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What is yearn.finance?
yearn.finance is a DeFi suite that helps people lend and earn yield by routing funds across lending platforms, with YFI used for governance.
Category | DeFi governance token and yield aggregator |
|---|---|
Launch year | 2020 |
Date added | 2020-07-18 |
Consensus mechanism | Ethereum uses a proof of stake consensus mechanism |
Platform | Ethereum (ETH) |
Max supply | 36,666 |
Circulating supply | 35,715.94808248 |
Main use case | Governance for yearn.finance and participation in DeFi yield aggregation through vaults |
Tags | defi, dao, yield-farming, yield-aggregator, governance, ethereum-ecosystem |
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What is yearn.finance (YFI)?
Yearn.finance is an aggregator service for decentralized finance (DeFi) investors, using automation to maximize profits from yield farming. The goal is to simplify the ever-expanding DeFi space for investors who are not technically inclined or want to trade in a less committed manner than serious traders. YFI is the native cryptocurrency of the Yearn.finance protocol. It is a governance token that allows users to vote on which direction they want the protocol to go.
Who founded yearn.finance (YFI)?
Yearn.finance, was launched in early 2020 by Andre Cronje and is an Ethereum-based protocol that aims to allow users to benefit from returns on deposits of ether, stablecoins and altcoins. Andre Cronje is a South African developer within the world of financial technology, which was triggered to build Yearn.finance after discovering inconsistencies in the returns of various DeFi applications.
How does the yearn.finance work?
The primary function of the protocol is called Vaults. It allows users to deposit cryptocurrency and earn returns (yields). The deposited funds are managed by a strategy that focuses on maximizing returns and minimizing risk. From its launch, Vaults were primarily focused on stablecoins, but have since expanded to include support for ether, tokenized Bitcoin products, Chainlink and other coins. Vaults are important because they help keep the high transaction costs on Ethereum lower. By pooling capital, only one account (the controller of each Vault) has to pay transaction fees (gas) when farming the profits. Yearn.finance also offers other services. Earn is a simplified version of Vaults that supports only stablecoins and tokenized bitcoin. Zap allows users to exchange traditional stablecoins for tokens for liquidity providers representing stablecoins.
Can I make money with yearn.finance (YFI)?
Yes, you can earn money by trading yearn.finance (YFI). Buy low, sell high. Yearn.finance can be used to trade against other cryptocurrencies. Always trade responsibly. Often the price is influenced by yearn.finance news. Buy yearn.finance at Coinmerce.
Vaults in plain language
Think of a vault as a container on the blockchain. You deposit an asset, and the vault issues a token that represents your share. The vault then interacts with lending protocols to earn interest. Because interest rates change, the vault can rebalance to keep the strategy aligned with current conditions. This design is meant to make yield strategies more passive for you. Instead of manually moving funds between platforms, the vault automates parts of that process.
Yield aggregation and why rates matter
In DeFi lending, the yield you can earn depends on supply and demand. When more people supply an asset, interest can drop, and when demand rises, interest can increase. yearn.finance is built around the idea that the best yield can move between protocols. It can shift capital between different lending venues as rates change. For you, the key takeaway is that yield is not guaranteed. Your results depend on how lending markets behave while your funds are in the vault.
Governance with YFI
Governance is the process of making decisions for a decentralized protocol. With YFI, holders can participate in that process. In practice, governance can influence things like how the protocol operates and how changes are prioritized. The exact mechanics can vary over time, so it is important to read the current governance information. Governance does not remove risk. It is still possible for outcomes to be unpopular or for changes to introduce new tradeoffs.
Where yearn.finance fits in DeFi
yearn.finance is part of the Ethereum DeFi ecosystem. It focuses on lending aggregation and yield generation, which means it depends on other DeFi building blocks. The system can work with major USD tokens such as DAI, USDT, USDC, and TUSD, and it can issue yield bearing versions for vault users. Because it relies on integrations, performance depends on both yearn.finance and the connected protocols. When you evaluate risk, look at the whole chain of dependencies.
Risk checklist for beginners
Start with smart contract risk. Any DeFi vault is software running on the blockchain, and software can fail. Next, consider market risk. The yield you earn depends on lending rates, and those rates can change quickly. Then think about integration risk. If a connected protocol has liquidity issues or other problems, the vault strategy can be impacted. Finally, remember governance risk. Decisions made through voting can change how the protocol behaves.
Understand yearn.finance step by step
What is yearn.finance?
If you want to learn about yearn.finance, read all about it in the What is overview.
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