What is YFI?

Yearn Finance is an aggregator service for decentralized finance (DeFi) investors. It uses automation to allow investors to maximize profits from yield farming. Launched in February 2020, the service, formerly known as iEarn, has seen huge growth as new products debuted and developers released the in-house token YFI. Yearn Finance’s goal is to simplify the ever-expanding DeFi space for investors who are not technically minded or who wish to interact in a less committal manner than serious traders. Yearn Finance runs on the Ethereum and Fantom blockchains.

How does Yearn Finance work?

Yearn Finance consists of several DeFi products that include: lending aggregation, yield generation, and insurance. It initially began only as a lending aggregator. In a lending aggregator, cryptoassets are automatically switched between lending platforms in search of the best yield. From there, Yearn launched an automated yield generator, allowing participation from investors who don’t have the knowledge or time to understand DeFi.

History of Yearn Finance

Yearn.finance started out as a service called iEarn. The predecessor to Yearn.finance was launched by Andre Cronje in February 2020. Cronje left the project, but returned to oversee an overhaul. By July 2020, new tools, a new name (Yearn.finance), and a native token (YFI) were live. Yearn.finance first launched on Ethereum, but is now also available on Fantom.

How can you use Yearn Finance?

Yearn Finance has several products that help you optimize certain DeFi activities.

Earn - Deposit stablecoins such as USDC or DAI, then Yearn will search for the best DeFi platforms on which you can earn the highest yield. Earn automatically rebalances to optimize the yield for you.

APY - Search the lending protocols available on Earn, and give an estimation of the amount of interest they should expect to make annually for a specific amount of money.

Vaults - Deposit assets such as USDC and DAI into different Vault strategies. Each vault strategy invests assets differently, and each displays a historical return on investment.

Zap - Complete multi-step transactions with a single-click, saving both time and gas costs. For example, exchange USDC for yCRV in one action, compared to three on yearn.finance and Curve.

How can you use YFI?

YFI is an ERC-20-token used for governance on Yearn Finance. To participate in governance, YFI holders must stake their YFI. When a user votes, the staked YFI is locked for three days. Users that vote earn a percentage of protocol profits for each of Yearn’s products at regular intervals. Andre Cronje describes this as, “dividend, not a yield strategy."