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Yearn.finance (YFI) Review
The explosion of the Decentralized Finance (DeFi) sector of cryptocurrencies has been one of the biggest boons for the world of digital assets.
DeFi assets provide users with a way in which to earn yields and interest rates that are much higher than through traditional finance avenues like a bank savings account. One of the biggest leaders in the DeFi sector is yearn.finance (YFI), sometimes just called Yearn Finance, a decentralized finance platform built on the Ethereum blockchain.
Yearn Finance provides users with the highest yields for their investment, but it has become more than just a yield aggregator, offering users the ability to swap pools, short assets, take out loans, and even take out insurance policies. If you are looking to get into using decentralized finance platforms, our Yearn Finance review will help determine if it is right for your needs.
Yearn Pros & Cons
Pros
High returns on your investments
Can take out insurance on your investments
Borrow assets against your deposits
Easy swap of assets
Cons
Not easy to understand for beginners
Risks of impermanent loss
YFI Ratings
Supply
- Total: 36,666 YFI
Network Speed
- Rating: Medium-High
- Reason: Uses the Ethereum blockchain for most of its services, so speed of the network is dependent on the congestion and the amount of gas paid by the user in order to have their transaction processed.
Disbursement
- Rating: High
- Reason: The entire supply of YFI has been distributed to liquidity providers on the platform, none was set aside for the creator Andre Cronje, and this allowed for one of the fairest token distributions that there has been in crypto. There is not a single holder of more than 0.5% of the supply except smart contracts and exchanges at this time.
Developer Engagement
- Rating: High
- Reason: Andre Cronje is one of the top developers in the smart contract space, and the YFI team is constantly testing their protocols and attempting to improve yields for their users. Everything is open source and Cronje was the first person to add funds to the protocol and continues to work on its growth.
Liquidity
- Rating: High
- Reason: Top 75 asset that is available on all of the top exchanges including Binance and Coinbase. Trading volumes are low due to so much of it being locked into contracts on the platform.
History of Yearn Finance
Yearn Finance was created by a man named Andre Cronje, a South African software developer who was in law before dropping out and completing a three-year computer science program in a little over 6 months. He quickly became a professor, and soon after began reviewing code and a partner at Crypto Briefing.
Yearn Finance began as iEarn, launched in early February 2020, but Cronje left at this time before coming back in July 2020 to launch Yearn Finance, which included the YFI token and a host of products which are the backbone of the platform today.
Unlike most token distributions, the YFI token was only distributed to those that provided liquidity to the protocol, and famously the developers have frequently stated that they think it should have zero value.
The only purpose for the YFI token is voting and governance on the platform, but that means that those who hold it can help shape the platform’s future and those that do not cannot.
Where You Can Buy Yearn Finance
You can buy Yearn.finance (YFI) on most of the top centralized and decentralized exchanges including:
Advantages of YFI
The biggest advantages of Yearn Finance are based within the suite of products available on the platform. You have Vaults, Earn, Cover and Zap. There is more that that even though with ytrade.finance, yswap.exchange, yliquidate.finance and iborrow.finance all in product beta.
Vaults and Earn are related with the former being where you can earn interest on liquidity pool deposits and the latter being where you can earn a stable return on a single asset rather than having to provide liquidity tokens. These are the biggest attraction for the platform as they give users high return on investment. Generally speaking, these involve stablecoins like DAI, USDT, and USDC.
Cover allows users to take out insurance policies on the smart contracts they are using in the event of big swings in market volatility.
Zap lets users perform multiple asset swaps or liquidity changes within one transaction which saves time and transaction fees.
The beta products are all interesting tools as well, with ytrade.finance allowing users to short or long stablecoins with huge leverage, yswap.exchange allowing them to swap any asset for another, yliquidate.finance allowing users to liquidate overleveraged funds on AAVE and iborrow.finance allowing users to take out assets against provided collateral.
Disadvantages of YFI
The main disadvantage of Yearn Finance is that is not that overly user friendly. The main page is fairly straightforward, but to use any of the beta products is not that simple to understand, and this would be especially true for a beginner. However, if the beta products end up being presented with the same user interface as the main Yearn Finance platform then it will be a moot point, but for now it is not easy for beginners, as none of the beta products are even shown on the main platform.
The other potential disadvantage is the potential for impermanent loss when providing liquidity to the pools. This can be mitigated if your return is higher than the change in tokens. For more information on impermanent loss please check out this article.
Yearn Finance FAQ
A yield aggregator is a decentralized finance platform that takes you deposit and places it in the best position for you to receive a high return. In Yearn Finance’s case, when you deposit into their Earn, for example, your deposit is shifted between dYdX, AAVE, and Compound in order to generate the best return on investment.
Yes, it is possible to make big profits using Yearn Finance. It is important to remember that you can also lose profits/funds because of poor risk management, or impermanent loss.
Yes, Yearn Finance is very safe to use, the smart contracts have been rigorously tested, and the creator put his funds in first in order to show his confidence in the programming and has yet to pull any, furthering users’ faith that the platform has secure coding.
Yearn Finance is so expensive because it has an extremely small supply of just over 36,000 YFI tokens, an extremely small number of tokens. Because they are used for governance, any user who wants to have a say in the future of the platform has to own some YFI which drives up the price due to the limited supply.
No, YFI is not better than Bitcoin, but it is not really a good comparison as both assets have different uses. Bitcoin is used as a store of value and has its own blockchain, whereas Yearn Finance is built on Ethereum and is used for governance of the platform. While YFI has no more supply being released, Bitcoin has much more long-term use at this time.
You can make money with Yearn Finance in a quite a few ways. You can deposit assets into their Vault or Earn products and earn a high interest rate on that deposit. You can short or long stablecoins using their beta ytrade.finance product and make money that way, and you can liquidate users who are over-leveraged using yliquidate.finance. The platform provides multiple avenues to potentially make money.
