Yearn Finance was one of the big early hitters in the DeFi explosion of late 2020. There is frequent talk of the mythical 1,000% unicorn coins, and Yearn was one of those, recording parabolic growth of $3 to $30,000 in a month. Someone, somewhere, was very happy. So, what is this unicorn, and on what basis did it record such phenomenal growth?
What is Yearn Finance?
Yearn Finance is a decentralized finance protocol built on Ethereum. Yearn Finance focuses on automated yield farming strategies. It runs a smart contract that automatically plugs its users’ collateral into various other DeFi protocols in order to gain the best yield possible with a low investment risk. That second part is important. Yes, there are degenerate yield farms with spectacular APY, but those farms are often plagued by the shadow of impermanent loss (a loss which, despite the name, is very much permanent). Yearn finance utilizes collateral in a way that, although providing market-beating APY, does so in a way that reduces the risk of such loss to as low as is feasible while still offering good returns. Yearn taps into a range of well-known DeFi platforms, such as Curve, Balancer, Compound, Aave, and more.
How Does Yearn Finance Work?
Users can deposit cryptocurrency in the protocol’s main product, Vaults. Stablecoins are the most commonly deposited collateral, but the protocol has expanded over time to accept wrapped Bitcoin, Chainlink and more. There are a wealth of “strategies” in the different vaults available on Yearn, representing different risk profiles and different deployments of various cryptocurrencies. So, depending on a user’s holdings and the return they are looking for, they can choose a suitable vault. Additionally, thanks to an integration with Zapper, Yearn users can automatically swap nearly any token to deposit into any vault all with a single click.
The vaults are what gave Yearn Finance its initial reputation, but they also represent the most complex product on offer. Although the smart contract is self-executing, it also changes and reacts to the current market state, and users should be following updates on the strategies so they are aware how their collateral is being put to use. Despite the low-risk investment ethos at the center of Yearn Finance’s approach, the risks are still there when using these services. These are custom-built and live investment strategies. Think of it as a community mutual fund – a community that the YFI holders are a part of.
Yearn Finance also offers other products that are focused on lending and trading their cryptocurrency for further gains. Earn is an automated search function that finds the best rate across several DeFi protocols at a given moment for the user, so that they can deploy their stablecoins and get interest rates. The Iron Bank is a decentralized money market platform that allows users to gain interest on their deposits, whilst also being given the option to collateralize deposits and borrow capital to be deployed within other DeFi opportunities.
What Is the Value of the YFI Token?
The heartbeat of all of this is the YFI token. It has an eye-catching price at time of writing, $33,548. However, it’s exceptionally important to note that the total max supply of YFI is a mere 36,666 coins. A far cry from the multi-billion coin max supplies of most cryptos (and bitcoin’s own 21 million). This means that in some respect its price is an illusion, but also means that, should you own a whole YFI, or even part of one, you are a substantial voice in the protocol’s governance.
The YFI token is what helps guide the direction of the protocol and the implementation of new products. This includes the possibility of minting more YFI tokens and pushing it into the market, as we saw in YIP-57. YFI is an ERC-20 token built on Ethereum, so you will require an ETH payments app to store it.
Is YFI Hard to Get?
Getting cryptocurrencies, whether by purchasing or trading, can be a daunting prospect for beginners. This is particularly true for any cryptocurrency that isn’t Bitcoin or Ethereum – with Ethereum YFIs, also known as ERC-20 YFIs, such as YFI being a prime example.
If you are thinking about getting YFI then Numio is a great choice for handling your assets. Numio allows you to pay people using your stored YFI assets, as easily as if it were cash. If you are a bit more crypto savvy you can also trade and swap YFI at the touch of a button.
How can I get YFI?
Getting YFI is easy on Numio. You can use your credit or debit card to purchase ETH or USDC, which can then be exchanged for YFI*, you can swap or trade it for other ERC-20 tokens (up to 100x cheaper than other wallets), and you can send or receive it as a payment. Whatever way you choose you can be sure that you are always in full control of your YFI.
*direct YFI purchases coming soon.