Yearn.finance is an aggregator system for lending services that was launched in 2020. For the past two years it has been the application with the highest APY (annual percentage yield) on crypto deals.
Yearn.Finance is a set of protocols that provides decentralized insurance, lending aggregation, and yield generation on the Ethereum blockchain.
When developing the application, he focused on three features that are crucial for users: user-friendly interface, safe use, and the absence of financial intermediaries.
How does Yearn.finance work?
The application includes four automated products for non-banking finance. They help investors to make money based on their financial capabilities and the current market conditions.
1. Earn is a lending aggregator for profitable farming where assets are shifted between multiple DeFi protocols such as Compound, Dydx, Aave, and others. The Yearn app continuously tracks interest rate fluctuations in various protocols and provides algorithms for profiting from these changes.
2. Zap helps to swap assets in liquidity pools. It supports various stablecoins such as USDC, USDT, TUSD, DAI, BUSD and allows combining several transactions with one click.
3. Cover is insurance that allows users to get the necessary coverage in case of financial losses. The amount of insurance coverage depends on conditions of the smart contract and the specifics of the protocols associated with the Ethereum network.
4. APY is an algorithm for calculating the annual percentage yield when choosing a financial strategy. Yearn.finance users can make money via staking, which entails locking their assets in DeFi protocols. A table with variable data on lending rates across different DeFi platforms can be found in the APY section.
Simply put, the main task of Yearn.finance is to monitor the decentralized staking platforms to ensure that users’ assets are always in pools with the best payouts and liquidity.
What is a YFI token, and how does it work on Yearn.finance?
It is an ERC-20 token, which implies compatibility with any wallet that works with Ethereum.It is tailored for governance and the facility of incentives on the Yearn platform. Holders of YFI tokens can vote on protocol changes proposals. In order to pass and be implemented into yearn.finance’s codebase, a proposal needs to have more than 50% of votes.
The original YFI supply was 30,000 tokens. However, in order to obtain a fair consensus among its holders, it was increased to 36,666 tokens. There was neither a pre-mine for YFI nor a plan for it. Any mining, in Cronje's opinion, is a step toward the project's centralization. The token can be bought on a crypto exchange or obtained by providing liquidity to one of the Yearn Finance platforms.
The platform charges a tiny fee (0.5%) for its services. Commissions are paid into a financial pool that is solely available to Yearn network token holders. In exchange for holding YFI tokens, the project will give holders a percentage of this fee.
The Yearn algorithm's popularity, along with the limited supply of the tokens, make it an attractive investment. However, we should warn you that the Yearn Finance is not a safe haven. Holding YFI tokens in hardware wallets like the Trezor or Ledger is recommended.
