Investing in cryptocurrencies comes with significant risk. You could lose all the money you invest. Please read our risk warning here.
Yearn Finance is a decentralized yield aggregation protocol that automates the process of finding the highest returns across DeFi lending and liquidity platforms. Originally launched in early 2020 by developer Andre Cronje, Yearn has evolved from a simple yield-switching tool into a comprehensive DeFi infrastructure layer with V3 vaults, tokenized strategies, and multi-chain support. In this Yearn Finance review for 2026, we cover everything from vault mechanics and fee structures to YFI tokenomics, security track record, and how it compares with competing yield protocols.
Key Takeaways
- Yearn Finance automates yield optimization through V3 vaults that use ERC-4626 compliant tokenized strategies across Ethereum, Arbitrum, Polygon, Optimism, and Base.
- The protocol uses a dynamic fee model (previously a flat 2% management and 20% performance fee) managed by on-chain Accountant contracts.
- YFI holders can lock tokens into veYFI to earn boosted vault rewards, vote on gauge allocations, and receive protocol revenue.
- Yearn suffered a $9 million yETH exploit in December 2025 targeting legacy code, but all active V2 and V3 vaults remained unaffected.
- A pending governance proposal would redirect 90% of protocol revenue to YFI stakers (stYFI), replacing the veYFI model.
Yearn Finance at a Glance
| Feature | Details |
|---|---|
| Protocol Type | Decentralized yield aggregator |
| Launch Date | February 2020 |
| Founder | Andre Cronje |
| Current Vault Version | V3 (ERC-4626 compliant) |
| Supported Chains | Ethereum, Arbitrum, Polygon, Optimism, Base |
| Governance Token | YFI (max supply: 36,666) |
| Fee Structure | Dynamic (historically 2% management + 20% performance) |
| Key Products | yVaults, yETH, yCRV, Juiced Vaults, veYFI |
| Auditors | ChainSecurity, Trail of Bits, Statemind |
| Website | yearn.fi |
What Is Yearn Finance?
Yearn Finance is a suite of decentralized protocols on Ethereum that automates yield generation for deposited crypto assets. The core product, yVaults, accepts user deposits, mints share tokens representing ownership, and then allocates the underlying assets across multiple yield strategies to maximize returns. Strategies can include lending on Aave, providing liquidity to Compound, farming on Curve Finance, and utilizing newer protocols like Morpho and Liquity.
What separates Yearn from simply depositing into a lending protocol directly is automation. Rather than manually monitoring rates across dozens of platforms, Yearn's strategy contracts periodically rebalance funds toward the highest available yields. This is managed by experienced strategists who write, deploy, and maintain these automated strategies, with oversight from the Yearn DAO governance process.
Brief History of Yearn Finance
Andre Cronje created the original iEarn protocol in early 2020 as a tool that automatically moved stablecoins between Compound, Aave, and dYdX to chase the best lending rates. The protocol gained widespread attention in July 2020 when the YFI governance token was launched with no pre-mine, no VC allocation, and no team reserve. All 30,000 YFI tokens were distributed to liquidity providers over a single week, which Cronje described as having "0 value."
The fair launch created enormous community engagement. YFI's price surged from near zero to over $40,000 within weeks, exceeding Bitcoin's price at the time. The protocol quickly expanded beyond simple rate switching to include yVaults (automated yield strategies), Earn (lending optimization), Cover (decentralized insurance), and governance infrastructure. V2 vaults launched in early 2021 with support for up to 20 strategies per vault. V3 vaults, released in 2023, introduced a fully modular architecture based on the ERC-4626 tokenized vault standard.
How Yearn Finance Vaults Work
Yearn's vaults are the protocol's primary product. A vault is a smart contract that accepts deposits of a specific token (like USDC, ETH, or DAI), issues share tokens to depositors, and deploys the underlying assets into one or more yield strategies. As strategies generate returns, the value of each share token increases, meaning users earn yield simply by holding their vault tokens.
