What Is Yearn Finance II (YFII)?

Yearn Finance II (YFII) is a decentralized finance (DeFi) yield farming platform that allows users to determine the products they want and enjoy the yields. The platform is now known as DFI.Money and acts as an aggregator that automatically puts users’ digital assets to work for high-yield profits. YFII project is a fork of Yearn Finance (YFI), a decentralized finance platform implemented through Yearn Improvement Proposals (YIPs). Essentially, when a community votes to make changes in the blockchain protocol, a fork takes place. Yearn Finance II, or YFII For Innovative Investment, was formed to protect the protocol design from being spoiled by whales (big manipulators) when a community decision got rejected in YIP-8.

Contrary to the earlier protocol at Yearn Finance, YIP-8 proposed a different token emission model, one that is similar to the Bitcoin halving model. This proposal was the genesis of the YFII platform. According to the Bitcoin halving model, the number of Bitcoins issued to miners is cut in half every four years until all coins have been virtually mined. This model is designed to maintain a scarcity that will stop an endless creation of the asset. Likewise, the YFII platform proposes a weekly halving model, meaning the newly added tokens are reduced to half every seven days to facilitate a fair distribution to the community.

According to YFII’s platform, the vault is a standout offering for retail traders. YFII’s vault is a farming pool aggregator that uses a set of strategy contracts to let traders earn a better APR (annual percentage rate), a measure to represent crypto returns. Essentially, the traders deposit the token supported by the platform and receive the reward that the strategy farms automatically. The vault offers a decentralized mechanism that lets anyone write strategies and implements the one with the most votes. In addition, the vault aims to cut down the gas or transaction fee as traders deposit and withdraw the tokens.

Further, vaults use a proof-of-deposit set of tokens called iTokens. These are interest-bearing tokens that users receive upon depositing funds into vaults. In a general sense, proof of deposit serves as a mode of verification between lenders and borrowers. For instance, a deposit of XY into the vault will yield iXY, which is interest bearing. Interestingly, the user does not have to withdraw their principal amount from the vault when they require funds, as they can opt to exchange their iTokens directly. Also, these interest-bearing tokens can be used as collateral for debts and staked in the DeFi space. Thus, these iTokens aim to prevent the outflow of funds from entering the YFII platform’s vault and provide users with a straightforward method to engage in YFII’s operations.

YFII token is a community-driven Ethereum-based ERC-20 token. According to the YFII documentation, there were no ICO, pre-mining, or developer team rewards for the token. This community governance token aims to be the key to the diverse DeFi ecosystem’s farming yields. As a primary objective, the YFII token seeks to provide liquidity to the pool, the sole method to obtain YFII tokens. Further, the YFII community utilizes the token for income allocation and voting in the ecosystem.

Why Was Yearn Finance II Created?

The fork, Yearn Finance II or YFII, was formed in July 2020 due to a rejected proposal of erstwhile Yearn.Finance. The community created the platform to protect the idea of its initiator, Andre Cronje, from being manipulated by other traders. The CRV and BAL (crypto tokens) pools opened on July 27 and July 28, 2020, respectively.

How Are YFII Tokens Created?

The YFII platform has pools that supply tokens through yield farming. To restate, in yield farming, staking one token into the pool grants another token as a reward. Accordingly, this platform offers two such pools and earns YFII by staking CRV and BAL tokens. CRV is the governance token of the Curve.fi platform, and BAL is the governance token of the Balancer platform. Providing liquidity to any of these pools using either CRV tokens or BAL tokens earns YFII tokens.  

How Many YFII Tokens Are There?

According to the YFII documentation, there is a total supply of 40,000 YFII with 20,000 tokens in each pool. The platform seeks to distribute the tokens ten weeks following the launch date, starting with 10,000 tokens.

How to Buy YFII Tokens

YFII tokens can be purchased using exchanges such as Coinbase. Both Coinbase and Coinbase Pro support YFII trade.