Yearn Finance In-depth Analysis. Token Which Has Most Expectations To Hold At Present?

Yearn Finance In-depth Analysis. Token Which Has Most Expectations To Hold At Present?

Key Takeaway:

  • Overview: Yearn Finance is one of the most powerful Defi projects, supported by the community and other major projects.
  • The model works well and brings in real cash flow.
  • YFI token is out of inflation, very stable and adds value to the project.
  • There are strong narrative and expectations for both $YFI and Yearn in coming.

I. Overview of Yearn Finance

Yearn Finance (YFI) is one of the largest Defi projects in the market created by Andre Cronje, who has been dubbed the “Godfather of Defi”. The project started building in January 2020 and launched in July, in just a short month after that, Yearn's YFI token increased to $14,000 and surpassed BTC for many months. So what is Yearn Finance? Why does the project create such a strong traction in the market?

yEarn – which can be understood as an abbreviation of Yield Earn (receiving interest), is a project to help users optimize their received interest. In the Defi space, users can send their money to many Dapps and receive interest every year, just like traditional bank deposits. However, things in Defi change very quickly, and there are hundreds of deposit pools opening every day. Users will have to transfer money back and forth between Dapps to find a good yield source, costing both transaction fees and gas fees. Not to mention the complexity of having to bridge, swap, ... will make it difficult for many people.

 ➡ Yearn solves all these problems. When depositing money in Yearn, the project's smart contract will find the best APR (yearly interest) source among top projects like Aave, dYdX, Compound, ... and put money into it. The project will also rotate its own capital when it finds a better source of APR.

Thanks to a smart model that thoroughly solves the problem, Yearn has attracted millions of USD TVL since it was still in beta. And increased strongly after launch, quickly surpassing TVL 1 billion USD.

II. Operation model

Yearn Finance in the early days included 4 products:

  • Earn – Provides the best source of APR for lenders.
  • Vault – Provide strategy and investment for users.
  • Zap – Tool that integrates with Curve for user convenience.
  • Cover – An insurance service that allows users to receive money when there is a risk to the projects.

However, we only focus on two key products, Earn and Vault. These are the two main products that attract TVL sources and bring in revenue to Yearn. Zap is just an integrated tool for convenience, while the current Cover array is no longer active. In addition, Yearn is also associated with IronBank, a Lending project that is also part of the Yearn family ecosystem.

Yearn Vault

Currently, Yearn's Earn and Vault have been combined into 1 - Vault. Because in nature, they are all receiving money from users and Yearn finds the source with the best yield. With stablecoins, it can be lent to lending Dapp, or with other coins and LP pairs, it can be staked/providing liquidity.

How it works

User deposits assets into yVault ➡ Get yVault tokens ➡ Real assets will be invested, when profitable, increasing the value of yVault and yVault tokens.

For example, you put 100 USDT into Vault and get yvUSDT back. After a while USDT Vault receives interest, yvUSDT will be $ 105 and you can withdraw money.

Yearn is supported and associated with leading Dapps such as Aave, Compound, Curve, ... so the project's yield source is very quality and almost risk-free. Meanwhile, still maintain the best APR by applying up to 20 automated investment strategies per Vault.

Yearn's revenue

In V1, Yearn's profit comes from the 0.5% Vault withdrawal fee and profit commission. However, since V2, Yearn has clearly shown as a Dapp that provides investment services and has a strong focus on management fees.

👉 Management Fee is calculated with the total assets by year, so for example, if you deposit $1000 into the Vault for 1 week, the fee is only 1000 x 2% x (7/365) = $0.38 ➡ Insignificant to the user but brings a huge cash flow for Yearn, due to the huge amount of TVL.

👉 Performance Fee is 20% commission from user profits. Although 20% is a high number, users still accept it because the profit that Yearn brings to users is much more than that.

Close relationship with Curve

It is easy to see that in the total number of Vaults of Yearn, more than half are related to Curve, many Vaults also account for a very large proportion of assets. Why is that?

