What is yearn.finance

yearn.finance is a revenue aggregator created by the "godfather of DeFi," Andre Cronje, in early 2020 after finding inconsistent revenue provided by different DeFi protocols. The project aims to give users high returns on ETH, stablecoins, and other tokens while simplifying the crypto investment process. At the same time, the platform also provides customized tools for various DeFi protocols to improve the coverage of revenue aggregators, including Curve, Compound, Aave, etc.

If you want to know more about Andre Cronje and his projects, check the article: The Crypto Journey of DeFi Godfather - Andre Cronje

The launch of yearn.finance was a big shock to the DeFi market, not only because it was the first DeFi revenue aggregator but also because its tokens were issued on a “fair Launch" model, i.e., Andre Cronje did not raise any funding for the project. He did not personally set aside any $YFI tokens to make the platform truly belong to everyone who owns them. This has led to yearn.finance not only being praised as a "true embodiment of the decentralized spirit" but also surpassing Bitcoin's price of $60,000 at one point.

Currently, yearn.finance has four main products: Vault (yVault), yCRV, veYFI, and yBribe, among which Vault, which provides liquidity mining, is the core product of the platform.

What is Vault (yVault)?

In the traditional financial field, depositors can earn interest on their deposits in the bank. The interest comes from the income obtained by the bank from lending these assets (or other productive asset allocation). The Vault (yVault) of yearn.finance is like a savings account in the crypto world. Users can make profits by depositing crypto assets, that is, earning income through liquidity mining.

After the user deposits tokens into the Vault, new yTokens are automatically minted, which are LP tokens. yTokens can redeem initially deposited liquidity at any time, and rewards accumulated for depositing liquidity in the Vault.

The Vault of yearn.finance compresses complex DeFi applications and components into a simplified "Strategy." Simply put, this Strategy is a series of automatic execution codes, including which assets the Vault should borrow, which assets should be allocated in liquidity mining, and where to sell the farmed assets.

As the platform continues to evolve, Vault is constantly iterating. The v1 version of Vault only supports a single Strategy, and the v2 version of a single Vault can have up to 20 Strategies. In the latest v3 version launched in May 2022, more Strategies can be accommodated in the Vault while enabling Vaults with a higher degree of automation, risk, and reward.

Vaults don't charge deposit and withdrawal fees and generally have no account management fees but only a performance fee of about 10% of the proceeds. Compared with savings interest in traditional banks, this fee mechanism allows users to enjoy the benefits of providing liquidity to a greater extent.

At present, Vaults adopt a dynamic rate mechanism, and the specific fee will vary depending on the type of Vaults. For real-time rates, please refer to: https://yearn.watch/

In addition, yearn.finance also launched the Vault Factory feature in early 2023. This feature allows users to create an automatically compounded Vault for any token. Currently, this function only supports Strategies of LP tokens from Curve, and the platform said it would cover more token types in the future.