Yearn Finance: review token YFI and project, advantages and disadvantages

DeFi

Yearn Finance gives access to a whole ecosystem of DeFi Ethereum based protocols. The alfa version of the protocol was released in summer of 2020. The main developer of the project was Andrea Cronje.
Initially, the project worked under the name iEarn. It functioned as an aggregator of DeFi lending protocols that provided users with the highest return on cryptocurrencies, tokens, and stablecoins deposits. But in 2020, after iEarn was hacked, the management decided to make a rebranding. As a result, a more advanced version of the protocol called yearn․finance was launched.

What is Yearn Finance?

Yearn Finance project is created for:

  • credit DeFi protocols work optimization;
  • income farming process simplification;
  • additional provision of liquidity providers with internal DeFi protocols tokens.

The basic protocol of the Yearn Finance ecosystem automatically moves user’s funds between various lending protocols, such as Compound, AAVE, and let them maximize the profitability of deposits. The system supports DAI, USDC, USDT, TUSD and SUSD stablecoins. In addition, transactions are available in such cryptocurrencies and tokens as ETH, LINK, BAT, KNC, MKN, REP, SNX, ZRX and WBT. In exchange for digital assets deposits, liquidity providers get an equivalent amount of yTokens.
July 2021 marked a major positive change for the project when the YFI Protocol Governance Token was released. 36,666 tokens were distributed among liquidity providers. Holders may vote for additional emission in the future.

Products

Yearn Finance offers several products which are detailed below.

Vaults

yVaults is the most popular Yearn Finance product. It is designed to maximize income across a variety of lending protocols. These vaults are presented as a special protocol that lets liquidity providers make deposits in crypto and earn on trading strategies. Liquidity providers receive yTokens in accordance with their share in the pool in exchange for escrowed assets.
yVaults minimize risk and help you save on fees paid in Ethereum. Only one account pays a transaction fee. Liquidity providers need to connect their cryptographic wallet to the protocol.

At the time of writing, yearn․finance supports the following wallets:

  • Metamask;
  • Trust Wallet;
  • WalletConnet;
  • Coinbase Wallet;
  • Ledger;
  • Trezor;
  • Fortmatic;
  • Portis;
  • Squarelink;
  • Torus;
  • Authereum.

Earnings

It was the loan aggregator Earn that was the first product of the yearn․finance ecosystem. It is a simpler version of yVaults that also lets you earn income in credit protocols. Similar to yVaults, Earn automatically moves funds between different DeFi lending protocols as interest rates change. The difference is that Earn only supports stablecoins and tokenized bitcoins such as DAI, USDC, USDT, TUSD, sUSD and wBTC.

Exchange

Zap provides one-click deposits to yVaults protocols. To do this, the platform exchanges the user’s stablecoins for liquidity provider tokens. Zap integration is done through the Zapper DeFi protocol.

Lending

The Lending service lets yearn․finance users borrow assets. Currently, users can borrow in currencies such as DAI, USDC, USDT, TUSD, SUSD, ETH, LINK, BAT, KNC, MKN, REP, SNX, ZRX and WBT. The service is currently in beta.

Insurance

Cover lets users receive compensation in case of financial losses. It is paid in YFI and depends on the total amount of contributed assets. Cover is also currently in beta.

Loans

Iron Bank is a relatively new product of yearn․finance, designed on the Fantom blockchain. The system was created in partnership with the DeFi protocol C.R.E.A.M. Finance
Unlike yVaults, Iron Bank lets you take out loans and make deposits in a wider range than yVaults includes. Lending is open to regular users (overcollateralized) and DeFi protocols (loans without collateral) that have been selected and whitelisted by the ecosystem.

Woofy

This token is tied to YFI. It was released in May 2021 by the project developer under the banteg nickname. The token acted as a kind of analogue of the Dogecoin memcoin. The coin has a fixed rate of 1 YFI = 1,000,000 WOOFY. The ecosystem provides free conversion of YFI to WOOFY and vice versa. You can test its functionality right now.

Summary

This ecosystem is a multifunctional liquidity platform that will be useful for both an investor or trader, and an ordinary user who wants to exchange cryptographic coins. You can test its functionality right now.

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