What is Yearn Finance (YFI)?
yEarn is a liquidity aggregator providing automated yield farming strategy through a number of lending pools. The protocol’s most well-known pool, yearn.finance, shifts capital between top DeFi lending protocols like Compound, Aave and dYdX — ultimately geared at providing lenders the best return on liquidity.
yEarn also created Curve’s Y pool, a lending pool consisting of top stablecoins like USDC, DAI, TUSD and USDT, and is used for the BUSD Curve pool thanks to yEarn’s interest-earning yToken standard.
yEarn recently released a native governance token, YFI, which is earned through liquidity money on a number of different pools. YFI is earned by staking proof of liquidity and is one of the only DeFi tokens which was launched with no premine and no initial DEX offering.
Background
yEarn was founded by Andre Cronje in February of 2020. yEarn never raised funds as Andre says he builds software for himself.
Andre is notorious for “testing in prod” — meaning all of his contracts are pushed directly to mainnet without receiving formal audits. He is open about losing money to his very own smart contract, as well as openly stating for people to “not use this software” in regards to certain portions of yEarn.
Andre has since handed control of virtually every aspect of the protocol over to the community, including governance and the ability to mint new YFI. Now, the yEarn protocol rest in the hands of the community.
Conversations about yEarn can be found on the governance forum.
Why yEarn?
yEarn offers an easy and intuitive way to enter various yield farming opportunities in a few clicks. The protocol is constantly adding innovative new pools that, while risky, are pushing composability to its limit to make the most out of what DeFi has to offer.
As a passive participant, depositing capital to one of yEarn’s vetted pools, like Curve’s Y pool, offers a novel way to yield farm with little to no overhead.
Farming YFI
One of the more talked about yield farming strategies of the past year is YFI’s newly launched liquidity mining. At its core, users stake their proof of liquidity in any of the supported ygov.finance pools in exchange for YFI rewards. Each pool is capped at 10,000 YFI each until governance adjusts the inflation through onchain voting.
Please note that YFI yield farming is one of the most complex the industry has seen to date and comes with a large degree of inherent risk. While we will show you how to yield farm, please recognize the risk of the opportunity and that there is an opportunity your funds could be lost forever.
yearn.finance Tutorial
To start using yEarn, visit https://yearn.finance/. Here, users can choose between a number of products. Please note that at the time of writing, Cover and Pool are currently disabled.
“Earn” is the powerhouse behind the product and is likely the option users want to choose to seek the best returns on the market.
Zap lets you “zap” into Curve Finance to aggregate stablecoin lending from DAI/USDT/USDC/TUSD with one simple transaction. APY is estimated by showing you the interest rate amongst different protocols compared to yEarn.
“Cover” utilizes Opyn to offer insurance on your holdings, while “Pool” lets users exchange between four stablecoins with minimal slippage, along with adding to larger liquidity pools.
With “Earn”, users will connect with one of the supported web3 wallets.
From there, users are able to interact with trading pairs to start earning interest. Using DAI as an example, the system prompts users to deposit the amount of capital they’re willing to lend.
After the transaction confirms, Dai is converted to yDAI — yEarns’s interest-earning version of Dai. From there, users can even claim the yDAI and lend it on Curve for additional interest.
As of right now, yEarn largely support stablecoins with the intent to add other Ethereum-based assets in the coming months.
