Yearn Finance Comic - Part 1
You probably heard about Yearn Finance, but what is actually Yearn Finance trying to accomplish?
Let’s explore.
Table of Content
Yield Aggregators Protocol
Banks Interest Earnings
Why Yearn Finance
In Conclusion
Yield Aggregators Protocol
Yearn Finance is a DAO. No company, no CEO, no single individual charges the operations. It is run by community members. It focuses on yield. Particularly using crypto to leverage the yield.
To make yield efficient and return higher profits, Yearn Finance utilized stablecoin to help users to earn more through their liquidity pools.
The idea of yield aggregators means people will put their funds together with smart contracts to help them trade and find the best possible earnings through various interest rate choices.
Banks Interest Earnings
People may wonder why interest earnings from banks are so low. The answer is they do not want your money. There is no incentive for them to ask for a deposit on their accounts. The way banks make profits does not rely on your money deposit.
People usually think that banks use your deposit to make loans. However, that is only their fraction of earnings. Bank's profits are mainly coming from selling financial products like loans, mortgages, and fees.
Particularly, those fees are acting as a punishment to people who use their services. Overdraft fees brought banks 1.3% of revenue in 2020. It is a combo of a one-time charge of $36 plus whatever you owe with interest.
Other profits mainly came from service fees that banks provide through credit services, loan services, and investment services.
If you cut all their services fees and punishments, their profits will shrink dramatically.
Why Yearn Finance
By eliminating the middleman, service fees and punishments are gone. All financial services can provide is to make users more profitable.
With this simple intuitive goal, Yearn Finance can easily offer higher APR to users.
In Conclusion
There are many valuable Defi projects. Yearn Finance is one of the top projects that you want to hold.
