Do you like cookies?We use cookies to ensure you get the best experience on our websiteLearn more

Yearn Finance Review: We Review it, So You Don't Have to

What is Yearn Finance? Will this Ethereum yield aggregating platform define the DeFi movement? Learn its history and our thoughts on yEarn in this review.

  • Dean Fankhauser
    By
  • Posted
  • Read Time9 minutes
  • Our score

Yearn Finance review

Our take

4.0

Whether you prefer to call it Yearn Finance or Yearn.Finance, it's time to take a closer look at one of the most decentralized projects in cryptocurrency. The Yearn Finance protocol has as its objective simplifying DeFi.

But its goals don't stop there. The company also aims to provide users with the highest possible annual percentage yields (APYs) on deposited cryptocurrencies. Not a bad deal, right?

Known as the Bitcoin of DeFi by some crypto users, it's delivered 1000 percent+ APY, which early users took full advantage of. Coupled with almost $200 million of assets, you need to keep an eye on this ecosystem.

It's little wonder that so many want a slice of the Yearn Finance pie. Here's our Yearn Finance review to help you take full advantage of this resource.

Yearn Finance Explained

Based upon Ethereum, Yearn Finance is an ecosystem of protocols created to streamline user interaction with popular DeFi protocol. It maximizes annual percentage yields (APYs) of cryptos deposited in DeFi.

What's the most popular protocol within this new ecosystem? Yearn Finance. It automatically moves user funds between DeFi and lending protocols like Aave, dYdx, and Compound to maximize APY.

Community governed and developed, Yearn Finance revolves around the Yearn Finance token. But the asset management protocols don't stop there. You'll also find:

  • Ytrade.finance

  • Yswap.exchange

  • Yliquidate.finance

  • Iborrow.finance

Ytrade.finance lets users short or long stablecoins with 1,000 times the leverage. Yswap.exchange permits users to manually deposit funds between and to various DeFi protocols.

Yliquidate.finance uses flash loans to liquidate funds in Aave. Then, there's iborrow.finance, which facilitates tokenizing debt in other protocols by using Aave. That way, you can use additional DeFi protocols.

The Man Behind Yearn Finance

A rogue programmer named Andre Cronje designed Yearn.Finance (YFI). After dropping out of law school, Cronje obtained a three-year computer science degree in little more than six months.

This achievement landed him an offer to teach at the institution where he studied. Instead of settling into academic life, however, he took a daring leap into the private sector.

He worked in various areas, from fintech to insurance, big data, and distributed ledger technologies (a.k.a. blockchain), before research in cryptocurrencies led him down the YFI path.

After doing his due diligence, Cronje concluded that most cryptos are too speculative and volatile to invest in. Nevertheless, he remained fascinated by the concept of decentralized finance protocols.

The incredible yields offered by stablecoins deposited into crypto platforms also provided a strong allure. As a result, Cronje started investing his and others' money into these platforms.

Promoted
InvictusUSD Margin Lending
  • Return rates optimized daily
  • Secure, stable investment growth
  • No minimum
  • No lock-up period, withdraw anytime

Cronje's Rise in the Crypto-Verse

He manually managed the movement of these funds to the stablecoin or platform, yielding the highest APY. To facilitate his work, he created a program that would automatically handle these switches between DeFi protocols.

These switches permitted him to optimize yield. While creating these resources, Cronje realized he could scale them up, thereby making a convenient tool for public consumption.

This epiphany led him to work with Aave and Curve Finance to craft iEarn. Simultaneously, Cronje gained a reputation in the crypto-verse for in-depth reviews of code published on Medium, known as Crypto Briefings.

These "briefings" gained in popularity, earning Cronje a reputation for making or breaking the companies that he reviewed in the cryptocurrency community.

Yearn Finance's History

Around this time, Cronje was gripped by the belief that DeFi had become too complicated for laymen to engage with. To counteract this, he decided to craft a simple yet intuitive user experience.

