The Investor’s Guide to Yearn Finance
Yearn Finance’s goal is to maximize returns on your cryptocurrency by arbitraging different lending platforms in search of the best available yield
What is Yearn Finance (YFI), and how can you invest in it?
Yearn Finance is a suite of yield-optimizing DeFi protocols anchored on the Ethereum blockchain.
Want to read more like the Guide to Yearn Finance? Scroll to the bottom for additional reading and a list of other Blockworks Investor’s Guides.
A quick primer on DeFi
All you need to get started in DeFi is an internet connection. Its core thesis is personal financial autonomy — removing unnecessary middlemen in banking, investing and transacting.
Yearn takes this thesis to logical extremes, providing a fast, decentralized method to use digital assets in ways that mirror traditional finance, including lending and borrowing, as well as in ways specific to DeFi (decentralized finance), like staking or yield farming.
Chief among today’s most-utilized DeFi-oriented blockchains is the Ethereum chain, which Yearn Finance was built on.
What is Yearn Finance?
The central goal behind Yearn Finance is to maximize returns on your cryptocurrency by arbitraging different lending platforms in search of the best available yield — shifting between dYdX, Aave and Compound, as interest rates vary between these platforms.
Within the Yearn Finance ecosystem, investors have a choice of three core products:
Below, we’ll take a closer look at each option and how they fit within Yearn’s larger ecosystem.
The case for Yearn
With $3.51 billion in current total value locked (TVL), Yearn Finance is one of the fastest-growing DeFi projects to date with promising potential for its future. Major mergers with other protocols like SushiSwap and Pickle have deepened Yearn’s market reach in the DeFi world.
For those thinking about Yearn for the long haul, it’s worth noting the limited supply of YFI tokens. Technically speaking, users can vote to change the rules on token economics. However, if Yearn’s limited supply stays the same, then Yearn Finance will follow a similar limited-supply model to bitcoin. At the time of this writing, 1 YFI token is $20,610.55. The predetermined total of 36,666 YFI are in circulating supply.
Yearn Finance remains decentralized and community-governed, allowing the Yearn community to shape the future of the project. With a robust offering of products that sets the bar for other DeFi projects, some look to Yearn Finance as the standard in the ever-evolving space. Remember, DeFi is in its infancy.
More conceptually, Yearn Finance remains true to its core, decentralized values in that it continues to uphold transparency and is governed by the users. That means everyone starts on equal footing. Token holders get to vote on the rules. All proposals require over 50% approval before passing. There’s also a newsletter which users can subscribe to stay up-to-date on planned releases, bug fixes, etc.
What began as the first fair token launch has evolved into one of DeFi’s most powerful investment opportunities. Of course, nothing in the crypto world comes without risk, so proceed with care.
How to invest with Yearn Finance
Option 1: Buy YFI
As an investor, you have options with Yearn Finance. If your plan is to simply own the YFI token, you can buy it on exchanges like Uniswap or Curve. Then, simply store your assets in a crypto wallet. You can also directly cash out your YFI when you decide to take profits. YFI is also available on centralized exchanges like Binance or Kraken.
Option 2: Yield-farm with YFI
Within Yearn Finance’s platform, the suite of products ranges from low to high risk. One of the simpler, lower-risk services is Iron Bank, which allows users to borrow using crypto as collateral without having to sell.
For those with a somewhat higher risk-appetite, there’s Vaults. Simply choose a strategy from Vault’s options, deposit the proper tokens and let Yearn tech help maximize yield through shifting capital, auto-compounding and rebalancing. Keep in mind there are no regulations to protect customers or a customer support number to call if there’s a bug in the code or in the event of a hack. While Yearn Finance is known to be secure, it remains experimental; it’s best to know your own risk tolerance.
Unlike traditional banking products, you can withdraw your investments with Vault at any time.
Finally, Yearn Labs offers an unconventional high-risk, high-reward approach. According to their documentation:
“The emerging strategies you’ll find here are the newest and most unconventional around. Be sure to review the About sections carefully and make sure you understand token locking, impermanent loss, and other risks before proceeding.”
Final considerations
As DeFi products go, Yearn Finance boasts a relatively simple and effective collection. However, emerging markets change quickly, so it’s vital to stay informed and keep up with the latest news and insights.
You can do so here, at Blockworks.co.
Additional resources
Yearn Finance Launches YFI Buyback Program: Markets Wrap
Podcast: The Rebirth of Tokenomics: Yearn Finance and Ve(3,3)
The Investor’s Guide to DeFi 2.0
Get educated. Check out The Investor’s Guide to Bitcoin, The Investor’s Guide to NFTs, The Investor’s Guide to DeFi, The Investor’s Guide to the Metaverse and The Investor’s Guide to Music NFTs.
The content of this webpage is not investment advice and does not constitute any offer or solicitation to offer or recommendation of any company, product or idea. It is for general educational purposes only and does not take into account your individual needs, investment objectives or specific financial circumstances.