V3 Vault Architecture
Yearn V3 represents a ground-up redesign of the vault system. The key innovations include:
- ERC-4626 Compliance: All V3 vaults follow the ERC-4626 tokenized vault standard, making them natively composable with any DeFi protocol that supports this interface.
- Tokenized Strategies: Unlike V2 where strategies were attached to a single vault, V3 strategies are standalone ERC-4626 vaults. This means a single strategy can serve multiple allocator vaults simultaneously, and users can deposit directly into individual strategies.
- Allocator Vaults: Multi-strategy vaults that act as debt allocators, distributing deposited assets across an array of tokenized strategies based on configurable logic.
- Modular Periphery: Core vault logic remains minimal. Optional modules like Accountants (fee management), Debt Allocators (automated rebalancing), Deposit/Withdraw Limit Modules, Swappers, and APR Oracles can be attached as needed.
- Permissionless Deployment: Anyone can deploy a new V3 vault or tokenized strategy using the Vault Factory contract, without needing approval from Yearn governance.
Vault Token Naming Conventions
| Version | Prefix | Strategies per Vault | Standard | Example |
|---|---|---|---|---|
| V1 (Deprecated) | y | 1 | ERC-20 | yUSDC |
| V2 | yv | Up to 20 | ERC-20 | yvUSDC |
| V3 Multi-Strategy | yv + category | Unlimited | ERC-4626 | yvUSDC-1 |
| V3 Single Strategy | ys | 1 | ERC-4626 | ysUSDC |
Vault Categories
V3 introduced a category system that groups vaults by risk and strategy profile. Each token type (like USDC) can have multiple vaults with different categories, allowing users to choose their preferred risk-reward profile. For example, a conservative USDC vault might allocate only to blue-chip lending protocols, while an aggressive one might include newer, higher-yielding strategies.
Yearn Finance Product Suite
Beyond the core yVaults, Yearn has expanded into several specialized products:
yCRV (Curve Locker)
yCRV is Yearn's liquid locker product for Curve Finance's CRV token. Users deposit CRV and receive yCRV, a liquid token that captures the benefits of vote-locked CRV (veCRV) without the four-year lock requirement. Yearn holds a substantial veCRV position (over 50 million CRV) that it uses to boost Curve rewards for vault depositors. The yCRV ecosystem includes the yvcrvUSD vault, which auto-compounds yield from crvUSD strategies.
yETH
yETH was designed as a basket product for liquid staking derivatives (LSDs), allowing users to gain diversified exposure to multiple ETH staking providers through a single token. However, following the December 2025 exploit that drained approximately $9 million from the yETH contract due to a mathematical bug, Yearn announced plans to sunset the yETH product and audit all legacy contracts.
Juiced Vaults
Juiced Vaults are specialized V3 vaults built to leverage the Ajna lending and borrowing protocol. These vaults typically employ leveraged lending strategies to amplify yields beyond what standard deposit-and-lend vaults provide. Juiced Vaults have their own dedicated frontend and documentation. One important consideration is that because Ajna involves lending markets, there may be periods where instant withdrawals are not available if utilization is high.
veYFI (Vote-Escrowed YFI)
veYFI is Yearn's governance and reward mechanism modeled after Curve's vote-escrow system. YFI holders lock their tokens for a period of one week to four years and receive veYFI in return. veYFI provides:
- Boosted vault gauge rewards (up to 10x multiplier)
- Voting power on gauge weight allocations (which vaults receive dYFI emissions)
- Share of early exit penalties from other veYFI lockers
- Share of unclaimed gauge rewards from users without full boost
Yearn Finance Fee Structure
Yearn Finance uses a dynamic fee structure managed by on-chain Accountant contracts in V3. Historically under V2, the standard fee model was a 2% annual management fee applied to total assets under management plus a 20% performance fee taken from strategy profits. This was established through governance proposal YIP-51, which eliminated the previous withdrawal fee in favor of this simpler model.