Yearn.Finance, which launched in February 2020, now epitomizes this user experience.

Besides making Yearn Finance easy to use, Cronje has also worked hard to make it the safest DeFi protocol on the market.

To demonstrate its safety, he recently announced the placement of his funds in the system. He's also promised to be the last individual to take his funds out of Yearn Finance.

What else do you need to know about Cronje? For one, he refuses to take any credit for the protocols he designed.

He's passionate about open source technologies, and he's obsessed with dissecting the code of other DeFi platforms objectively. What's more, he remains active in the development of Yearn.Finance and its community.

But perhaps most telling is the fact that when he created the YFI token, he refused to keep any for himself, although he did farm some as a regular user.

By the way, Cronje pronounces YFI as "waifu" and maintains it has zero value.

What Is YFI Cryptocurrency?

What do you need to know about YFI? Used to govern Yearn Finance ecosystem protocol, it's an ERC-20 token.

How do you earn these tokens? By interacting with various protocols.

The last YFI token got issued on July 26th, and you can earn it by providing liquidity to one of Yearn Finance's platforms. Conversely, you can purchase it from the exchange.

There's no ICO or pre-mine for YFI tokens and only 30,000 in circulation. Yearn Finance recently released a new supply of YFII tokens.

These YFII tokens represent further motivation for users to offer liquidity to the ecosystem.

How does YFII compare to YFI? It's considered a "fork" of YFI and has been released in a maximum 60,000 token supply. The community distributed the full supply within ten weeks as they did with YFI.

How to Use Yearn Finance?

One of the biggest impediments barring more people from using Yearn Finance remains its perceived complexity. Part of the reason for this impression is the lack of documentation about how it works.

Fortunately, a deep dive quickly demonstrates that Yearn Finance is easier to use than you might think, especially compared to DeFi projects.

Let's dig more deeply into how it works. We've already covered how Yearn Finance moves stablecoins between decentralized platforms like dYdx, Aave, and Compound to assist users in generating the greatest APY.

Right now, it supports:

What happens when you start using it? It converts a user's stablecoin into an equivalent amount of ytokens. These tokens may be utilized as YFI tokens and are referred to as "yield optimized tokens."

Because Yearn Finance remains community-governed, expect its lending protocols to evolve. Bear in mind, too, that when Yearn Finance starts shuffling around your tokens, it takes a small cut.

This cut gets deposited into the Yield.Finance pool and is accessible to YFI token holders.

Earning YFI Cryptocurrency

At this point, you may be wondering, "How do I earn YFI tokens?" When YFI tokens got created, they went into three pools.

Each of these pools contained 10,000 YFI tokens up for grabs. As a result, there are three primary ways to earn YFI and YFII, too.

The first way requires depositing your yGov and yCRV in yearn.finance.

The second requires depositing a 98 percent to two percent mix of DAI and YFI into the Balancer protocol. Do this in exchange for Balancer protocol tokens (BAL). Then, deposit these BAL tokens into your yGov in exchange for YFI.

What's the third method? Depositing a mixture of yCRV and YFI tokens into Balancer. In exchange for this, you'll receive Balancer pool tokens (BPTs). Take these BPTs and deposit them into yGov to start earning YFI tokens.

Do you feel lost by this explanation so far? If so, you're not alone. But viewing it through the proof of a stakes lens provides some clarity.

With other exchanges, you stake some crypto in exchange for its block rewards. But with Yearn Finance, you stake the tokens given to you by Balancer or Curve Finance in Yearn Finance.

Why do this? In exchange for governance over Yearn Finance.

Yearn Finance Governance

What's the deal with Yearn Finance governance? Let us start by saying that the elements associated with this governance are a bit more complicated to explain.

Why? Because the details about governance are scattered across Medium posts.

First off, one token is equivalent to one vote. How does voting work? A proposal only gets approved with a vote of more than 50 percent of YFI holders.

