosts a tutorial on getting started with using Yearn.

What Makes Yearn.Finance Unique?

Yearn.finance is one of the platforms that took DeFi mainstream and is widely considered a blue-chip cryptocurrency. Its fair launch, decentralization, and appeal to everyday users set it apart from many other projects in the space.

Yearn is also a multi-chain project. While it started with Ethereum, it can be no surprise that it also uses the Fantom network, given founder Andre Cronje’s ties to FTM. Alongside Ethereum and Fantom, Yearn uses Arbitrum as well.

Yearn also has a lighthearted side, as shown by its companion WOOFY token. According to Yearn.finance documentation, WOOFY solves the problem of YFI not being dog themed.

WOOFY is also representative of the fact that a single YFI token is often beyond the reach of the average investor. So, 1 YFI is always equal to 1 million WOOFY, and all WOOFY tokens are backed by YFI.

WOOFY can be created, or “woofed,” on the Woofy website by depositing YFI. Deposited YFI can be redeemed at any time, naturally, by “unwoofing” your WOOFY.

How is the Yearn.Finance Network Secured?

Yearn.finance is a decentralized application (dApp) that currently works with Ethereum, Fantom, and Arbitrum. This means that Yearn relies mainly on these host networks for safety. However, an attack or consensus failure on one of these networks could mean that Yearn could be affected.

Luckily, Ethereum, which commands the majority of Yearn.finance TVL, is an extremely safe network. One of the most decentralized and structurally sound blockchains, Ethereum is secured by a proof-of-stake consensus mechanism that’s also energy efficient.

Validators on Ethereum need to stake a minimum of 32 ETH to the protocol. However, even this minimum amount represents a sizable investment, which is important since it could be lost if the validator misbehaves.

On the other hand, behaving according to the protocol results in validators being rewarded with even more ETH. This mechanism provides ample incentive for validators to perform properly.

A far more likely risk vector when using Yearn, however, is smart contract vulnerability. Yearn’s Vaults search for high rewards, but that also tends to involve risk in the form of relatively untested platforms. If these platforms have critical flaws, funds could be lost.

What is the Use of YFI?

On the 17th of July 2020, while announcing Yearn.finance on his blog, developer Andre Cronje wrote:

“In further efforts to give up this control (mostly because we are lazy and don’t want to do it), we have released YFI, a completely valueless 0 supply token. We re-iterate, it has 0 financial value. There is no pre-mine, there is no sale, no you cannot buy it, no, it won’t be on uniswap, no, there won’t be an auction. We don’t have any of it.”

Liquidity providers earned YFI from that day on, and Cronje had already set up a governance module for Yearn.finance that put control into the hands of YFI holders.

This governance utility, coupled with Yearn.finance’s popularity as a platform, proved Cronje wrong, at least on the financial value of the YFI token.

Another benefit of the token is the fact that Yearn.finance collects 5% of all earnings as a fee. These fees go to the Treasury, but when the Treasury balance exceeds $500,000, the balance is distributed to YFI holders.

Who Controls Yearn.Finance?

YFI token holders control the Yearn.finance ecosystem. They can submit and vote on off-chain proposals that govern the properties and direction of the ecosystem.

Proposals that garner a simple majority, or over 50% of the vote, are implemented by a 9-member Gnosis Safe multisig wallet. These changes must be signed by a minimum of 6 out of the 9 signatories.

The 9 multisig members are also voted in by YFI holders, and the membership can be changed in future governance votes. The current members of the 6-of-9 multisig are:

• Milkyklim (Yearn.Finance)
• Mariano Conti (nenexcool.com, formerly MakerDAO)
• Leo Cheng (C.R.E.A.M. Finance)
• Cp287 (cp0x.com)
• Banteg (Yearn.Finance)
• Daryl Lau (Not3Lau Capital)
• 0xngmi (DefiLlama)
• Monoloco (Yearn.Finance)
• Lefteris Karapetsas (rotkiapp)

How Much YFI is In Circulation?

Year.finance’s native YFI token has a fixed supply of 36,666 YFI. This is an extremely tight supply in comparison to most cryptocurrencies. This low supply is one of the reasons YFI was the first token to overtake Bitcoin in per unit price, although it has since retreated.

The total supply of YFI was 0 at launch, meaning there was no premine, and developers did not receive any tokens. Most of the YFI supply has already entered circulation.

How Do You Buy YFI?

YFI is a DeFi token through and through, and it’d almost be remiss not to buy it on a decentralized exchange (DEX). Given its DeFi blue-chip status, you can buy it on almost every Ethereum DEX.

Balancer tends to have a variety of pairs to trade for YFI against, but you can also pick up YFI on Uniswap, SushiSwap, SpookySwap, Solidly, Pangolin, and many more.

If you prefer using centralized exchanges, you’ll find YFI listed on all of the big names too.

Is It Possible to Buy YFI Instantly?

Transaction speed when using DeFi and DEXs depends on which network you’re using and how congested it is.

Ethereum was notorious for slowing down at certain times, but the emergence of layer 2 scaling solutions has alleviated this problem. Layer 2s can also make trading a lot cheaper by reducing fees significantly. Many DEX platforms use layer 2 solutions to make trading faster and cheaper.

Centralized exchanges, meanwhile, provide instant trading but slower settlement. DEX trades are settled on-chain, but to take custody of your YFI tokens after buying them on CEX, you need to withdraw them.

Withdrawals can be delayed by KYC (Know Your Customer) and AML (Anti-Money Laundering), even before the exchange initializes an on-chain transaction to send you your YFI.

How Do You Store YFI?

Storing YFI is very easy, given that it’s an Ethereum-based token. Ethereum is one of the most widely used blockchains, so it also features a lot of compatible wallets.

Metamask and Trust Wallet are two of the most popular wallets for ERC-20 tokens like YFI because they can easily connect to dApps like DEXs and governance portals.

You could store your YFI on an exchange, but that wouldn’t allow you to participate in Yearn.finance governance or DeFi activities like yield farming.

Yearn.Finance Energy Consumption

Yearn.finance is a dApp, or a set of smart contracts. It is software and involves no hardware of its own, although it does rely on blockchains like Ethereum and Fantom.

Ethereum, which hosts the majority of Yearn.finance activity is a proof-of.stake network following its “merge.” It was previously a proof-of-work like Bitcoin and had been subjected to the same sort of criticism based on its energy consumption.

However, Ethereum completed its shift to PoS in September 2022 and was able to cut energy consumption by 99.95%, according to the Ethereum Foundation.

Is YFI a Good Investment?

YFI is considered by many to be a blue-chip cryptocurrency. It is a DeFi “OG” in a sense and was created by one of the most respected developers in the blockchain industry.

Part of YFI’s status comes from its astronomical price per unit and the fact that it even overhauled Bitcoin in that regard. This has to be discounted, given its far smaller supply, but the public perception and branding cannot be entirely ignored.

Yearn.finance brought DeFi to the masses, and the value of simplification cannot be understated. Cryptocurrency and blockchain technology remain complex and even incomprehensible to many, and DeFi even more so.

Thus, there remains plenty of scope for Yearn to do what it does best. While risks remain, DeFi provides individual users with financial freedom and decentralized opportunities. Of course, there is every chance the YFI can remain a valuable part of this financial revolution.