What Is Yearn Finance (YFI)?

Yearn Finance is a yield farming platform with an intuitive interface. Yield farming is a process of staking cryptocurrency to earn interest as passive income. Yearn Finance is a decentralized finance (DeFi) tool that aims to optimize yield to generate a higher return. In other words, this platform is an automation tool that invests into the liquidity pools of various projects to deliver the best possible profits. 

Running on Ethereum, the project’s primary purpose is to simplify yield farming for the masses. The platform eases users’ interaction with other DeFi projects and offers services such as swap and farm in one place. According to the whitepaper, the project provides three core products: Earn, Vaults, and Iron Bank.

• Earn: This is a lending aggregator and shifts funds between different platforms. Users can deposit to these aggregators to earn interest. The smart contracts of this product ensure that users are obtaining the highest interest rates at all times. 

• Vaults: These are like savings accounts for crypto assets. The user can manage their holdings and choose the best strategies to maximize their yield. The platform offers more than ten different strategies for every kind of user. Further, the platform also helps users shift capital, auto-compounding, and rebalancing.

• Iron Bank: This is a lending service for both users and the protocols. The service allows borrowing using the crypto as collateral. Collateral is a valuable asset pledged as security for the repayment of a loan. For particular whitelisted protocols, this service also offers zero-collateral loans. 

To better understand the platform’s mechanics, let’s illustrate an example. Let’s say a user wants to invest 500 DAI tokens. After giving tokens to Yearn, the protocol issues and returns yTokens. Here in our case, the user gets 500 yDAI tokens. The protocol then moves these tokens to different lending protocols to get maximum yield. Let’s assume that Compound gives more yield at a particular time than dYdX; then, the protocol would automatically move the funds to Compound. Meanwhile, the user can claim their DAI tokens back anytime by returning yDAI to the protocol by paying a 0.5% withdrawal fee.

The Yearn ecosystem is controlled by its native token, YFI. This is an ERC-20 token and serves as the platform’s cryptocurrency. Yearn Finance is a community-developed and community-driven platform governed by the YFI token. This means that the holders of the YFI token can submit and vote on the Yearn Improvement Proposals (YIPs) that govern and manage the whole ecosystem. To be enacted upon, a proposal needs more than 50% of the votes.

History of Yearn Finance

Yearn Finance was launched by Andre Cronje in early 2020. Cronje is a South African entrepreneur and software developer. The project received no funding, and Andre kept no tokens for himself. In July 2020, the platform launched its governance token and cryptocurrency, YFI.

How Are New Yearn Finance (YFI) Tokens Created?

The YFI tokens can’t be mined, but users can earn YFI tokens by staking funds into the Balancer protocol of the project. This protocol receives the share of the trading fee collected from the platform. The users can earn this trading fee, in a percentage of the total funds present in the protocol, in the form of YFI tokens.

How Many YFI Tokens Are There?

There are a total number of 36.6K YFI tokens circulating in the market. This is 100% of the total supply of the tokens. The community decides whether more tokens can be issued or not.

How to Purchase YFI Tokens

The YFI token is available on several centralized and decentralized exchanges like Coinbase, an easy-to-use and beginner-friendly platform.