Elevator Pitch
Yearn is a yield optimizer that focuses on maximizing defi yield by automatically switching between different lending protocols.
History
Andre Cronje had a bunch of stables and was waking up every day looking for juicy APY on a bunch of different dapps like AAVE and Compound. He got tired of browsing and decided to optimize this. YV1 was made up of pools of stable coins, users would receive yTokens for deposited stables and the pooled stable would be automatically moved for the best APY on different dapps. And to leave the pool they would deposit the yToken for the stable they initially deposited plus the interest accrued. Every time a user entered or exited these pools yearn would earn revenue on the rebalancing of the pools. As the protocol opened up to more users the pools got way bigger making it harder to get a good yield. So Andre and the curve team went to work creating the yCRV liquidity pool which contained yTokens like yDAI, yUSDC, and yUSDT which allowed users to easily swap between yToken stables without unwrapping their yTokens. Finding solid stable APY’s was pretty simple until Compound came out with the Comp token distribution which introduced liquidity mining. Now finding the best yield was a little harder than checking the APY of the deposit. To find the actual yield all of the distributed tokens would have to be added. This is where Andre introduced vaults, yearn vaults are pools of funds with an associated strategy that were more active than just lending out coins. They were farming, providing liquidity, or borrowing.
YFI Token
To further decentralize the protocol Andre decided to distribute a governance token to the community. There was a fair launch with no pre-mine, no VC allocation, and no team reward. The first 10k tokens were given to yCRV LP token stakers, then two Balancer pools with 10k YFI tokens each. There was a huge interest in the YFI token and $600 million was deposited in the pools for the token distribution. YFI token holders have exclusive rights to vote on proposed changes to the protocol and vault strategies. Currently, there is a circulating supply of 35,120 tokens with a max supply of 36,666. More recently a proposal (YIP-65) authored by 0xJiji was passed in January revamping the tokenomics creating a “black hole” for YFI meaning supply will be bought off the market and distributed to YFI stakers. Users who stake YFI will receive xYFI and holders will receive additional YFI bought by Yearn on the open market. Based on the Curve Finance tokenomics users will choose how long to lock up YFI where the longer they lock it up the more rewards are earned. Users will also get veYFI tokens used for voting based on how long they lock up YFI.
Edge Over Competitors
There are many yield optimizers popping up all the time including Compound, AAVE, or Curve but they haven’t had the ability to grasp the industry-leading 2/20 fee model which has generated top-tier protocol revenue without any liquidity incentives like Yearn has. Yearn cements itself into these competitors and basically milks them for more yield. For instance, the yveCRV-DAO vault provides liquidity into Curve pools and stakes the lp tokens into the respective gauges earning CRV rewards. And, these Yearn v2 vaults are able to employ up to 20 strategies simultaneously. No protocol has been able to find and execute these strategies just as well as Yearn has. Whether it’s a stable, defi token or curve vault on Ethereum and Fantom, Yearn has been able to maximize rewards on virtually every token. With well over 2.5 billion dollars in TVL and only, an 800 million dollar fully diluted market cap Yearn has significant room to grow. Their community is among some of the most active, and with a new tokenomic model and Yearn v3 on the way the YFI may inevitably be the first alt-coin to cost more than BTC.
Resources
https://yearnfinance.notion.site/Ecosystem-Updates-adcccb9a1f4b44d5ade65f22bb6f2380
https://yearn.vision/?orgId=1&refresh=1m