| Fee Type | V2 Standard | V3 Dynamic | Applied To |
|---|---|---|---|
| Management Fee | 2% annually | Variable (set by Accountant) | Total vault assets, calculated per block |
| Performance Fee | 20% of profits | Variable (set by Accountant) | Strategy earnings at each harvest |
| Withdrawal Fee | None (removed in V2) | None | N/A |
| Deposit Fee | None | None | N/A |
| Strategist Share | 50% of performance fee | Configurable | Split from performance fee |
In V3, fees are fully customizable. Each vault's Accountant contract can set unique management and performance fee rates, and different vaults can have entirely different fee structures. This flexibility allows Yearn to offer lower fees on competitive products while maintaining higher fees on specialized strategies that require more active management. All fees displayed on the Yearn interface are already deducted from the quoted APY, meaning the yield users see is net of fees.
YFI Tokenomics
YFI is the governance token of the Yearn Finance protocol. It was launched in July 2020 with an initial supply of 30,000 tokens and zero pre-mine. A subsequent governance vote (YIP-57) minted an additional 6,666 YFI, bringing the total maximum supply to 36,666 YFI. Of the minted tokens, 4,444 went to the Yearn treasury for contributor compensation and protocol development, while 2,222 were allocated to a vesting package for key contributors.
| Metric | Value |
|---|---|
| Max Supply | 36,666 YFI |
| Initial Distribution | 30,000 YFI (100% to liquidity providers) |
| Additional Mint (YIP-57) | 6,666 YFI |
| Treasury Allocation | 4,444 YFI |
| Vesting for Contributors | 2,222 YFI |
| Pre-mine / VC Allocation | None |
| Token Standard | ERC-20 (Ethereum) |
| Governance Mechanism | veYFI (vote-escrowed) |
dYFI Rewards Mechanism
dYFI is an ERC-20 token emitted as rewards to vault gauge stakers. Rather than distributing YFI directly, the protocol distributes dYFI, which holders can either sell on the open market or redeem for YFI by paying ETH at a discount to the spot YFI price. The ETH collected from dYFI redemptions is used for automated YFI buybacks through Dutch auctions, creating a deflationary pressure on YFI supply while generating protocol-owned liquidity.
The discount rate for dYFI redemption is calculated dynamically based on the ratio of veYFI supply to total YFI supply. As more YFI is locked into veYFI, the redemption discount increases, incentivizing long-term locking behavior.
Proposed Governance Overhaul (2025-2026)
A major governance proposal introduced by contributor 0xPickles in September 2025 seeks to redirect 90% of protocol revenue to YFI stakers through a new stYFI mechanism. This would replace the underutilized veYFI system with a simpler staking model, increase contributor accountability through on-chain financial reporting, and restructure DAO operations. As of early 2026, this proposal is pending a community vote and, if approved, would significantly alter YFI's value proposition by directly tying token ownership to protocol cash flows.
Supported Chains and Multi-Chain Strategy
Yearn Finance has expanded beyond Ethereum to support multiple blockchain networks. Each chain has its own set of deployed vaults and strategies, with the Vault Factory enabling permissionless deployment on any EVM-compatible chain.
| Chain | Vault Versions | Notable Strategies | Status |
|---|---|---|---|
| Ethereum | V2, V3 | Curve, Aave, Compound, Morpho, Spark | Primary chain, most vaults |
| Arbitrum | V3 | Aave, Compound, GMX-adjacent | Active |
| Polygon | V3 | Aave, Curve | Active |
| Optimism | V3 | Aave, Velodrome | Active |
| Base | V3 | Aave, Morpho, Katana | Expanding (2025-2026) |
The multi-chain expansion aligns with Yearn's broader strategy of deepening integrations across the DeFi stack. Partnerships with protocols like Katana, Liquity, Alchemix, and Term Labs allow Yearn to access curated lending markets and advanced yield strategies across these chains.
