by: Jordi Guillamon
Previously we made a small introduction on the Yearn Finance protocol, you can see it here and after having launched the report on Arweave we have decided to offer you a report of the same caliber, but in this case we are going to do it on Yearn Finance. Fasten your seatbelts Tokeners!
What is Year Finance?
Yearn Finance perfectly defines the term DeFi, popularly known as a term that refers to an ecosystem of financial products built on blockchain networks that allow easy access to financial products, facilitating access to the current financial system to people with ignorance . The DeFi ecosystem was born in order to leave behind the burdens of the traditional financial system. On the way to 105 billion dollars (current market capitalization of the Defi market), unthinkable advances were achieved, among them, a permit economy, without restrictions for those who want to participate with infinite options to finance themselves. The project reached its climax of attention after introducing the native token, the YFI.
Days before the token launch, the protocol had around $8 million in assets under custody, which quickly appreciated over $400 million within the first week. Anyone who had deposited liquidity into Curve yPool or YFI Balancer pools during the first week of launch were eligible to claim YFI. These facts are what captured all the public attention towards Yearn Finance, given that the mechanism with which the launch was carried out later helped to convert decentralized applications (Decentralized Apps or DApps) into an active community, due to the fact of being one of the first projects in which there was no allocation of tokens for the development team or investors. This fact gave all the control of the supply to the users of the community, which makes it a project totally governed by the users themselves.
The team behind Yearn Finance
Founders and Core Team
Formerly known as iEarn, Yearn Finance was created by a single developer, Andre Cronje. After suffering an exploit in February 2020, Andre announced that he would be stepping away from the project after facing backlash from the community. He later came back and the project was changed to look like it is today; Yearn Finance, and introduced a set of new tools. In his early years he studied law, but changed his career when he saw a more promising future in virtual codes and a bigger growth to explore. So he ventured out by choosing a Software Architecture career in his native South Africa. Having finished his studies, he worked as a professor at the same institution where he had developed his studies for 5 years. His work in the field of big data and mobile device security allowed him to get to know the world of cryptography from the inside. He assimilated first-hand with all the concepts about blockchain technology, and it was mainly the operation of this technology that attracted him to the world of cryptocurrencies. His leap to success has been catapulted mainly by developing Yearn Finance and Keep3r, although recently he is also developing two new projects; a decentralized Exchange (Solidly) and a project that rewards investors for locking their tokens in a protocol for a set period of time while also giving them more power over the Fantom-based protocol called “ve(3,3 )”.
Photograph of Yearn Finance creator Andre Cronje.
Project investors
Investors who have entrusted their capital to André Cronje's project have been firms such as Delphi Digital, FrameWork Ventures, ParaFi Capital, Spartan Group and Three Arrows Capital.
Technology behind Yearn Finance
Vaults (Bóvedas translated into Spanish): the protocol that predominates due to its use in the majority of users, the Vaults represent 67% of the Total Value Locked (TVL or Total Value Locked translated in English) of Yearn Finance. Users deposit into a vault that is defined by asset and underlying return strategies are executed to deploy capital. Vaults in the first version were initially limited to single strategies and have since been deprecated. Version 2 was released earlier in the year and offers more complex performance aggregation, as vaults can work with multiple performance strategies.
Earn: Similar in nature to vaults, but even simpler. It originally focused on stable assets that users could deposit, and underneath, assets are moved between money market protocols based on which offers the highest return.
Iron Bank: A money market protocol focused on serving users and protocols. Users can deposit approved assets as collateral to earn returns from borrowers or borrow other assets. Protocol users can be whitelisted to facilitate unsecured loans.
yInsure: A bundled insurance that provides coverage against financial loss due to smart contract errors and various risks underwritten by Nexus Mutual. Unlike Nexus Mutual, to own the token, the user does not need to be KYC. Furthermore, the token is also transferable as it is in the form of NFT (non-fungible token). Each deposit in the insured vault is charged with 0.1% initiation fee and 0.01% for rolling weeks. All subject to change by the YFI government.
StableCredit: Works similarly to MakerDAO's multiple collateral model, but the difference here is that you can deposit any asset you want as collateral and get a line of credit once the asset is deposited. It is essentially a lender, combined with automatic market makers that do a dynamic utilization rate (credit line) so that it can keep up with the amount of credit the user borrowed based on the collateral the user provides.
yLeverage: Allows arbitrage traders to short up to 5x stablecoin with another stablecoin to hit their pegs. It is in the research and development phase.
Yearn Finance TVL growth graph in 2021. Source: yearn finance
yTrade – a leveraged stablecoin exchange. It allows users to borrow stable assets with up to 1000x leverage, users deposit one or more stable assets as collateral and will receive other wrapped stable assets incorporating leverage ranging from 75x to 1000x. This product is useful for traders who want to arbitrage between stablecoins, but do not have the capital to make profitable arbitrage trades. It is in the research and development phase.
yLiquidate: A liquidation bot that monitors the Aave protocol, allows anyone to call the contract, pay part of the debt and receive discounted collateral in return. It is in the research and development phase.
