How did YFI rise? How will it develop?
Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley)Editor's Note: This article comes from
Crypto Valley Live (ID: cryptovalley) , Author: Jeffrey Hancock, translation: Li Hanbo, reproduced by Odaily with authorization. In less than three months, Yearn Finance has grown from a relatively unknown credit matchmaker to one of the major movers in the DeFi market, with a capitalization of $670 million (peaking at over $1 billion), and a position in the industry today The hottest trend - the heart of Yield Farming. Yearn's dominance in yield farming is so convincing that some people use its token as a yield farming index. With the rise of YFI, complex issues such as Yearn's future value, impact, risks, and opportunities are worth thinking about. secondary title"yearn.financial "The Birth and Rise of YFI"YFI "Until July 16th, Yearn is a simple DeFi credit integration designed to optimize user profitability. It manages $8 million in assets, and since its launch in January, its liquidity providers have earned an aggregated annualized revenue of 10.58%. But most importantly, it does not issue Tokens. The next day, July 17, everything changed."Andre Cronje, founder of , published an article called"of blog posts. To transfer control of the yearn.finance protocol to his users, Cronje devised a plan for users to earn YFI by providing liquidity to Curve and Balancer pools. This was probably the first real launch in years when Cronje did not allocate YFI Token to itself, giving up any funding rounds, team allocations, pre-mines or anything like that. All YFI Tokens are allocated to users of the yearn.financial protocol."A few months later, a so-called"Total market capitalization reached $670 million and led to a $770 million (nearly $1 billion at its peak). And it earns about $20 million a year for Token holders."Yield Farming "secondary title Yield farming industrialization A long time ago, Compound launched a liquidity mining plan, and speculators poured in. Many people called it the DeFi agricultural revolution. Simply put, liquidity mining refers to the process of distributing tokens to users to use the protocol. The purpose of liquidity mining is to distribute the control of the agreement and encourage the implementation of the agreement. The community introduced"Vaults "In the weeks following the launch of Compound mining, yield farming was fairly straightforward. You invest your capital into one of several protocols that offer incentives in exchange for liquidity, and start earning tokens. The first stage of yield farming is similar to that of an artificial field farmer. Users must define and understand each strategy before manually entering capital. But as more and more protocols run liquidity mining programs, yield farming has become more complex, and the process has become more complicated for many users. In addition, due to the congestion of the Ethereum blockchain, the gas fee has risen sharply, and many retail investors no longer participate in yield farming. Everything changed when yearn.finance launched the v2 (second version) protocol and introduced yVaults. Not only reduces the risk faced by users trying to understand the different possibilities of yield farming, but also alleviates their concerns about gas fees by sharing with other funding providers in the pool. Therefore, Yearn.finance has become the largest yield farming project in the industry, making a case that only mature users could participate in the past. secondary title transfer of funds The economy is simple. YFI charges a fee of 5% of the funds it manages, and a 0.5% withdrawal fee if the user withdraws cash. Withdrawal fees apply to both Earn and Vaults products, while management fees only apply to Vaults products. Especially for depository products, a fee is charged every time a cash withdrawal occurs (sell the processed asset to exchange it back to the underlying asset). After the approval of the YIP-36 plan, it is determined that part of the system fee will be used as operating funds every year, and 100% of the system fee will be sent to its treasury. YIP stipulates that the treasury must maintain a buffer equivalent to 500,000 yuan, and all surplus rewards allocated to YFI are placed in the management pool. YFI's profit-to-price ratio means that if all YFI holders stake, they will receive an annualized return of about 5% (only YFI holders participating in the corporate governance pool receive cash flow). Since about 12% of YFI is currently placed in the pool (a large proportion of YFI is placed in other pools), YFI participants can obtain an annualized return of about 40%, which means that the PE ratio is 2.4 times . These ratios are best understood as a range. Currently, YFI holders who participate in managing the pool receive ~40% annualized returns, but if everyone stakes, they will receive ~5% annualized returns. 5% can be seen as a limit based on the current price and profit per Token. secondary title The yCRV repository below shows what this process looks like from the inside. There are some differences from this warehouse, but the general logic is the same. Replace yCRV with YFI and YFII with CREAM, and the picture will be very similar. With the implementation of yVaults, as long as this trend continues, the Yearn system will collect more and more of the total profit from all the most profitable yield farming. The question, then, is whether this is sustainable."secondary title"Yearn is now able to generate such a high cash flow, mainly due to its very high profitability. There is a reason for the high rate of return. The reason for the high rate of return is that there is enthusiastic support for the protocol speculation of the liquidity mining program. the reason why"rate of return"the farmer"Three-digit or even higher"rate of return", because speculators are constantly buying new tokens on exchanges. In simple terms, speculators are"the farmer rate of return"rate of return"Pay the bill. rate of return Additionally, under the current system, Yearn does not pay strategy authors for their work. It's as if asset management firms don't pay their portfolio managers. If Yearn acts as a decentralized asset management platform (some have likened it to a goalless/arbitrage-oriented automated management platform), it will end up having to compensate strategy developers, leading to increased costs. secondary title"YFI Outlook"There may be no project better suited to mirror the development of yield farming than YFI. At present, YFI provides liquidity rewards of USD 7.3 million per day, which requires USD 2.6 billion a year. YFI hitched a ride on yield farming. But while YFI is currently the leader in yield farming, it’s not the only one vying for it.Yearn.Finance is determined to become the entrance of many income-generating products in the Ethereum ecosystem
yield farming industry
The most effective idea of yVaults is to present a two-way market, with capital providers on the one hand and strategy developers on the other. Builders of strategies allocate users' capital, and providers of capital choose the strategies they want to use. These strategies enable automated yield farming for users. With the launch of yVaults, potential farmers can now simply deposit funds into yVault and their capital will be automatically allocated to the best strategy.
Within a week of its implementation, the vault has accrued more than $463,000 in revenue, out of an annual revenue of more than $21 million. Based on the market capitalization of US$390 million at the time, this meant a price-to-sales ratio of about 20 times. Considering that the agreement had no cost other than the income obtained from finance, it could also be regarded as a price-to-sales ratio. Libby (price to profit ratio).
sustainability
, or add products to provide other sources of income for the Yearn system. Equally important to YFI Token holders is the current usage rate of Yearn. Yearn's 5% fee represents the highest rate of any DeFi protocol. This fee may be justified given the value Yearn provides to capital providers. Even Cronje himself believes that YFI Token holders will not simply receive benefits from capital providers.
