Token Review: Yearn Finance (YFI)

Today we are going to see Yearn Finance.

Yearn Finance is a suite of products in Decentralized Finance (DeFi) that provides lending aggregation, yield generation, and insurance on the Ethereum blockchain. The protocol is maintained by various independent developers and is governed by YFI holders.

As of now, Yearn is one of the most popular and most decentralized DeFi projects in the crypto sector. While the YFI is the native cryptocurrency of Yearn Finance. Unlike Bitcoin, YFI is a governance token that boasts of the autonomous protocol.

That means users of the platform have the rights to cast a vote on the protocol’s direction that favor their intention the most. As of now, YFI is one of the largest Ethereum based tokens prioritizing automated yield farming strategies.

On August 31 2020, Yearn Finance launched the ETH vault which allows users to stake their ETH holdings for high returns via its new YETH product. The new product will likely attract a large amount of ETH tokens from the market, creating more demand for the second largest crypto.

Image source: https://yearn.finance/

How does governance work?

YFI holders govern the Yearn ecosystem and are eligble to receive a portion of protocol profits. Therefore, YFI represents a right to govern the platform and a claim on its earnings. Profits are obtained from each of Yearn's products through a governed fee structure.

To guarantee benefits, YFI holders stake their tokens into the Governance contract. Benefits are occasionally shipped off this agreement from the Yearn Treasury Vault, which incidentally holds benefits before dissemination to partners. Benefits are shipped off the Governance contract after the Treasury Vault has gathered a $500,000 save; this save is utilized to pay for different operational costs, including engineer pay and local area awards. The sum held in the Treasury contract before benefits are shipped off the Governance contract are liable to change by YFI holders. Benefits are distributed as yCRV tokens.

To decide on a proposition, YFI holders should be marked in the governance contract. Right now, clients of the YFI Vault (for example yYFI holders) are likewise qualified to cast a ballot. To lessen the burden of fees on more modest holders, Yearn governance chose to relocate to off-chain voting hosted by Snapshot. Snapshot is an off-chain gasless multi-governance customer with simple to check and difficult to challenge results. It makes making and deciding on proposals free with comparative advantages to on chain voting.

Yearn Finance is an interesting protocol that is building unique decentralized finance products. The future seems bright as they hire a team of developers and marketers, but only time will tell if the project will manage to thrive longer in the Ethereum DeFi space.

The introductory part of yearn is over, now let's proceed with the in-depth part!

Now I want to focus the attention on five core products of Yearn Finance:

• Vaults

• Governance

• Zap

• Earn

• Cover

Vaults: they are a capital pool that can automatically generate income based on opportunities in the market. Vaults benefit users by socializing natural gas costs, automating the process of revenue generation and rebalancing, and automatically transferring capital when opportunities arise. End users do not need to be proficient in the underlying protocols or DeFi (Decentralized Finance) involved, so the vault represents a passive investment strategy. Currently there are 2 versions of the yVaults.

Governance: The Yearn ecosystem is controlled by YFI token holders, who are responsible for managing and voting on off-chain proposals for the ecosystem. The proposal that generates majority support (more than 50% of votes) is implemented by a 9-member multi-signature wallet. The change must be signed by 6 of the 9 wallet signers to be implemented. The members of the multi-signature wallet are voted and approved by YFI holders and may vary depending on future governance votes.

Zap: A tool that enables users to swap into and out of (known as "Zapping") several liquidity pools available on Curve.Finance. Currently, users can use five stablecoins (BUSD, DAI, USDC, USDT, TUSD) and "Zap" in one of the two pools (y.curve.fi or busd.curve.f) on Curve. Alternatively, users can "Zap" from these two Curve pools and enter one of the five basic stablecoins.

Earn: Yearn's first product is a loan aggregator. As interest rates change between these agreements, funds will be automatically converted between dYdX, AAVE and Compound. Users can deposit funds to these loan aggregator smart contracts through the "earn" page. This product fully optimizes the accrual interest process for end users to ensure that they always get the highest interest rate on the above-mentioned designated platform.

Cover: this is an insurance that enables users to obtain financial loss insurance for various smart contracts or protocols on the Ethereum blockchain. The cover is underwritten by Nexus Mutual.

The release of YFI marks an industry-wide shift in the distribution of coins by cryptocurrency projects. By motivating early users, the project can be quickly adopted and community developed. This is related to the concept of "skin in the game", which implies that those who have a financial or emotional interest in the investment will do their best to make the investment successful.

Yearn.finance is an interesting protocol that is building a unique decentralized financial product. When they hired a team of developers and marketers, the future seemed bright, but only time will tell whether the project can flourish in the Ethereum DeFi field.

Are you trading YFI or have you already earned something from Yearn Finance Vaults or Earn?