Decentralised finance is one of the largest innovations accompanying the growth of crypto. It brings the power of financial services to a much larger audience. One such DeFi project is known as Yearn finance. But what is Yearn finance?
It is a collection of protocols that provides yield generation, lending aggregation and staking services through supported platforms. It rewards users for locking their digital assets in Yearn finance smart contracts by offering them the platform’s native token, YFI.
How Does Yearn Finance Work?
The Yearn finance protocol is built on the Ethereum blockchain and removes the need for middlemen in financial services, such as banks. It offers services such as Earn, Zap, APY and Vaults. Investors can use linked DeFi products like Aave and Compound to earn maximum yield.
Earn is a product through which users can deposit their tokens and obtain the highest interest rates on lending. This is done by finding the best rates across lending platforms.
Zap simplifies the process of completing and converting investments. If you want to trade one token for another, it can be a complicated process with many steps. Zap enables you to complete such trades in a single click, even if the tokens are on different platforms.
Finally, APY is what powers Earn. The Annual Percentage Yield protocol searches all supported lending platforms and informs users how much interest they can expect to earn on an annual basis.
How Does Yean Finance Vault Work?
Yearn vaults, or yVault is a protocol that allows you to invest based on self-executing code. It operates like a mutual fund, receiving your capital and employing multiple strategies to maximise your investment.
Unlike the default offerings from Yearn finance, yVault has access to more complex functions. It can enable you to farm multiple tokens, provide collateral and borrow assets. You can use a combination of these strategies to earn high returns on your investments.
How To Use Yearn Finance?
Earn, APY and Vaults
To begin using the platform, the first step is to connect your crypto wallet. To do this, simply go to the Yearn Finance website and click the “connect wallet” button. You can either create a new wallet or link your own.
Next, choose the investment you want to make and purchase the required tokens. The platform accepts many stablecoins like DAI and USDC.
If you are more willing to take risks, you can invest in Vaults. Choose a strategy from the ones available and deposit your tokens. The protocol will automatically perform tasks like shifting investments and compounding to give you the highest possible return.
Another way to engage with this platform is to buy its native token. The YFI token is the governance token of the protocol and enables you to make decisions about its future. If you hold YFI, you are entitled to receive platform fees as rewards.
How To Mine Yearn Finance?
The YFI token cannot be mined as the protocol does not run on Proof of Work consensus. However, YFI is distributed as a reward when you lock your tokens into Yearn finance smart contracts. This is the only way to earn more tokens as the total supply is just 36,666 YFI.
Future of Yearn Finance
Yearn Labs is a new initiative by the platform to explore highly unconventional trading strategies. It lets users deposit their tokens into extremely high-risk opportunities that can lead to massive earnings. However, users must educate themselves about how the new service works and whether they are ready to take that risk.
With more time and experimentation, Yearn Labs can lead to discovering new successful trading strategies for users.
The YFI token gained popularity for surpassing even Bitcoin in its price in May 2021. It reached an all-time high of $93,435.53, which is significantly higher than Bitcoin’s peak price of $68,789.63.
Investors believe the high demand for the token and the platform can push it to new heights as more new investors join the DeFi space.
Yearn finance is a highly successful platform that simplifies DeFi investing for its users. You can choose to keep it simple and use its Earn and APY functions, or opt into the yVault and use complex strategies to maximise your profits. The protocol alleviates the need to actively manage your portfolio and makes it easy to earn returns over a long period.
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Is Yearn Finance Safe?
The platform is known to be safe and its operations have been seamless. However, it suffered a hack at the beginning of 2021 that meant an $11 million loss for Yearn Finance. This amount was repaid to users by creating a new vault and offering YFI tokens. It is important to do your own research and find out if you believe the platform is now more secure.
Is Yearn Finance A Good Investment?
Yearn finance is a good platform for your investments as it automatically finds you the best returns. The YFI token is also expected to bounce back in the future and reach new heights.
What is YFI Token Used For?
The YFI token is the governance token of Yearn finance. Holders can propose and vote on crucial issues of the protocol and its operations.
Who Is Behind Yearn Finance?
Andre Cronje, a veteran DeFi developer, founded Yearn finance in 2020. However, today it is an entirely decentralised project. Cronje did not reserve any YFI tokens for himself ahead of the launch. This is because he believed the platform could not be a successful DeFi project if the founder dictates its future course.