Can Yearn Finance (YFI) generate income from DeFi?

Yearn Finance, or yearn.finance (YFI), is a protocol and a set of decentralized finance (defi) products that Mr. Market loves.

For example, CoinMarketCap gave Yearn Finance (YFI) a Coin Price of $19,940.79 on 9 March 2022. Similarly, Yearn was CoinMarketCap’s 93rd largest cryptocurrency on 9 March 2022.

CoinMarketCap gave Yearn (YFI) a $730.585 million Market Cap, a Fully Diluted Market Cap of $731.148  million, and a 24-Hour Market Volume of $174.960 million on 9 March 2022. They based those numbers on a Circulating Supply of 36,637.73 YFI, a Maximum Supply of 36,666 YFI, and a Total Supply of 36,666 YFI.

Thus, Yearn gets its high Coin Price from a small supply rather than demand. The YFI is worth $19,940.79 because there are only 36,666 of them. Therefore, I think there will be a demand for a fractional or synthetic asset based on the YFI cryptocurrencies.

So what is Yearn?

Yearn Finance is a suite of defi products, as we noted above. Yearn’s defi solutions include: Vaults, a Wallet, Labs, and the Iron Bank.

These products comprise an ecosystem. The Yearn Token (YFI) is the governance token for the ecosystem. YFI token holders govern the Yearn Ecosystem by voting on proposed changes. YFI holders vote through a mutli-signature wallet. Yearn will adopt a change if 50% of token holders vote for it.

They call the Yearn Vaults or yVaults capital pools that auto-generate yield by taking advantage of market conditions. Yearn Token Holders use can use the Yearn DeFi solutions to manage holdings in the vaults. They call the Vaults a passive investing strategy that socializes gas costs, rebalances assets, and automates yield generation.

How Yearn Generates Returns

Ideally, the yVaults generate passive income a user can access through a yVault wallet. The passive income comes as APR and APY.

Yearn bases net annual percentage yield (APY) and gross annual percentage yield (APR) on individual assets. Thus, each asset in a yVault offers a different APY and APR. The difference between APR and APY is that APR does not automatically compound yield while the yVaults auto-compound APY. The amount of APY and APR depends on the asset and its performance in the market.

Users can customize yVaults. There are yVault Tokens that function like a deposit receipt. To explain, the yVault tokens represent a user’s share of the funds in a yVault. They claim individuals who deposit a cryptocurrency or a stablecoin in a yVault will receive that cryptocurrency in return. The number of yVault tokens will grow if the yVault makes money.

Yearn Wallet and Zap

The Yearn Wallet serves as the gateway to the Yearn Ecosystem. Yearn holders can manage assets through the Wallet. The Wallet gives users access to the Yearn Vaults, the Iron Bank, and the Yearn Labs.

They claim the Yearn Wallet allows users to deposit funds to any Vault using the “zap” feature. For instance, they claim users can deposit USDC (USDC) stablecoins to a Yearn Vault through the Wallet. Users can increase the speed of Yearn transactions by paying Yearn a higher gas fee.

Yearn’s solutions are multichain products that operate on both the Fantom (FTM) and Ethereum (ETH) blockchains. They say Yearn will operate on other blockchains, such as the Binance Smart Chain in the future.

The Iron Bank on Yearn

The Iron Bank is an independent project that operates in the Yearn Ecosystem. The Iron Bank is a protocol-to-protocol lending platform and liquidity back up system for decentralized finance built by C.R.E.A.M. Finance.

To explain, I think the Iron Bank provides funds for defi lending and the money defi protocols need to operate. For example, the Iron Bank can access funds from Yield Vaults.

They claim the Iron Bank enables zero-collateral lending to make protocol-to-protocol loans possible. For instance, the Iron Bank could lend money to a Yield Vault that needs liquidity. Iron Bank offers access to pools of assets protocols can borrow against. They call those assets CREAM v2 assets.

Some CREAM v2 assets supported by Iron Bank are available through Yearn Finance’s lending portal. They claim CREAM v2 assets could soon include Tether (USDT), USDC (USDC), mUSD, LINK, YFI, SNX, and WBTC.  Some of those stablecoins, so Iron Bank could provide fiat currency funds to back Yield loans and lending.

WOOFY

The WOOFY token is a companion token to YFI. WOOFY uses special WOOF technology that allows two-way conversion between YFI and WOOF tokens. They hope WOOFY can prevent YFI token inflation because of its low price.

For example, one YFI is equivalent to one million WOOFY. Users can convert yield.finance (YFI) to WOOFY and WOOFY to YFI with WOOFY.

Yearn Labs

Yearn Labs is a feature that tests emerging strategies and features. Users can get earlier access to new Yearn products through Yearn Labs.

There is also a Yearn software development kit (SDK), or Yearn Stack. Developers can use the SDK to build Yearn features into their decentralized autonomous organizations (DAOs) and DeFi solutions.

For example, blockchain and defi developers can build Yearn’s Smart Contracts into their cryptocurrencies or defi solutions. For instance, a decentralized exchange could access liquidity through yVaults, while an e-commerce platform could offer lending with Iron Bank’s help.

What is Yearn?

I think Yearn (YFI) is a decentralized autonomous organization (DAO) that functions as a Fintech company. For example, Yearn sells solutions banks, investment banks, and other organizations could use.

I think Yearn could be an excellent DeFi investment because its platform is up and running and supporting investments. Hence, Yearn.Finance is a company that is making money.

Moreover, data shows Yearn offers enormous value. For example, Coinbase gave Yearn a Coin Price of $19,909.53, a $729.4 million Market Cap, and a 24 Hour Market Volume of $174.9 million on 9 March 2022. They based those numbers on a Circulating Supply of 36,600 YFI.

However, Yearn is an unstable asset. For example, Coinbase gave it an all-time high of $93,435.53.

If you have a lot of money to invest in a DAO, DeFI, or cryptocurrency, I think yearn.finance (YFI) is examining. Conversely, I consider Yearn a dangerously unstable asset.