Annualized over 1000%? Why can YFI become the new favorite of DeFi?
Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley)Editor's Note: This article comes from
Crypto Valley Live (ID: cryptovalley)
Crypto Valley Live (ID: cryptovalley)
, Author: Martin Young, translation: Ling Jie, reproduced by Odaily with authorization.
In the rapidly expanding world of decentralized finance, a new player has emerged, attracting high-yield liquidity miners (that is, people who earn income by providing liquidity for DeFi). Yearn Finance is the latest DeFi darling, and its YFI token is gaining a lot of attention."The DeFi market has reached the milestone of $3 billion in total value locked. This achievement came much sooner than most expected, as many in the crypto industry were not predicting $2 billion until 2020."Even the amount of Ethereum locked in DeFi has soared to an all-time high of 3.9 million ETH, equivalent to nearly 3.5% of the total supply. The darling of DeFi today is Yearn Finance, because of its
priceless
The token has been attracting liquidity miners."YFI's annual return reaches four digits"Tag of.
The latest DeFi governance token to be listed is Yearn’s YFI, and the issuer has also labeled it
worthless"Tag of."。
To sum up the nascent state of the industry, prices skyrocketed from the get-go and $150 million in deposits were harvested. The platform claims to be the yield matcher of the lending platform, rebalancing for the highest yield during the contract interaction process.
Yearn Finance released the governance token a few days ago, saying that it will be used to govern the management platform, and expressed its support for the governance platform
Those who are not interested please stay away
Yearn added that it has issued zero-value tokens to further relinquish control of the platform.
This isn’t enough to stop a digital gold rush, as liquidity miners “mine” governance tokens, presumably for voting power, but more likely for interest yields of up to 1,000% per annum.
According to Camila Russo's latest Defiant newsletter, YFI is distributed among those who deposit funds into the yEarn pool. Just like other DeFi tokens, its purpose is to incentivize liquidity providers.
“Three days after the token distribution started, here’s what they did: Deposits jumped over $150 million to over $280 million.”
secondary title
Avoiding DeFi Disasters
In a Defiant article by Cooper Turley, Ethereum community members pointed out that control of the YFI issuer remains in the hands of yEarn founder Andre Cronje. In theory, using simple Solidity code, Cronje could mint millions of tokens to drain the DAI/YFI pool, which at the time contained about $60 million in assets.
Collateral on the Curve Finance protocol quickly soared to over $100 million, all based on YFI smart contracts. If the intentions were malicious, this could lead to another massive DeFi attack, unfortunately, this is not the case.
Yesterday, this potential risk was addressed by placing control of the YFI token in a multisig, which requires 6 out of 9 participants to agree to the change. However, this still seems somewhat centralized as only a small number of voters are required to use the wallet.
YFI can only be earned by using the yEarn platform, and its total supply is only 30,000 tokens, which will be distributed to lenders using liquidity pools. At the time of writing, the price according to Uniswap is $1,140. That's a huge increase for a "valueless" coin.
Currently, there are four pools working with Curve and Balancer, with the first three governance proposals recently passed to generate returns in YFI. This multifaceted image is posted to explain how the Yearn pool works:
The attraction is the high annual yield (APY) some of these pools offer.
Turley observes;
These are short-term payoffs from the surge in demand, he added. Constant four-figure APYs are not sustainable, however, yEarn has been offering ~10% annual returns on its Yearn Finance lending pool, which is based on the highest returns at the time, between Compounds, Aave, and dYdX auto-adjust.
Turley elaborated on the governance proposals in a Medium post on the project, concluding that;
“If you haven’t discovered it yet, YFI is entering uncharted territory. If you’ve gotten this far, you’re one of the few who already knows how to navigate the furthest DeFi “rabbit hole” to date.”
secondary title
How much room does DeFi have to grow?
The latest $3 billion milestone for the DeFi ecosystem came just twenty days after TVL hit $2 billion.
