In the crypto world, not much can surpass BTC. Only one thing, in fact: YFI, the token of yield aggregator platform Yearn Finance, whose price surpassed that of Bitcoin earlier this year and reached an all-time high of $82,071.
Yearn’s innovative mechanism and the fact that YFI has only 36,666 in total supply means it’s price is the highest for all tokens besides BTC and WBTC.
Footprint Analytics: The Price – YFI VS BTC
Yearn launched in July 2020 as a yield aggregator that helps users automatically and quickly choose the best investment strategy. It lets users avoid making frequent transactions and operations with high gas fees via its cooperation with Curve, MakerDAO, Compound, Convex and other leading DeFi platforms.
Yearn currently ranks second in the yield aggregator category with a TVL of $5.5 billion, behind latecomer Convex. After updating V2 earlier in the year, Yearn went live with V3 in mid-September. This time, developers mainly updated the front-end user experience and deployed multiple chains, which Yearn has also deployed on Fantom.
Footprint Analytics: Yearn TVL
This article will explore how V3 solves some of Yearn’s biggest issues, and is leading the protocol to expand beyond yield aggregation.
Vaults: Multi-Strategy Asset Management
Yearn helps users manage their assets through up to 20 strategies by simply depositing assets into Vaults, where protocols include: MakerDAO, Balancer, Aave, Synthetix, LeagueDao, Vesper Finance, Curve, and Convex Finance.
This includes staking the user’s assets and swapping for other assets and then providing liquidity in return for transaction fees, or by mining other tokens for rewards. Yearn maximises returns by transferring assets, auto-compounding and rebalancing them, and eventually sells the returns back to the user in swap back the assets deposited by the user.
Yearn also helps users save on gas fees for frequent operations by pooling their assets through the strategy, and also charges a 20% performance fee and a 2% management fee. The APY shown on the front end is the net APY after taking into account compounding and fees, and it should be noted that the APY here is an estimate based on history and not a fixed figure.
Fifty percent of the performance fee collected will be paid to the strategist who wrote the strategy. To encourage partners to increase their integration of yVaults protocols, Yearn will share the remaining revenue, after deducting the amount given to the strategist and approximately 35% of the overhead, with the partner on a pro-rata basis based on the level of TVL contributed, thus creating a positive incentive.
The current V3 version supports 68 assets, which are divided into three main categories.
- Stablecoins：5. There are USDT, USDC, TUSD, LUSD, DAI.
- Non-stable Assets：11. Such as YFI, WBTC, UNI, SUSHI, COMP, AAVE, etc.
- Curve LP Token：52. Such as stETH, MIM, FRAX, alUSD, 3Crv, etc.
There are five pools over $100 million, namely Curve stETH, ETH, DAI, Curve Iron Bank, and USDC.
If you don’t have a token in your wallet that you want to deposit into the pool, you can quickly convert ETH, WETH, DAI, USDT, USDC, WBTC in your wallet into the corresponding assets via Zapper, and you can also directly convert the above 5 assets back to your wallet when you withdraw.
Labs: The core of high yield
We can see that Vaults has the majority of LP Tokens coming from Curve, and therefore has a deep relationship with Curve. The returns from the Curve pool will have a significant impact on the returns for Yearn. Since its launch, Yearn has been a leader in the field of yield aggregator projects mainly because of the yeCRV pool under Labs.
Since Curve can increase the reward boost of certain pools by up to 2.5x by staking CRV, Yearn needs to acquire a lot of CRV in order to increase the revenue of its corresponding Curve LP Token pool. Therefore, yeCRV has been set up to collect CRV from users and deposit it into the backscratcher, and users will get yveCRV tokens after locking CRV. Note that the word “Lock” is used here to indicate that once CRV is deposited into yveCRV, it cannot be converted back to CRV.
As with staking CRVs directly with Curve, users will also receive 50% of all transaction fees from the protocol, and the revenue earned will be collected and used to purchase 3CRVs before being distributed to the holders. However, users will receive more in yveCRV because Yearn will save 10% of the CRV rewards from all vaults into backscratcher to collect more CRVs and continue to increase the reward boost of all Yearn’s Curve vaults, and for yveCRV holders to share the CRV rewards from the entire protocol.
In addition, yveCRV is more liquid than veCRV staked directly in Curve, as it can be swapped on Sushiswap.
In the yvBOOST pool the user can also deposit yveCRV to get yvBOOST to help the user with compounding and the yvBOOST thus converted can be converted back to yveCRV. After getting yvBOOST, you can get SUSHI reward in SushiSwap by depositing it in the pSLPyvBOOST-ETH pool and get PICKLE reward by depositing this SLP in Pickle Finance.
Iron Bank: Zero-collateral loans
Besides yield aggregation, Yearn has also become a leader in lending with its Iron Bank feature. Iron Bank is a lending protocol launched by Yearn in cooperation with Cream Finance. Lending between the protocols can be done with zero-collateral after the credit is granted through a whitelist, which is similar to Compound as an over-collateralised loan for users.
Iron Bank supports cross-asset supply and borrowing, as well as leveraged mining of SUSHI, CRV and ALPHA in the SushiSwap liquidity pool using Alpha Homora’s leveraged mining.
Currently there are 32 pools on Yearn, of which USDC, DAI, ETH are among the top 5 pools with over $100 million TVL. The highest lending and borrowing APYs are CRV, SBX and EURS, but the pools provide less liquidity.
The collateral factor for borrowing at Iron Bank varies depending on the asset. The higher the collateral factor, the more asserts can be borrowed. Most stablecoins are 90%, while the rest of the non-stable assets fluctuate between 50% and 85%. Supplies are also subject to a reserve factor of 10% to 20%.
Although YFI’s market cap has recently been overtaken by Convex’s token CVX, many of Yearn’s strategies use Convex, with the two yield protocols reinforcing each other.
Footprint Analytics: Yield Token Market Cap
Recently, Yield has also partnered with Sushiswap to build liquidity and optimise the user experience in decentralised transactions, a lending program with Cream (Iron Bank), and Cover in the insurance sector. For Yearn, which has been updated to V3, the future goes beyond yield.
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