Yearn Finance Cryptocurrency has been a great success in 2020. But will the project continue its winning streak in 2023?
One of the most surprising successes in the Decentralized Finance DeFi world, Yearn Finance took the blockchain by storm. The project launched on the ETH network managed to launch the most valuable token of the whole crypto-economy YFI. A token so successful that it even became more valuable 1 to 1 than Bitcoin.
At the time of this writing, the price of YFI is 23,576.59 US dollars, while BTC sits at around 18,000 dollars. It is a true testament of its success that even in a bull run on Bitcoin, YFI is still more valuable.\
But what is Yearn Finance? What does it do? And How the YFI token became so valuable?
We'll address these questions in this article and look a little at the project's future.
(YF) is an Ethereum-based DeFi project launched in early 2020 to provide the highest possible yield in deposits using Ether, stablecoins, and some supported altcoins.
The main reason for creating Yearn Finance was the high variability levels when discussing annual yields on DeFi. There was no sure way to know which platforms, Compound or Aave, would give the best returns.
These inconsistencies brought about the project's creation, intended to provide the best returns on crypto deposits. YF offers the following products:
The flagship product of Yearn Finance is named vault. Vaults are accounts where users can deposit cryptocurrencies and gain annual yields. They are managed by YF using investment strategies that maximise profit while reducing risk in DeFi.
At first, vaults only accepted deposits in stablecoins such as USDT, USDC, DAI, etc., but recently Wrapped Bitcoin (WBTC), LINK token, and Ether have been added.
Another popular product by YF is Earn It is a limited version of Vaults focused on stablecoins and WBTC only. It is basically what Vaults used to be before more products were added as deposits.
The smaller market makes the yields of Earn sometimes higher than those on the Vaults. It serves a significant market complementary to the Vaults and is not a direct competitor of the same project.
Zapp allows users to exchange stablecoins for Liquidity Tokens directly through Yearn FInance. For example, deporting DAI on Aave to get aDAI can be expensive to do it traditionally. YF helps with gas costs as these operations can be done directly with them for multiple liquidity providers and money markets\
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This is meant for anyone who actively invests in liquidity tokens of the money lending market. One of the most significant obstacles to this strategy is that the gas costs of interacting with Aave, Compound, Pool Together, etc., can be costly individually. The YF platform allows access to all from the same place.
Cover is an insurance policy on DeFi smart contracts. It provides coverage to DeFi projects that get attacked or hacked and, consequently, lose money. It is still in the beta phase and is partially operational.
For anyone paying attention to the DeFi landscape, it is common to see hacks that take millions of dollars occur frequently. CoverCover aims to secure both the developers of these projects and the users by providing insurance policies to cover these eventualities.
Cream was a separate project that merged with Yearn FInance. It is a decentralised marketplace for loans. It is also in beta, and not all features have been completed.
As we can see, Yearn Finance has many DeFi products that have made it a success. All of them separately is what gives the YFI token its value.
YFI is the governance token of the Yearn Finance platform. Initially, it was not for sale. The only way to get it was to provide liquidity to Balancer, a Decentralized Exchange, or deposit tokens directly into YF vaults. On their Medium Page, YF mentioned that the YFI token had no intrinsic value and instead, its price would be decided on the market.
Of course, to keep the token scarce, it was decided that the total supply of YFI would be limited to 30,000 tokens. So, even if each YFI token is more valuable than BTC, overall, Bitcoin has a much higher market capitalisation because of how many BTCs out there. The current market cap of YFI is 708,910,786 US dollars.
The strategy worked, and the YFI token has taken off like a few other blockchain assets, with an all-time high of 43,678.11 US dollars. It is the most valuable token of all the cryptocurrencies on any blockchain in the market.
As we can see, the price has seen awe-inspiring growth considering the token has existed for six months.\
YF was perhaps a tremendous success of the DeFi wave and has become the most successful governance token in the blockchain. This is even more impressive, considering how young the project is. As it is not even a year old since it started in January 2020, and the YFI token has only been around six months.
