Yearn.finance Review 2024: Pros, Cons, & How To Make Money With YFI
Our Take On Yearn.finance
THE BOTTOM LINE:
Yearn.finance is a group of DeFi lending, yield, and trading protocols that lets you earn income from your crypto assets with high-yield investment opportunities. The platform offers a full-featured onramp to decentralized finance, but not without risks.
Pros
- Offers high investment returns –up to 50%.
- Users can insure their investments
- Lower transaction fees (0.5% fee for Earn and 5% for Vault service)
Cons
- Some strategies have high risks, and you could lose significant sums
- Security– Yearn.finance has been hacked before
- A complicated interface, especially for beginners
What Is Yearn.finance?
Yearn.finance is a platform that lets users earn income from their crypto assets. It includes a group of protocols for lending your assets, investing them in other DeFi projects, or for typical crypto trading.
History
Andre Cronje, a South African entrepreneur, launched Yearn.finance in 2020 to help crypto users generate income from their assets. In July 2020, the platform launched its native token, YFI.
How Does Yearn.finance Work?
Yearn.finance transfers crypto assets between different DeFi investment platforms (e.g., UniSwap and Curve) to enable users to maximize their returns. It lets you find and deploy your crypto assets into the most profitable investment strategies from various DeFi platforms.
Yearn.finance Features
Yearn.finance constitutes an ecosystem of crypto investment features, including:
iborrow.finance
This feature enables you to lend your crypto assets like DAI and USDC and earn interest of up to 50%. Lending is an effective way to put your assets to work and earn rewards instead of having them do nothing, and Yearn.Finance makes it easy by offering users access to different vaults where they can deposit money to lend to others and earn pre-determined interest rates.
For example, if you have $50,000 USDC and find a vault offering 5% interest after 90 days, you can deposit your funds and claim $2,500 in interest at the end of 90 days.
Yliquidate.finance
This feature allows users to get flash loans, which are uncollateralized loans borrowed and returned within seconds. Flash loans are useful for arbitrage trading and debt refinancing, and they help infuse liquidity into crypto platforms.
yswap.exchange
Yswap is a single source to manually deposit funds into different DeFi protocols. You can deposit tokens into liquidity pools in exchange for a share of transaction fees charged to traders using that pool. The fee varies depending on the transaction pool, but you can expect between 0.1% and 5%.
ytrade.finance
This feature lets you open long and short positions on stablecoins — DAI, BUSD, USDT, and USDC — with up to 1000x leverage. Using leverage can increase your trading profits (and losses).
For instance, if you place a $1,000 trade on BTC with 11x leverage, that means you’ll borrow $10,000 and spend a total of $11,000. If the price of BTC rises 10% after a month, you can sell your position for a $1,100 profit instead of just $100 without leverage. Alternatively, the price of BTC may decrease and bring more losses, so beware.
Yearn.finance Vaults
Vaults work like savings accounts for your crypto assets. They are like investment banks that accept deposits, and invest your assets with the best yield available. There are many vaults on Yearn.finance with different investment strategies, so you can choose the one you’re comfortable with.
How Do Vaults Work?
Vaults take deposits from users, invest their money, and earn a cut of any profits from the investments. The investment strategy behind any vault is designed by a person or team called strategists, and Yearn.finance vets every strategy before accepting it as a vault that users can deposit money into.
The fee structure for every vault is as follows:
- 20% Performance Fee: Deducted from the investment yield.
- 2% Management Fee: A flat rate taken from vault deposits each year. This fee is deducted by creating new shares of the vault and diluting existing participants.
There are different strategies for every vault, and it’s up to you to choose one you like. A typical example entails collecting deposits from customers and loaning the deposits as collateral for margin trading on another exchange. The vault then distributes the interest accordingly to all shareholders.
The strategists behind every vault take up to 10% of the generated yield fees as compensation.
Earning Yield
Yield is the amount of profit you can earn on your deposits in every vault described as a percentage increase. Different vaults advertise different yields, but note that there’s no guarantee of getting the exact yield. The final yield could be lower or higher depending on market conditions.
What Is YFI Crypto?
YFI is the native token of Yearn.finance built on the Ethereum blockchain. YFI holders can vote on the rules governing the Yearn.finance platform.
