Yearn Finance Explained: The Largest One-Stop DeFi Smart Pool

1. Andre Cronje, who has thoroughly utilized the composability of DeFi contracts, can be likened to a “Lego Master” in the DeFi space.

2. Similarly, DeFi smart pools refer to those capital pools that weigh risks and constantly seek the highest returns.

3. Yearn has created a one-stop yield farm for DeFi users who can obtain a higher revenue in the industry just by providing liquidity to the protocol.

4. Yearn will charge 2% of all savings in the Vault as the Management Fee every year. Every time the Vault settles from the strategy, it will charge 20% of the settlement income as the Performance Fee. Half of the performance fee will only be distributed to analysts who write and maintain the strategy, thus forming a virtuous incentive mechanism.

5. Andre Cronje’s departure may have little impact on Yearn’s operations.

Andre Cronje (AC), a legend in the DeFi field, announced on March 6 that he would bow out of the DeFi and Crypto fields. Anton Nell, an architect at Fantom, also made the same announcement. About 25 Dapps jointly developed by the two would also be announced to cease operation on April 3. This news shook the DeFi circle where the prices of dozens of tokens slumped, and some were even halved.
While regretting that AC would stop serving the crypto community, we also admire what AC has achieved. If DeFi is likened to a "Financial Lego", then AC is the "Lego Master" in the DeFi field. He has brought out the composability of DeFi contracts to the fullest. In 2020, AC became famous by virtue of the great success of Yearn Finance. What will be explained in this article is all about Yearn, a milestone in DeFi projects.


What is Yearn Finance?

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Founded by AC in January 2020, Yearn.finance is a DeFi revenue aggregation project and has been upgraded to the v3 version. Sometimes people call it the largest "smart pool" in the DeFi space. Smart pools in virtual currency mining refer to mining pools that are not limited to mining a specific currency but the ones that can switch back and forth between currencies using the same mining algorithm based on the income. Similarly, Defi smart pools refer to those capital pools that weigh risks and constantly seek the highest returns.


The birth of the "DeFi Summer" gradually brings out the potential of Yearn. Despite the huge profit potential in the Defi space, general investors will find it an uneasy task if they really want to tap it. Because the giant industry covered lots of mixed projects, it is necessary for users to figure out the mechanism and team situation of major projects and grasp basic cryptocurrency knowledge. Even if they managed to do so, they can but barely distinguish the risks and benefits. What Yearn has done is to provide a one-stop yield farm for DeFi users who can obtain a higher-end revenue in the industry just by providing liquidity to the protocol.


Yearn’s Yield Mode

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These revenue protocols are called yVaults (vaults). Users deposit their crypto assets into yVaults and receive corresponding yVault tokens, which represent their share of funds in yVaults. After that, the protocols will utilize the deposit according to the established strategy, and the income obtained will continue to be deposited into yVaults, similar to rolling profits. As the total amount of tokens in the entire vault accrues, the number of tokens that can be retrieved by yVault tokens, which will become revenue for users, will also rise.

Yearn Protocol automatically aggregates the revenue opportunities provided by major DeFi protocols in the market by utilizing algorithmic robots, such as depositing funds into Compound Protocol to obtain deposit interest, etc. In the v1 stage of the Yearn protocol, each smart pool can only support one strategy. In the v2 version, each pool can support up to 20 strategies. Yearn will charge 2% of all savings in the Vault as a Management Fee every year.

Every time the Vault settles from the strategy, it will charge 20% of the settlement revenue as a Performance Fee. Half of the performance fee will only be released to analysts who write and maintain the strategy, thus forming a favorable incentive mechanism.

In addition, Yearn will update the protocol's quarterly earnings report on Github for everyone to view its revenue and expenditure.


Yearn can now offer a total of 74 different Vaults (smart pools), including a variety of major stablecoins and non-stablecoin assets, as well as a variety of LP Tokens on Curve. Yearn was taking the lead in the Curve War before Convex was born. Even with Convex's strong performance, Yearn still plays a significant role in the entire Curve ecosystem.

Users can deposit CRV into Yearn and convert it to yveCRV. This process is irreversible, but yveCRV holders will still receive 50% of the handling fee corresponding to veCRV on the Curve platform. Meanwhile, they will also get better liquidity, because yveCRV can be traded on exchanges such as Sushiswap. Consistent with the profit strategy mentioned earlier, 10% of the CRV income earned by the smart pool will be reinvested in the pool, and by increasing CRV, the income that can be obtained also rises, like rolling a snowball.

Furthermore, Yearn has also issued its own governance token YFI. YFI has a very rare volume of 30,000 tokens. AC distributed all YFI tokens to the community, with no part initially reserved for the project side. YFI’s price has witnessed a growth miracle, with its price on Uniswap soaring by 350 times within a week of going live. By far, YFI remains one of the crypto assets with the highest unit price.


Conclusion

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Actually, this is not the first time that AC announced he would bow out of DeFi and cryptocurrency circles. Previously, he had quit temporarily from the field due to slander after he poured all his money into establishing Yearn in 2020, but he came back soon after. This may also explain “more power, greater responsibility”.

For Yearn alone, AC’s departure probably won’t make much of a difference. Yearn has established an experienced and stable development team, and AC has not worked for Yearn in over a year, according to a core developer, part of the Yearn team.

So will AC come back after quitting this time? We don’t know.



Author: Edward H., Gate.io Researcher; Translator: Cedar W.
*This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this original article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.



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