What is yearn.finance?

A decentralised asset management platform, yearn.finance offers a variety of applications ranging from liquidity supply to lending aggregation to insurance. Vaults are the most notable product in its ecosystem, maximising customers' harvests via different yield farming tactics provided by the community. YFI is the Ethereum token that governs the yearn.finance platform.

A brief history of yearn.finance

Independent developer Andre Cronje launched iEarn as a decentralised finance (DeFi) aggregator platform in February 2020, and saw it grow into a protocol that held over US$8 million in contracts at the time. Cronje briefly left later that month due to negative comments from the community about his project, but he returned soon after to fix vulnerabilities at iEarn. He has since renamed the platform into yearn.finance; introduced new features like Earn, Vaults, yInsure, and StableCredit; and launched YFI, the native token of the DeFi platform, in July 2020.

At first, Cronje had the unique authority to issue tokens. But this privilege was eventually expanded to nine active members of the DeFi community, known as Multi-signature (multisig) owners, who each required six signatures. Cronje did not add himself as a signature owner.

In yearn.finance V2, the team introduced a new product called Vaults, a smart savings account designed to optimise the value accumulation of deposited assets. The first vault to be launched, yUSD, quickly surpassed US$600 million in total value locked. The success of yUSD inspired the community to develop more on this product, and yETH was formed as a result. The yETH vault generated so much buzz that customers deposited US$140 million in ETH on the first day alone. This occurrence prompted Maker (the protocol that created DAI, a major component in the yETH accumulation method) to raise DAI's debt cap.

YFI was released with zero supply and no pre-mine for the team or early investors. Instead, the 30,000 tokens were allocated evenly to platform users and liquidity providers through three separate processes. The yearn.finance platform garnered approximately US$800 million in assets in its first month of operation, making it one of the fastest-growing DeFi projects to date.

Cronje briefly left yearn.finance in August 2020, this time citing exhaustion, before returning once more. In March 2022, developer Anton Nell, who worked with Cronje, announced that he and Cronje would “close the chapter of contributing to the DeFi/crypto space.”

How yearn.finance works

As a DeFi aggregator, yearn.finance automatically transfers users’ cash across DeFi lending protocols, depending on their investments’ ROI. To optimise APY, the platform swaps users' assets among recognised yield farming platforms like Compound, Aave, and DyDx. This straightforward protocol constantly analyses market leaders to guarantee that users’ assets stay in the top-paid pools. In particular, yearn.finance supports DAI, USDC, USDT, TUSD, and sUSD.

When a user deposits a stablecoin into yearn.finance, the network turns the coin into the corresponding number of y-tokens, also known as 'yield optimised tokens'. The system then automatically switches between the highest-yielding Compound, Aave, and DyDx funds.

A small fee is charged by yearn.finance for its efforts and network maintenance. This charge is credited to the yearn.finance pool, which is exclusively available to YFI token holders only.

The yearn.finance platform is characterised by a strong dedication to decentralisation. For example, the company never had an initial coin offering (ICO), and no YFI tokens were ever pre-mined. As a result, yearn.finance has established a reputation as one of the most decentralised cryptocurrency ventures. Users also like the platform’s simplified method to DeFi, overall security, and a community-vetted, open-source code. The bulk of yearn.finance's services include Earn, Zap, and Vaults, making it possible for customers to lend or sell their cryptocurrency.

What is yearn.finance used for?

As the crypto token that governs yearn.finance, YFI grants its holders the right to vote on new proposals for the platform. Any new proposal needs to be approved by more than 50% of the voters in order to be applied as a rule in yearn.finance. In addition, YFI holders can earn a share of the fees being charged by the platform’s services.