From the early days, Curve was the project that supported Andre to deploy Yearn Finance, Yearn also helped Curve through association with many liquidity pools. But the relationship has taken a big step since Curve implemented the veToken mechanism and created the Curve War. To understand more about this mechanism of Curve and understand why Yearn chose Curve, read details here.

So how did Yearn take advantage of Curve?

Yearn Vault has a lot of LP pairs on Curve, they will be staked on Curve and receive a reward of CRV. 90% of the CRV is returned to the user's pocket, however 10% of all these CRVs will be permanently locked into Yearn's own Vault yveCRV-DAO, called the Backscratcher.

Thanks to the huge amount of CRV collected at Backscratcher ➡ huge amount of veCRV is minted ➡ Yearn can vote to boost the APR for all of the above LP pairs. This amount of veCRV can max up to x2.5 APR compared to normal.

➡ User will get much bigger APR, while Yearn has veCRV power and attracts cash flow. Curve, on the other hand, has a large amount of liquidity. All are beneficial.

III. Tokenomics

One of the most special things about Yearn is tokenomic. The project is completely distributed 100% to the community, no funds go private, no IDO ICO occurs, even the founder did not receive a single token. Therefore, this is the standard of real building projects, doing real for the community and without inflated prices.

Token: YFI

  • Use case: Governance.
  • Contract (ERC-20): 0x0bc529c00C6401aEF6D220BE8C6Ea1667F6Ad93e.
  • Total supply: Initially 30,000 – later proposed to increase to 36,666 $YFI.
  • Circulating Supply: 36,666.

The only way to earn YFI is through farming at 3 pools: yCRV staking pool on Curve, YFI-DAI pool and YFI-yCRV pool on Balancer. (during the time Yearn was just released).

👉 Now that YFI has reached the max cap, the token is no longer inflationary. About 15% of YFI is locked in the Treasury, and about 15% is locked in major platforms and CEX exchanges, meaning the supply is not much right now. Meanwhile, the Yearn community voted and started to burn YFI from December 2021, with the project's profits. So far, about 1,110 YFI ~ 3% of total supply has been burned.

➡ It is easy to see that YFI's tokenomic is very stable. Although YFI only has usecase governance, the project's use of burning tokens also adds value to YFI.

IV. Why did YFI hype and Yearn became the big Defi Dapp?

Since building in February and launching in July 2020, Yearn Finance has always been a name that has been strongly noticed in the community. Just a month after listing, $YFI hit the $15,000 mark, surpassing BTC and achieving 17x growth. $YFI then did not stop but continuously conquered the 4x and 8x milestones… reaching the ATH market cap of ~ 3 billion USD. What made Yearn grow so rapidly?

Cash flow constantly poured in

Yearn TVL

Thanks to an effective model and thoroughly solving the problems of Defi users at that time, Yearn had a TVL of millions of dollars right from the beginning of the Beta build. And after starting to launch in July, it didn't take too long for TVL to conquer the $1 billion mark. In addition to the strong model, there were 2 factors that had strongly attracted TVL for Yearn:

  • Farming event to receive YFI: 100% supply as farm reward for a very hot token, has attracted a large cash flow to provide liquidity.
  • Curve War: Yearn Finance was one of the biggest Dapps taking advantage of the intense war taking place in 2020. Thus, bringing great rewards to the users of the project.

It was this explosive TVL growth that contributed to the phenomenal price growth for $YFI token.

Attractive Tokenomics

As analyzed above, Yearn's tokenomic is completely community-driven and has no individual benefits for any fund/shark. Token supply is quickly maxed out and inflation is gone after a short time. Meanwhile, Yearn still earns a huge profit from the huge amount of TVL poured in. Therefore, the demand to buy into YFI is already very high.

Supported by big hands

From the very beginning as a small project built by Andre Cronje himself, Yearn was supported and helped by Aave and Curve to successfully build. Not only big projects, KOLs was also in favor of talking about Yearn and didn't hesitate to PR for this Dapp during that time.

