Coin Insights: What Is Yearn?

Yearn, or yearn.finance is an emerging “protocol” on the Ethereum blockchain that is focused on decentralized finance.

As of January 2021, its all-time-high (ATH) pricepoint was  $93,435.53 on May 12, 2021, even higher than Bitcoin’s highest point ($64,863) at the time. What makes Yearn one of the models to look out for among so many decentralized finance projects?

Let’s explore!

What’s a Protocol

In other words, Yearn is a system of rules that helps information to be passed between two parties in a digital form. Because decentralized finance (DeFi) involves projects or models where digital monies (cryptocurrencies) are traded or lent between two parties, without the need for a central or regulatory authority like banks. Yearn helps with both.

What is Yearn and DeFi?

To understand Yearn we must first understand DeFi or decentralized finance. DeFi is a divergent financial model, where, unlike the conservative banking system, there is no central regulatory authority.

What makes decentralized finance tick are smart contracts that run on the Ethereum blockchain.

Smart contracts can be defined as paperless digital codes that contain the agreement between two or more parties. These automated codes self-execute when predefined rules are met. In many ways, smart contracts eliminate middlemen and intermediaries. They can be more cost-effective, quicker, and safer than using traditional forms of contractual processing.

Essentially, yearn.finance is a group of smart contracts that manifests in numerous products. Yearn is a type of Autobot (automatic program) for financial trading and lending. Its master power is its algorithmic model that automatically invests in DeFi protocols to maximize yields and generate as much interest as possible.

Call it a trading bot for DeFi cryptocurrencies.

In a nutshell, it moves your money between many interest-bearing cryptocurrencies to provide you with the highest investing returns.

Origins

Previously known as iEarn, a single developer, Andre Cronje, created yearn.finance. This protocol was a byproduct of his frustration with the existing DeFi systems, which he felt were too complex or technical for the average user.

He also wanted a functionality where he didn’t have to search through different platforms and protocols looking for the best yield. Additionally, shifting his coins from one protocol to another took a lot of time and was costly. The charges to move coins on the Ethereum blockchain (called gas fees) started to eat through his portfolio, as he had to pay for every transaction to get verified.

But unlike other DeFi projects, where owners or creators raise investments for developing the protocol, he built it himself.

Cronje also realized that having an open protocol would make it more efficient than bringing it under a more traditional ‘board’ style governance model. This is why yearn boasts a strong community. Interestingly this community is what has boosted Yearn’s formidable rise in popularity and adoption.

The whitepaper on yearn.finance showcases the early visions of a decentralized loan market without the need for complex regulatory procedures.

What does Yearn (YFI) do?

The core advantage of Yearn is that it uses automation to help investors in decentralized finance profit from yield farming. To understand this, we must naturally understand what is “yield farming”?

In its simplest form, yield farming is a process that allows cryptocurrency holders to earn on their assets.

Investors can deposit units of a specific cryptocurrency into a lending pool to earn interest. This interest comes from trading fees. The concept of yield farming is similar to bank loans. Usually, when you take a loan from the banks, you have to pay back the amount along with a specific interest after a particular period. However, with yield farming, the crypto owners get paid as individuals, instead of the bank taking all of the profits.

The following visual will help you understand better :

yearn-loans

Source : leewayhertz.com

True to its founding vision, yearn is becoming a sophisticated automation tool for moving funds between the liquidity pools of various DeFi projects using smart contracts. The core focus is to achieve the highest possible return for investors.

With yield farming as the most significant growth driver of the still-nascent DeFi sector, yearn has helped it balloon from a market cap of $500 million to $10 billion in just over a year.

Importance to Investors

yearn-price

Source: DeFI Pulse

What is attractive to investors is the opportunity to earn (YFI tokens) by locking cryptocurrencies in yearn.finance contracts.

Tokens vary from coins in a variety of ways. They are digital forms of an underlying asset while crypto coins are a medium of exchange. These digital tokens represent tradable assets or utilities that thrive on the blockchains for which they are built, and can be used for both investment purposes or as a store of value.

The yearn.finance protocol has its token called the YFI, launched in July 2020 to improve yearn’s user base. This token runs on the Ethereum blockchain and has a 30,000. YFI’s value has risen by 122,417.5% since its launch, according to CoinGecko data.

Future Forecast

The ingenuity with which yearn.finance has introduced additional features, makes it one of the most evolving projects in DeFi. Sophisticated automation tools help free users from manually depositing and withdrawing funds from lending platforms.

For example, one of the features of yearn.finance, Yearn’s Vaults, works typically like a hedge fund. Users put money in, pay a fee (currently there is a 20% performance fee and a 2% management fee), and earn returns without the need for any in-depth expertise.

Yearn.finance continues to evolve, introducing new features to the decentralized finance domain, turning the conservative finance world upside down. Its future roadmap includes revolutionary changes in insurance, exchange trading, leverage, venture capital, and liquidation.

But getting into yield farming could become a risky endeavor if one does not have much experience in the cryptocurrency world. It is prudent to be very aware of market fluctuations to stake your money. The world of yield farming is fast-paced and volatile.

Summary

Yearn.finance has a circulating supply of 36,638 YFI coins and a max. supply of 36,666 YFI coins currently. The current CoinMarketCap ranking is #90, with a live market cap of $1,170,957,368 USD.

If you are planning to buy yearn.finance, check out our price page on our trading platform. Additionally,you can also check out our free newsletter.  It will allow you to keep posted on the price movements of yearn.finance (YFI).

Yearn (YFI) Resources

If you want to learn more about yearn, you can visit the links below.

YearnWebsite

What is Yearn ?

Whitepaper.Yearn

Yearn.finance Protocol Whitepaper

Yearn (YFI) References

Coindesk.com

What Is Yearn Finance? The DeFi Gateway Everyone Is Talking About