Delegated Funding DAO Vaults: YFI holders can provide capital to DAOs listed in the DAO Vaults ecosystem. The governance will decide the credit limits that the DAO can access and any profit generated by the DAO is shared between the DAO and the capital providers. It is in the research and development phase.
“Iron Bank” section of the Yearn Finance page.
Tokenomics Year Finance (YFI)
The native token of the Yearn Finance protocol is recognized by the ticker YFI. It is a token that since the beginning of its creation and to this day continues to be coined as a governance token, which is required to be able to participate in the governance decisions processed by the protocol. At first, Andre was the only person allowed to mint tokens, but that privilege was later extended to 9 multi-signature owners requiring 6 signatures. These members are active members in the DeFi community and Andre did not include himself as a signatory. Users must stake their YFI in the governance group in order to vote and claim their earnings. In the initial stage of the project, the voting process is 100% on-chain, where the user commits to YFI for 3 days in a voting contract.
Yearn Finance's most recent governance proposal. Source: Snapshot
In September 2020, due to the high transaction fee costs of the ERC-20 network experienced during the DeFi boom, the governance chose to vote for Snapshot (screenshot of holdings at the time), thus way you could vote without having to resort to paying network transaction costs. The voting mechanism essentially checks if the voter has YFI in their wallet. YFI token custodian wallets can submit and vote on proposals to govern the system. Proposals that meet the quorum requirements (more than 20% of the tokens in the governance contract) and generate majority support (more than 50% of the votes) are implemented by a 9-member multi-signature wallet. Changes must be formalized by 6/9 multi-signatures before implementation. YFI holders also vote for multiple signers. The number of multiple signers and quorum requirements are subject to change in governance.
Relevant information about the YFI token. Source: Coinmarketcap
Pros and Cons of Year Finance
Despite the fact that at first the community had jumped on André Cronje after the exploit that the platform suffered when Andre Cronje decided to temporarily abandon the project at that time, the continuous effort of the team to move forward with the project together with the new additions of options for the users of the platform allowed him to recover the spirit deposited at the beginning of the project.
When its creator just returned and the launch of the platform token began, it was already seen how the community gave value to the project in its own way, given that the token they devised was for governance, for which the price levels that we have been able to observe since its creation are amazing as it is a token that was created with the idea of being able to participate in project decisions and has been able to reach almost 100,000 dollars in mid-May 2021. We could observe this as one of the positive points that , together with its products with an intuitive interface, present it as a great project to observe in the long term.
However, we must also take into account that one of the points against that we could observe within the Defi ecosystem and that can also directly affect Yearn Finance is the censorship one day of this type of financial digital assets by governments themselves. establish CBDC (Central Bank Digital Currency or Central Bank Digital Currency in Spanish) with the same products that current protocols can offer but with the typical returns that banking entities offer us today. We must also have the competitors that may arise offering better returns.
Is Yearn Finance (YFI) a good investment?
In the long term, Yearn Finance has good characteristics to be able to expand as the adoption of crypto-assets and traditional finances start to integrate towards decentralized ones. It is clear that looking at the current chart of the YFI asset, it may seem that we are heading for a downward movement, but it does not necessarily have to be so. We see volume activity emerging at key price levels, for example, as we approach breakouts of the guideline we have outlined in red. Immediately when it comes to crossing that zone, the price falls to the downside, but even so we can see how it continues to maintain the support levels well in the price and how it has sustained itself in the main upward trend of the movement. In which we can in turn note that a low has been made with super low selling interest compared to the price reaction at the time which revealed that it has been buying back YFI en masse since November in response to a community vote. to improve the economy of the YFI token. The decentralized asset management platform bought 282.40 YFI at an average price of $26,651 per token, a total of more than $7.50 million. Additionally, Yearn Finance noted that it has more than $45 million saved in its Treasury and is "stronger than ever" in earnings. As a result, in the future, you could deploy your income to buy back more YFI tokens.
The next levels to watch over the next few weeks would be a stalking of the $30,000 area, where an interesting trading zone is formed which in turn coincides with the crossover we see formed by the bullish and bearish guidelines. We can also see how the interest in breaking the price below these levels has dipped considerably compared to the activity we witnessed in the pre-bearish trend stalk, where we can see the announcement of the proposed token buyback in governance ( large circle) could not sustain the movement and finally ended up falling. Next, the healthiest thing to observe a sustained growth of the asset would be to witness an uptrend in which the upward guideline of this movement continues to support the movement. Going above the $40,000 zone we could see periods of strong volatility, as we saw when it first climbed to its ATH ($94,000).
2D temporality graph of the YFI asset. Source: Tradingview
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