Typically one of them is Arthur Hayes, CEO of the large Margin exchange BitMex. Arthur has repeatedly actively shown YFI in his holding list, and also stated that this was a very good investment choice. Especially with a tweet, the CEO said that $YFI would hit 100,000 USD (YFI price was 27,000 back then).

V. Future expectations for YFI?

Although once one of the biggest uptrend tokens, YFI and many other tokens are currently sideway at the bottom after a strong downtrend. But in the near future, the possibility that YFI will recreate a pump wave is very large. Where does this expectation come from?

veToken and yCRV Mechanism

According to the project, in the near future Yearn will implement a veToken mechanism similar to Curve's famous veCRV model. This will help create more value for $YFI, similar to how $CRV did. Since the advent of veCRV, various types of Dapps have competed in a Curve War leading to a sharp increase in the demand and price of CRV.

Thanks to veToken, the amount of CRV being locked has reached 57.7% of the supply ➡ An impressive number. Looking back at other major Dapps that are also adopting veToke, we see the amount of locks:

  • Frax Finance locks 42% of $FXS.
  • Curve Finance locks 57.7% of $CRV.
  • Velodrome locks 66.57% of $VELO.
  • Liquid Drawer locks 46% of $LQDR.

➡ On average, with efficient projects, applying veToken can help lock 40 - 60% of the supply ➡ The same thing can be expected with $YFI. Especially, since $YFI is no longer inflationary, locking in a large amount of supply will create a strong shortage and possibly lead to a long bull run.


Furthermore, Yearn's community has recently proposed implementing yCRV/CRV, a new gauge for thriving the yveCRV/yvBOOST pair. Simply put, the close relationship between Yearn and Curve analyzed above, will now have more liquidity and bring a large amount of CRV reward and fees to Yearn. This is done in conjunction with veYFI.

👉 Especially Curve is likely to soon release stablecoin ➡ Yearn, Curve's brother will benefit.

Yearn V3

Yearn Finance is about to deploy Yearn V3, the new upgrade means there will be new expectations for investors. In this V3, Yearn will add:

  • Junior Traches: Provide Vaults with higher APR and risk, diversifying choices for users.
  • Moving from Vyper to Solidity: Solidity is the most popular programming language that allows Yearn to access large dev resources ➡ thrive.
  • Optimize gas costs and operations for users.
  • Allows protocols to apply investment strategies to Vault.

Although there is no direct impact on $YFI, these are also good plus points for the Yearn narrative during this period.

Sharks accumulate $YFI

Overall Smart Money, not too much volatility with YFI. Because as analyzed above, this is not a much inflated coin, and most of YFI is currently also in Dapps, Treasurys and some market maker wallets such as Wintermute.

However, recently, along with the story of YFI's new expectations, many sharks have also started to collect YFI. Typically a wallet with Whale tag, this wallet is the child wallet of an ETH whale with ~$20 million in assets. A few days ago Whale received 140 YFI ~ 1,120,000 USD.

Or another wallet tagged Token Millionaire, looking at this wallet you can see a beautiful line of symmetry between the price line and the number of tokens. This means, the lower the price, the more this shark collects YFI, the wallet buys mainly YFI from Bithumb and discharges it on major CEX exchanges when the price is high.

Currently, the wallet is holding a total of nearly $10M YFI, and the move is complete when taking a little profit in the recent recovery of the market. Collect $1M – $1.5M YFI each time. But in general, in the long term, this wallet still holds a large amount of tokens.

VI. Summary

Yearn Finance is a powerful Defi project with an efficient model that actually generates cash flow and is, for the community. Although Defi passed its glory days, with changing expectations coming, Yearn can still make a breakthrough. Especially the $YFI token, which has been out of inflation and now has more use cases and demand, investors can expect a strong rally for YFI if the market reflects these positive factors. Can actively buy in the price range of 5-7k to hold.

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