Yearn Finance

What Is It?

Yearn Finance is Decentralized Finance (DeFi) platform that offers a suite of products, providing aggregator services on the blockchain such as yield generation and lending aggregation. 

About Yearn Finance

Launched in February 2020 by Andre Cronje, Yearn Finance has become one of the most popular yield aggregators, with a total value locked (TVL) of US$460.72M (as of 8 June 2023). It is currently available on four chains: Ethereum, Optimism, Fantom, and Arbitrum. Its flagship product, Yearn Vaults (yVaults), allows users to deposit digital assets and receive yield from it.

YFI is the governance token of Yearn Finance, and it is used to coordinate between Yearn’s contributors, community, and relevant protocols. Governed by YFI holders, Yearn is maintained by multiple independent developers.

Yearn Vaults v2

Yearn Finance v2 was created to tackle the challenges in an increasingly complex yield farming scene and improve the lack of flexibility of Yearn Finance v1. With v2, Yearn introduced two main components: yVaults and Strategies.

1. yVaults

With delegated yVaults, users can fund it with tokens such as USDC and WBTC, and they’ll receive a receipt of their deposit in the form of an ERC-20 yVault Token (yvToken). For example,  if users deposit DAI, yDAI will be generated for them using the most optimum strategies available, so that users do not lose their exposure.

2. Strategies

Strategies are fundamentally smart contracts for yVaults. They allocate funds to specific yield-generating operations automatically, and find the best path of DeFi investments for users to maximize returns. They reduce gas fees through conducting batched transactions. Funds deposited are sent to one or more strategy contracts where there are guardians and strategists to help ensure that deposited funds achieve optimal returns.

Yearn Vaults v2 Structure

Yearn Vaults v3

yVaults v3 iterates on yVaults v2 to improve its core aspects, including maintaining high security practices, developing vaults with a wider range of strategies, and allowing more automation of vault functions. It is aimed at increasing robustness, pushing Yearn towards further decentralization.

Yearn is working on the following:

  • Increasing modularity through a robust core, smart modules, and adoption of ERC-4626 for their vaults to be compatible with any protocols that follow it
  • Simpler strategy testing and deploying, and including more tools for the vaults to tackle a wider range of yield possibilities such as locking funds and riskier strategies
  • Creating new products like Junior Tranches that allows users to choose higher-risk deposit options
  • Providing more flexibility to developers and strategists to ship codes to production

New v3 Features:

  • Allow for more than 20 strategies per vault
  • ySwaps (service used to make token swaps) will be optimized for gas efficiency
  • Shorter duration for share-prices to go up
  • More Maximal Extractable Value (MEV) protection

According to their recent April 2023 newsletter, we can look forward to the v3 Vaults launch soon. Yearn v3 smart contracts have also been audited by Chain Security.

Yearn Finance Products
Responsibilities of Yearn's Multi-DAO

Token and Tokenomics

YFI is used to coordinate Yearn’s contributors, community, and associated protocols.

Total supply: 36,666

Current supply: 33,018 (as of 8 June 2023)

Token type: ERC-20

Unlike most protocols, YFI had a “fair” token launch, meaning that the tokens were distributed in an equitable and transparent manner, and no tokens were given to the founding team or early investors before the launch. Each YFI token stands for a controlling stake in Yearn’s smart contract protocol development. Initially, the tokens were distributed to those who were willing to deposit tokens in a designated liquidity pool.

Similar Protocols

  1. Aave
  2. Cream
  3. Compound
  4. Curve
  5. Alpaca Finance

Appendix

  1. Yearn Finance Website
  2. Yearn Finance Docs
  3. Yearn Finance Medium
  4. YFI Contract Address: 0x0bc529c00C6401aEF6D220BE8C6Ea1667F6Ad93e
Disclaimer

This publication is provided for informational and entertainment purposes only. Nothing contained in this publication constitutes financial advice, trading advice, or any other advice, nor does it constitute an offer to buy or sell securities or any other assets or participate in any particular trading strategy. This publication does not take into account your personal investment objectives, financial situation, or needs. Treehouse does not warrant that the information provided in this publication is up-to-date or accurate.

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