Security and Audit History
Security is both a strength and an ongoing challenge for Yearn Finance. The protocol has invested heavily in auditing and security infrastructure, but its history also includes several notable incidents.
Audits
Yearn's V2 and V3 vault contracts have been audited by multiple reputable firms including ChainSecurity, Trail of Bits, and Statemind. The V3 codebase is open source and available on GitHub, allowing for continuous community review. Every new strategy undergoes an internal review process before deployment, and Yearn maintains a bug bounty program to incentivize responsible disclosure.
Security Incidents
Despite robust auditing of active vault contracts, Yearn has experienced exploits targeting legacy infrastructure:
- February 2021 (V1 DAI Vault): An exploit drained approximately $11 million from a V1 vault through flash loan manipulation. Yearn compensated affected users and accelerated the migration to V2 vaults.
- April 2023 (iEarn Legacy): An attacker exploited an old iEarn contract that remained on-chain, using flash loans through Aave. Active V2 and V3 vaults were unaffected.
- December 2025 (yETH Exploit): A mathematical bug in the yETH smart contract allowed an attacker to mint trillions of tokens, draining approximately $9 million. A separate $300,000 exploit hit the legacy iEarn pools later that month. Yearn responded by initiating a comprehensive audit of all legacy contracts and announcing plans to sunset deprecated products like yETH and iEarn.
The December 2025 incidents are worth noting because they did not affect any active V2 or V3 vaults. They highlight a persistent risk in DeFi: legacy smart contracts that remain deployed on-chain long after a protocol has moved to newer versions. Yearn's response -- sunsetting old contracts and auditing remaining legacy code -- represents a responsible approach to this challenge.
Understanding Yearn Strategies and Risk Scoring
Each Yearn vault deploys assets into one or more strategies, which are smart contracts coded to interact with external DeFi protocols in specific ways. Strategies can range from simple single-protocol lending (depositing USDC into Aave to earn supply interest) to complex multi-step operations involving leveraged looping, liquidity provision, and reward farming across multiple protocols simultaneously.
Yearn's strategy team evaluates every strategy using an internal risk scoring system that considers factors including smart contract maturity of the target protocol, audit status, historical uptime, liquidity depth, and oracle dependencies. Strategies must pass internal peer review before deployment, and vault managers can adjust debt allocation between strategies at any time to respond to changing market conditions or emerging risks.
For V3 vaults, the introduction of tokenized strategies adds another layer of transparency. Because each strategy is a standalone ERC-4626 vault with its own on-chain accounting, users and integrators can independently verify strategy performance, total deposits, and withdrawal availability without relying on off-chain data.
Common Yearn Strategy Types
- Lending Optimization: Deposits assets into lending protocols (Aave, Compound, Spark) and earns supply-side interest. Lowest risk, lowest yield.
- Curve/Convex Farming: Provides liquidity to Curve pools and stakes LP tokens via Convex or Yearn's own veCRV position for boosted CRV + CVX rewards.
- Leveraged Lending (Juiced): Deposits collateral into Ajna or similar protocols, borrows against it, and redeploys to amplify yields. Higher risk due to liquidation potential.
- Liquid Locker Compounding: Auto-compounds rewards from yLocker products like yCRV, converting earned tokens back into the base position.
- Multi-Protocol Allocation: Splits deposits across multiple protocols simultaneously, rebalancing based on APR oracle data to capture the best available rates.
How to Use Yearn Finance
Getting started with Yearn Finance requires a Web3 wallet and some crypto assets on a supported chain. Here is a step-by-step overview:
- Connect Your Wallet: Visit yearn.fi and connect a compatible wallet such as Trust Wallet, MetaMask, or Coinbase Wallet. Ensure your wallet is set to the correct network (Ethereum, Arbitrum, Polygon, Optimism, or Base).
- Choose a Vault: Browse available vaults on the V3 interface. Each vault displays the underlying asset, current APY (net of fees), TVL, and strategy details.