As for vetoes, they occur with 25 percent of YFI token holders, and items get tabled with 33 percent of YFI token holder votes.

But here's the caveat. Only YFI holders who have deposited their PBT tokens in the yGov governance pool can vote. (If you remember that was the third way to earn YFI tokens.)

Cronje refers to this as "meta governance." In other words, to have a say in the system, you must put yourself in a position of higher vulnerability and risk.

YFI Performance

Within the first month of its release, the YFI token had already hit a stunning $4,900. And the price continues to appreciate despite all the tokens issued and in circulation.

Sure, there was a slight decrease from $3,900 to $2,800 right around the time the last YFI token got issued. But other than that, YFI has enjoyed visible uptrends since its issuance.

We don't expect it to slow down anytime soon.

Among the more fascinating things about YFI is that the circulating supply is almost equivalent to the total supply. Only 51 YFI tokens remain out of circulation.

What happened to these 51 tokens? Some speculate they got burned in exchange for some DAI. (This burning option has since been voted away.)

As for YFII? This recently issued token came on the market at $1,000 and has settled in at $130 per token. Like YFI, YFII's value appears to be generally stable.

Yearn Finance: How Safe Is It to Use?

How safe is YFI to use? If you go to Yearn Finance's website, their answer proves rather unsatisfying. It says simply, "Please do your own research and decide for yourself."

We definitely think they need to elaborate when it comes to answers like these, thereby providing potential customers with reassurance.

That said, it's quite a new ecosystem, so it may not be for people that aren't ready to stomach some risk.

Nonetheless, YFI and YFII appear stable in terms of overall valuation trends. As for wallets, here's what we know.

Cryptocurrency Wallets and YFI Storage

Because it's an ERC-20 coin, you store it on nearly any wallet that takes Ethereum-based assets. That means the flexibility of using a hard wallet like Ledger, Trezor, or Keepkey for exceptional security.

Of course, if you move your tokens to a hard wallet, you shouldn't plan on trading them soon. For that capability, stick with a software wallet.

Software wallets prove great for those who plan on moving their YFI around. It's also convenient for people who don't want to hassle with tracking a tiny USD device.

What are some reputable software wallets worth considering for your YFI holdings? Exodus Wallet for mobile or desktop, Atomic Wallet for mobile or desktop, or Coinomi for mobile.

Compare with Yearn Finance alternatives

Similar Savings Accounts and Loans

Best Crypto Savings Accounts of 2021
CoinPlatform5 Star RatingInterest Rate (APY)
USDCNexo4.512%
BTCNexo48%
USDCCoinLoan412.3%
BTCCoinLoan47.2%
USDCBlockFi3.58%
BTCBlockFi34.5%
BTCCelsius4.56.2%
USDCCelsius48.88%
USDCHodlnaut4.512.7%
BTCHodlnaut4.57.5%
GUSDGemini48.05%
BTCGemini2.51.49%
USDCLedn39%
BTCLedn36.1%
BTCCrypto.com46.5%
USDCCrypto.com412%

The Takeaway When It Comes to Yearn Finance

While Yearn Finance remains a new kid on the block, it could very well come to define a new era for DeFi. It seeks to take the complication out of DeFi, something that Cronje foresees as a major game-changer moving forward.

What's more, the ecosystem is bringing a much-needed level of community governance to DeFi, which is an achievement in itself. Coupled with relatively low risk and significant returns on investment, its allure is obvious.

That aside, you must remember that the risk of DeFi as a whole remains high. This risk spills over into Yearn Finance, too. Most especially in terms of overextended funds associated with yGov and BPT tokens.

Nevertheless, if you go in with an open mind and a clear understanding of what to expect, it's a fantastic way to break into DeFi. Interested in learning more about crypto? Check out our BlockFi review for 2020.

Earn more

Get exclusive offers and the latest news to help you earn more with your crypto

By submitting this request, you consent to Bitcompare sending you marketing communications via email. Read Bitcompare's cookie & privacy policy.