Yearn (YFI): Automating Yield Farming

Thursday, December 16, 2021

One of the most exciting trends in the crypto world, Decentralized Finance (DeFi) aims to move financial services to community-driven blockchain infrastructures. One facet of DeFi is yield farming, and the interest in this alone has helped DeFi grow exponentially. Yield farming is about lending or staking cryptocurrency in exchange for interest payments. Users contribute liquidity to DeFi protocols and are incentivized for doing so.
One of the DeFi projects that provides yield farming opportunities is Yearn.Finance. SMART VALOR appreciates the value offered by Yearn and its YFI token, and the rest of this piece will go into more details about both.

What is Yearn Finance?

Yearn.Finance came out in 2020 and has attracted almost $800 million in its first month, making it one of the fastest-growing DeFi platforms to date. It was launched by developer Andre Cronje, who got the crypto community’s attention by reserving no YFI tokens for himself.
The Yearn.Finance portal helps users make the best out of Ethereum-based protocols by locating the top yield farming opportunities. While the Yearn.Finance ecosystem includes several major components, it can primarily be regarded as a robo-advisor for yield projects. You can compare it to one of those websites that filter the best prices of products sold online.
In a nutshell, most services on Yearn.Finance allow users to lend or trade their cryptocurrencies in some way or another in return for interest or yield payments.

The YFI Token

The ecosystem’s proprietary token is YFI. It can be generated by locking cryptocurrencies (let’s say Ether or Bitcoin) in Yearn.Finance contracts running on the Curve or Balancer trading platforms, using the Yearn.Finance platform itself. For example, users can earn YFI by depositing yCRV (Curve’s pool token) into the yGov pool. YFI owners enjoy a series of incentives that are distributed automatically by the Yearn.Finance protocol. These incentives make the YFI token more attractive, and have served to enhance its value giving it a market cap of over $700 million.
Even though the project has been one of the fastest-growing ones, it still has room for growth, and here is why:

● Yearn.Finance is a multifunctional gateway for the DeFi space and will stay in demand as more people want to get the best deals from yielding protocols.
● The YFI supply is capped at 36,666 tokens. Thus, the token is very scarce, and the only variable is the demand. This supports higher prices for YFI.
● YFI can be staked, and holders are eligible to participate in the platform’s governance process.
● In the long term, platforms like Yearn.Finance may thrive as Ethereum is transitioning to Proof of Stake (PoS) and becomes capable of hosting even more DeFi projects without congestion.
● Yearn.Finance developers are working on several new products that may attract more users.
● The annual return for staking YFI is over 17% as of today, which is higher than the average.

Yearn.Finance to USD Chart

Yearn.Finance to USD Chart. Image via Coinmarketcap

Yearn.Finance is definitely a project that deserves recognition and one to keep an eye on. The extensive features of decentralized investment options and automated yield farming have made the protocol a major player in the DeFi space.

Explore the DeFi section on SMART VALOR to trade YFI.