- Deposit: Select a vault, enter the amount you wish to deposit, and approve the token spend followed by the deposit transaction. You will receive vault share tokens (e.g., yvUSDC-1) representing your position.
- Earn Yield: Your share tokens automatically appreciate as the underlying strategies generate returns. There is no need to claim or compound manually.
- Withdraw: When ready, select the vault and enter the withdrawal amount. Your share tokens are burned and you receive the underlying asset plus accumulated yield.
For users who also want to participate in governance and earn boosted rewards, the additional step is to lock YFI tokens into veYFI through the governance interface.
Yearn Finance Pros and Cons
| Pros | Cons |
|---|---|
| Automated yield optimization across multiple protocols | Smart contract risk, especially with legacy contracts |
| V3 ERC-4626 compliance enables deep DeFi composability | Complex for beginners compared to centralized alternatives |
| Fair launch with no VC or insider token allocation | Gas fees on Ethereum mainnet can erode smaller deposits |
| Permissionless vault and strategy deployment | Yields are variable and not guaranteed |
| Multi-chain support (5+ networks) | Limited customer support (community-driven only) |
| Strong governance with veYFI and gauge voting | veYFI locking involves early exit penalties up to 75% |
| No deposit or withdrawal fees | Some Juiced Vaults may have withdrawal delays |
| Open-source and continuously audited codebase | December 2025 exploits highlight legacy code risks |
Yearn Finance vs. Competing Yield Protocols
Yearn operates in a competitive landscape with several other DeFi yield aggregators and protocols. Here is how it compares with the most prominent alternatives:
| Feature | Yearn Finance | Convex Finance | Beefy Finance | Aave (Direct Lending) |
|---|---|---|---|---|
| Type | Yield aggregator | Curve yield booster | Multi-chain auto-compounder | Lending protocol |
| Chains | 5+ (ETH, ARB, POLY, OP, Base) | Ethereum | 20+ chains | 10+ chains |
| Vault Standard | ERC-4626 | Custom | Custom | aToken |
| Strategy Complexity | Multi-strategy allocators | Curve-focused boosting | Single-source auto-compound | Single lending pool |
| Management Fee | Dynamic | None | None | None |
| Performance Fee | Dynamic (historically 20%) | 16% + 1% withdrawal | 4.5% of harvest | N/A (spread-based) |
| Governance Token | YFI / veYFI | CVX / vlCVX | BIFI | AAVE |
| Permissionless Deployment | Yes | No | Yes | No |
| Best For | Automated multi-strategy yields | Maximizing Curve rewards | Cross-chain auto-compounding | Simple lending/borrowing |
Yearn's key advantage is its multi-strategy allocator architecture. While Beefy auto-compounds single sources and Convex focuses exclusively on Curve, Yearn vaults can combine multiple strategies and dynamically rebalance between them. The trade-off is higher fees and concentration on fewer chains compared to Beefy's 20+ chain coverage.
Who Should Use Yearn Finance?
Yearn Finance is best suited for:
- DeFi-experienced users who want automated yield optimization without manually managing positions across protocols.
- Large depositors who benefit most from gas-efficient vault strategies (Ethereum gas fees make small deposits less practical).
- Governance participants who want to lock YFI, earn boosted rewards, and influence protocol direction through veYFI.
- Protocol integrators looking for ERC-4626 compliant yield infrastructure to build on.
Users seeking simpler, centralized yield products may be better served by platforms like Nexo or YouHodler, which offer fixed-rate earning accounts with less technical complexity. For users primarily interested in Curve-related yields, Convex Finance is a more focused alternative.
Frequently Asked Questions
What is Yearn Finance and how does it work?
Yearn Finance is a decentralized yield aggregation protocol that automatically optimizes returns on deposited crypto assets. Users deposit tokens into vaults, which deploy those assets across multiple DeFi strategies -- including lending on Aave and Compound, liquidity provision on Curve, and leveraged strategies via protocols like Morpho. The vault share tokens users receive appreciate in value as strategies generate yield, with no manual intervention required.