Supply
The total number of YFI tokens in circulation is 36,666. There’s no additional supply, so users must trade these limited amounts between each other. The limited supply makes a single token pretty expensive, costing over $8,000 as of writing.
Network Speed
YFI uses the Ethereum blockchain, so the network’s speed depends on congestion in the network and the gas fee you pay to process a transaction.
Liquidity
YFI is a top-traded asset on different exchanges, such as Binance and Coinbase. For instance, it has a daily trading volume of over $20 million on Binance, implying ample liquidity.
Disbursement
All the supply of YFI tokens has been disbursed to liquidity providers, with none set aside for the founding team. This token has one of the fairest distributions such that no single individual holds an outsized percentage of tokens.
Governance
YFI holders can vote on rules governing Yearn.finance. It’s as democratic as it can be, letting every token holder have a say in how to run the Yearn.finance platform.
Lending Protocols
Many lending protocols support the YFI token, including popular ones like Aave, Compound, and dXdY.
Where Can You Buy Yearn.finance (YFI)?
You can buy the YFI token on various centralized or decentralized exchanges, including;
How To Choose A Wallet For YFI
Factors to consider when selecting a wallet to hold your YFI tokens include:
- Security: Choose a wallet provider without a history of lax security practices. Ideally, your wallet provider should support two-factor authentication to prevent unauthorized access.
- Low fees: Choose a wallet provider that lets you swap tokens for low fees relative to other platforms.
- Fiat on-ramp/off-ramp: Not all wallets let you exchange fiat money for digital tokens—some only support token-to-token swaps. Look for a wallet with fiat on-ramp and off-ramp tokens if you want to exchange fiat for YFI tokens and vice versa.
How To Earn YFI
There are several ways to earn YFI tokens, including;
- Staking – You can use your existing crypto to help validate transactions on a blockchain in exchange for rewards paid in YFI tokens. YouHolder supports YFI staking.
- Lending – You can lend existing YFI tokens and earn more tokens as interest via different lending protocols.
How To Make Money With Yearn.finance
Yearn.finance enables users to earn profits from their crypto assets in different ways mentioned below.
Buy YFI
You can buy YFI tokens and hold them if you expect the token to appreciate in the short or long term. If your conviction holds true, the value of your assets will increase and earn you profits.
Yield Farm With YFI
Yield farming entails lending or staking your crypto assets to earn additional tokens. Yearn.finance connects you to different yield farming protocols through which you can earn significant interest on your crypto assets.
Leveraged Trading
You can use the ytrade.finance feature to open short positions on stablecoins with up to 1000x leverage. If the value of the stablecoins drops, you’ll earn significant profits.
The Future of Yearn.finance
Since Yearn.finance started in 2020, the platform has gradually added features to help users earn income passively or actively. It keeps adding support for more lending and staking protocols, providing more opportunities for users to earn interest on their existing crypto assets.
Yearn.finance reported $80 million in revenue in 2021, representing unprecedented growth in the platform’s first full year of operation. We think such growth is bound to continue in the near term, although stymied a bit by the 2022 crypto market crash.
Yearn.finance Review: Our Final Verdict
Yearn.finance is a good example of innovation in the DeFi space. It lets you earn income from your crypto assets without a third-party intermediary. It gives users access to high-yield investment opportunities, although with significant risks involved.
The main drawback of Yearn.finance relates to security. The platform has suffered multiple hacks that lost it $15 million in 2020 and $11 million in 2021, although it compensated users for the latter. DeFi platforms are vulnerable to hacking, and you risk losing your funds if you fall victim to it.
Frequently Asked Questions
No, Yearn.finance is an active platform with many users across the globe and has a native token with a high trading volume.
Yes, Yearn.finance is a legit decentralized platform whose governance is determined by YFI token holders.
No platform is 100% safe, especially decentralized ones. There’s always a risk of losing your funds due to theft and hacking, but Yearn.finance has proven itself pretty safe by compensating users for a previous hack.
The price of YFI is predicted to rise slightly in the near term and considerably in the long term.
YFI has slumped in value in 2022. It would be a good investment if you expect the crypto markets to recover soon and the platform to add more users that’ll compete for its limited token supply. Remember, any investment has its risks, and it’s impossible to know if it will be a good or bad investment long term.