The growth and impact of this project have been nothing short of spectacular, considering how young it is. Of course, this could be just a fluke, and YF and the YFI token could experience a mass correction in 2021, driving the token price to a new low.
One way to judge what the Future of Yearn Finance will be is to look at what they are doing now. YF is taking the gains of its massive success and making some strategic moves on the market.
The last quarter of this year has done some major mergers with many other DeFi products and incorporated their best aspects. Let us look at some of them.
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The famous Dex has been through some harsh times. First, the original creator, the anonymous "Chef Nomi," sold all of his tokens for 14 million dollars, making some scam project accusations. Then, the project suffered a hack that took 15 thousand dollars from the platform, damaging its reputation.
Despite all of the bad news, on December 1st, Yearn Finance announced it was merging with Sushi Swap. YF won't take over the project totally, and Sushi Swap will remain as a separate platform.
However, YF will finance some additional development and create a Vault on its platform built to provide Sushi Swap liquidity directly.
Both projects will benefit from the collaboration. The two services' reach will grow, and finally, some stability will be restored to Sushi Swap.
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Yes, one of the products we mentioned early is one of Yearn Finance's mergers. On November 26th Cream and YF announced that the latter would be helping with the development of Cream V2. A lending platform focused on Yield Farming, crypto lending, and leveraged products.
Again, Cream will remain its platform, and its token will still be on the market. But the greater coordination between the two DeFi platforms will help improve liquidity and market participation.
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A DeFi project focusing on compound earning, Pickle Finance was already very close to YF. As such, it was announced that the two projects would start collaborating directly, and Vaults and Jars would merge into one project.
Pickle Finance would remain as an independent project and focus on creating more yield-earning strategies. While Yearn Finance would offer assistance when designing and testing the security of their products.
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Again, one of the previous products being developed by YF resulted from a merger. Cover will focus on developing more insurance policies over the blockchain. At the same time, Yearn Finance takes care of the liquidity on its side.
Additionally, the CLAIM token previously used inside the Cover platform will become a borrowable asset that can be acquired on the market, and not only by buying insurance using Cover. Coverly, Cover wCoveregin offers perpetual coverage as one of their services with Yearn Finance baking.
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Akropolis is a decentralised lending platform on Ethereum. Their stablecoin pools got hacked in November, and the attackers took over 2 million US dollars in stablecoins.
This affected the project in a major way, and shortly after, they announced their merger with Yearn Finance. YF Vaults and Akropolis pools will merge into one product. Any deposits done through Akropolis will allow users to gain Pickle Finance, Cream, and other liquidity tokens to those making deposits.
The two projects will collaborate in bringing more products to the market.
Finally, Akropolis, before the hack, was actively developing on the Polkadot blockchain. This could indicate that YF is looking to expand beyond Ethereum. These efforts have not stopped and seem to move faster than before.
Not such a complete merger, but Yearn Finance Cryptocurrency has announced it will launch a Non-fungible token through the Bounce Finance platform. It will be a way to create gifts on the NFT standard using the YF platform that can be traded on the blockchain.
We have all the ambitious moves Year Finance has made over the second half of 2020. The project is expanding rapidly, and it needs to let its success go to its head. They have been developing partnerships with some inspiring DeFi projects and are preparing to innovate even more during 2021.
Ultimately this is a personal decision, as no one should be swayed purely by outside opinions. But in our estimations, the YFI token and Yearn Finance, in general, are substantial projects. Its enormous success has been used as a launch platform for further development and innovation.
It has not slowed down, and as a project, it keeps growing. Additionally, investing in the tokens of those projects now associated with YF will bring many profits. Since then, they have been backed by one of the DeFi giants of Ethereum. Read 10 Cryptocurrency Trends for 2021: What Happens Next for what to expect next year?