Is Yearn Finance safe to use in 2026?
Yearn's active V2 and V3 vaults have not been exploited and are audited by firms like ChainSecurity and Trail of Bits. However, DeFi always carries smart contract risk. The December 2025 exploits affected only legacy contracts (yETH and iEarn), not active vaults. Users should only interact with current V3 vaults listed on the official yearn.fi interface and avoid deprecated products.
What fees does Yearn Finance charge?
Yearn V3 uses a dynamic fee structure set by on-chain Accountant contracts. Historically, the standard was a 2% annual management fee on total assets plus a 20% performance fee on profits. All APY figures displayed on the Yearn interface are net of fees, so users earn the quoted rate without additional hidden charges. There are no deposit or withdrawal fees.
What is veYFI and how does it benefit YFI holders?
veYFI (vote-escrowed YFI) is a governance and reward-boosting mechanism. YFI holders lock tokens for up to four years to receive veYFI, which provides up to 10x boost on vault gauge rewards, voting power over gauge allocations, and a share of protocol fees from early exit penalties and unclaimed gauge rewards. Without veYFI, stakers receive only 10% of their dYFI farming rewards.
What chains does Yearn Finance support?
Yearn Finance supports Ethereum (primary chain with the most vaults), Arbitrum, Polygon, Optimism, and Base. V3 vaults on Layer 2 networks offer the same automated yield strategies with significantly lower transaction fees compared to Ethereum mainnet, making them suitable for smaller deposits.
How does Yearn Finance compare to Beefy Finance?
Yearn uses multi-strategy allocator vaults that can combine and rebalance between multiple yield sources, while Beefy focuses on auto-compounding single-source strategies. Yearn supports 5 chains with a focus on sophisticated strategies; Beefy covers 20+ chains with simpler auto-compound vaults. Yearn charges higher fees (dynamic management + performance) compared to Beefy's 4.5% harvest fee.
What happened in the December 2025 Yearn exploit?
In December 2025, an attacker exploited a mathematical bug in the yETH smart contract to mint trillions of tokens and drain approximately $9 million. A separate $300,000 exploit hit legacy iEarn pools later that month. Active V2 and V3 vaults were completely unaffected. Yearn responded by sunsetting deprecated products and conducting comprehensive audits of all remaining legacy contracts.
Can anyone create a Yearn vault?
Yes. Yearn V3 introduced permissionless vault and strategy deployment through the Vault Factory contract. Anyone can deploy a new allocator vault or tokenized strategy on any supported chain without needing governance approval. However, to be listed on the official Yearn interface and benefit from Yearn's brand trust, vaults typically go through a review process.
Final Verdict
Yearn Finance remains one of the most technically sophisticated yield aggregation protocols in DeFi. The V3 architecture, with its ERC-4626 compliance, tokenized strategies, and modular periphery contracts, represents a significant advance over previous versions and positions Yearn as infrastructure that other protocols can build on. The fair launch of YFI, active governance through veYFI, and deep integrations with major DeFi protocols like Curve, Aave, and Morpho give Yearn genuine staying power.
However, Yearn is not without its challenges. The December 2025 exploits, while limited to legacy code, are a reminder that DeFi protocols must actively manage technical debt. Fees are higher than some competitors, and the complexity of veYFI locking and gauge mechanics may deter casual users. The pending governance proposal to redirect 90% of revenue to stakers could be transformative if approved, but it also introduces uncertainty about the protocol's economic model in the near term.
For experienced DeFi users seeking automated, multi-strategy yield optimization with strong governance rights, Yearn Finance is a compelling choice. For users who prioritize simplicity or need support across many chains, alternatives like Beefy Finance or centralized earning platforms may be more appropriate. As always with DeFi, deposit only what you can afford to lose and verify you are interacting with official, current-version contracts.
This review was last updated in February 2026. Always verify current rates, TVL, and supported products directly on yearn.fi before depositing funds.
