The summer of 2020 saw a surge in decentralized finance (Defi), and Yearn.Finance was at the forefront of this movement.
By utilizing smart contracts, Yearn Finance could optimize interest rates and deposit returns while operating on the Ethereum blockchain.
The term for this farming method is “yield farming,” Yearn Finance was an early leader in this field. First, we’ll examine what Yearn Finance is all about.
What Is Yearn Finance (YFI)?
Yearn Finance is an all-encompassing suite of Decentralized Financial (Defi) solutions that operate on the Ethereum blockchain to facilitate activities like loan consolidation, income production, and risk management.
All of Yearn’s features are offered in a decentralized fashion thanks to the protocol, which is maintained by a group of independent developers and regulated by those who own YFI.
How Does Yearn.Finance Work?
Four main components make up Yearn Finance.
Vaults
Profitable staking pools that capitalize on market fluctuations.
Users can save money on gas by pooling their resources and saving time and money by having their vaults generate yields and reallocate funds on their behalf.
Earn
The inaugural release by Yearn. Earn is a lending aggregator that allows customers to take advantage of the best interest rates by automatically moving their money between dYdX, AAVE, and Compound, as interest rates vary among these protocols.
Zap
Users can enter and leave Curve’s liquidity pools with this product.
Budgeting with Five Stable Coins (BUSD, DAI, USDC, USDT, TUSD).
Cover
A cover is a form of insurance for Ethereum smart contracts and protocols that protects their users from financial loss.
The amount of cryptocurrency locked in Yearn Finance contracts on the Balancer and Curve Defi trading platforms via the yearn.finance platform is the determining factor in how much YFI a user gets.
Who Are the Founders of Yearn.Finance?
Andre Cronje founded and introduced Yearn Finance. Cronje did something unusual in the cryptocurrency industry: he did not raise any private or public funding for the yearn.finance protocol, and he did not reserve any tokens for himself.
In the world of cryptocurrencies, Cronje is practically a legend, and his name has been inextricably linked to that of DeFi.
Since its launch in July 2020, Yearn has amassed a little over $1 billion.
What Makes Yearn Finance Unique?
Unlike other companies, Yearn Finance’s mission is to make participation in Defi investments and related activities, such as yield farming, easier to understand and implement for newcomers.
To aggregate several Defi protocols, like Curve, Compound, and Aave, Yearn employs a wide variety of in-house developed technologies. The software automatically compares available interest rates, ensuring that users who stake cryptocurrencies receive the maximum potential return.
As of right now, Yearn Finance’s withdrawal fees are 0.5%, which is affordable. In addition, a variable 5% gas subsidization fee is applied to transactions on the Ethereum network. These fees can be adjusted whenever the community as a whole decides it is appropriate.
How Many Yearn.Finance (YFI) Tokens Are in Circulation?
The initial amount of YFI tokens, the native currency of the Yearn Finance system, was capped at 30,000. There was no pre-mine for Yearn, and the developers received no seed funding; there were initially zero coins in circulation.
Most of the supply has been released into circulation (the max supply has inflated). The high token price and robust user base of Yearn Finance attest to the platform’s success.
How Is the Yearn Finance Network Secured?
Due to the volatility of the financial markets and unscrupulous actors looking to take advantage of those with less experience, Yearn Finance customers occasionally run a moderate risk of losing money.
Even after independent code audits, founder Andre Cronje made it obvious to the community that Yearn Finance could never be guaranteed 100% safe. There will always be a degree of uncertainty when dealing with decentralized financial systems.
How To Use Yearn Finance
Yearn Finance provides a wide range of products to meet the varying demands of its DeFi customers.
The Yearn Finance platform’s native YFI token serves as a voting token for community-submitted proposals that could effect the protocol’s long-term future and as a rewards mechanism for liquidity providers and YFI holders.
How To Choose a Yearn Finance Wallet
YFI may be stored in any wallet that supports ERC-20 tokens, which means it can be used with any Ethereum-based platform. The number and purpose of your YFI tokens will likely determine the form you select.
Offline storage and backup make hardware wallets (also known as cold wallets) like Ledger and Trezor the safest choice. Only individuals with experience and many YFI tokens to store would likely benefit from their higher prices and complexity.
The use of software wallets is a less complicated and frequently cost-free alternative. These can be either custodial or non-custodial in nature and can be downloaded to your smartphone or computer.
When you use a custodial wallet, the service provider is responsible for safeguarding and managing your private keys.
You may keep your private keys safe with a non-custodial wallet by using your device’s security features.
Software wallets are preferable for inexperienced users holding lower quantities of YFI tokens due to their increased convenience during transactions but decreased security compared to hardware wallets.
Hot wallets, accessible via a web browser, are a final option. These need users to put their faith in a platform to handle their YFI tokens, making them less secure than competing options.
These are the most convenient for traders and people who own relatively few YFI coins. Make sure you go with a reputable firm that takes security seriously.
