The central theses
- yEarn Finance has released an automated market maker that solves the problems of income builders.
- To further democratize the governance process, yEarn introduced a pre-mined governance token.
- It is the first major governance token in DeFi to be launched with no existing allocation to those who helped build the protocol, making it the most decentralized to date.
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Renamed yEarn Finance, iEarn Finance introduced a no-pre-mine governance token and over 1,000% APY for investors, earning it the title of the most lucrative pool in DeFi.
The most lucrative pool in DeFi
Before the DeFi boom in June 2020, then-iEarn Finance started out as a yield aggregator that maximized interest income by redirecting tokens to the best lending markets.
This week, it joined the DeFi yield farming movement with yields that eclipsed any other protocol.
Current yield for YFI mining is over 850% APY over Curve.
The protocol’s suite of products now includes tools to short DAI and re-peg it when it’s trading at a premium, liquidate Aave loans that are undercollateralised, and the latest version, a new breed of Automated Market Maker (AMM ).
First, consider the agricultural dynamics at Compound, the industry’s most valuable project.
When yield farmers deposit a token into Compound, they receive interest on their holdings in addition to COMP rewards. To maximize this return, these investors deposited their cTokens (compound deposit tokens) with Balancer to earn liquidity provision fees and BAL mining rewards.
However, it is the pool – not the investors – that earns the corresponding COMP, BAL and compound interest. This can be remedied with a “return-aware” liquidity pool that does not differentiate between cBAT and BAT, for example.
YEarn’s new AMM, ySwap.exchange, is yield-aware and introduces a transfer token that represents all liquidity for an asset, whether it’s aBAT, cBAT or BAT.
Unlike Uniswap where all pools are between an ERC-20 token and ETH, all ySwap pools are linked to the transfer token. This allows yield farmers to overcome problems with other AMMs.
yEarn Finance launched a governance token to also democratize decision-making in the ecosystem.
While it was explicitly stated that the token has no value and its sole purpose is to facilitate governance, DeFi has been doing what it does best: pumping tokens.
Source: yEarn Finance
The price of YFI spiked from $0 to over $1,700 at times, giving yield farmers a return of over 1,200% APY. However, the token continues to hold above $1,500, attracting the continued attention of yield builders.
YFI Holders may, through reasonable means, make any suggestion to change any aspect of the Protocol. There is currently a supply cap of 30,000 tokens, hence YFI’s high price. However, as the token makes it easier to control the project, the majority of YFI holders could increase this supply cap.
YFI price chart, via CoinGecko
This is the first iteration of a governance token that has been evenly distributed in a meritocratic manner with no attribution to founders or existing investors.
Andre Cronje, the founder of yEarn Finance, is an investor at Crypto Briefing.
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