Yearn Finance, often abbreviated as YFI, is a decentralized finance (DeFi) platform that operates as a yield aggregator on the Ethereum blockchain. Launched in 2020 by Andre Cronje, Yearn Finance aims to optimize yield generation for cryptocurrency holders.
The protocol aims to optimize returns by automatically reallocating investors' funds across different liquidity pools and lending protocols, seeking the most profitable opportunities. It accomplishes this through various DeFi (decentralized finance) services and operates entirely without traditional financial intermediaries such as banks.
Key functions of the protocol
- Yield aggregation: At its core, Yearn Finance functions as an automatic yield aggregator. It uses smart contracts to continuously analyze and move users' funds between different decentralized finance platforms, such as Compound, Aave and Curve Finance. This dynamic strategy aims to maximize returns on deposited funds and provide users with an efficient way to earn passive income.
- Vaults: Yearn Finance introduces the concept of "Vaults", which are essentially smart contract-based pools that automatically distribute users' assets across different DeFi protocols. Vaults are designed to optimize yield farming strategies by dynamically adjusting the allocation of assets according to market conditions and the potential yields of the different protocols.
- YFI token: Yearn Finance has its own governance token (YFI) that serves as the backbone of the platform's decentralized governance model. YFI holders have the right to propose and vote on changes to the protocol to influence the development and direction of the protocol. The token has gained wide recognition and is actively traded on various cryptocurrency exchanges.
Fair conditions when minting their governance token
The owner of Yearn Finance (YFI) Governance has voting rights and can submit and vote on proposals for protocol improvements. The Yearn Governance Forum is the central platform for discussion and voting on proposals. YFI token holders can share their ideas, exchange arguments and cast votes. To propose a protocol change, YFI token holders must submit a proposal to the Yearn Governance Forum. The proposal must include a detailed description of the desired change and how it will be implemented.
Yearn Finance's (YFI) governance token was launched in mid-July 2020 and the founder did not allocate any tokens to himself. After announcing the token, the founder started yield farming. This strategy makes the launch of YFI the fairest launch since Bitcoin. At the beginning, only 30,000 YFI were minted. The community voted in favor of Proposal 0, which advocated allowing more YFI minting to create ongoing incentives for LPs. Yearn was built by Andre Cronje as iEarn. While managing stablecoins for friends and family, Andre decided to automate it using on-chain oracles and smart contracts.