Yearn.finance and the success of the YFI token

yearn.finance developed a new solution enabling rotation tokens. The company creates a decentralized ecosystem that uses external lending services DeFito optimize your own loans. The project also created a YFI coin.

DeFi protocols

So far, several DeFi protocols have been developed that enable token trading. However, each of them provides different rates of return and interest. In practice, it is most often the case that users who provide tokens to one of these protocols for the purpose of a loan, wanting to obtain interest later, are forced to transfer their tokens to those offering a higher profit. However, this action involves performing two transactions within blockchaina Ethereumwhich in turn automatically generates higher costs.

Yearn.finance solution

Meanwhile yearn.finance proposed a self-balancing basket solution that would prevent users from carrying out transactions through a decentralized protocol. It means that tokens placed on a given protocol are kept in exchange for yTokens. These, in turn, are automatically balanced at regular intervals. Thus, this group includes tokens of the most profitable loan services of the DeFi sector. The loan tokens belonging to the yTokens group include, among others Aave, Compound, dYdX and Fulcrum tokens.

AND FI

Yearn.finance became famous largely due to the YFI coin. In just a few months, there has been a strong increase, parallel to the increase in Total Locked Value (TVL). The new protocol was launched in the winter of 2020, and by the summer it never exceeded TVL USD 10 million. On July 18 this year, the YFI token entered the cryptocurrency markets with an initial price of around $ 34, only to rise to $ 1000 the very next day. During one week, TVL exceeded the amount of USD 340 million, and at the end of August - USD 1 billion. At the same time, the price of the token also increased to USD 30.

Decline and rebound

In September TVL dropped, after which it increased again to nearly USD 950 million. The price of the YFI also fell initially to reach a record high of $ 43 in mid-September. The token is only available to those users who provide liquidity with selected yTokens. There is no pre-sale or distribution to the development team for its distribution. The huge success of the YFI token can be explained, among others, by its limited availability. Only 000 units are distributed, and the high demand has led to a large increase in the price.

This case was one of the first crops in the DeFi sector. One can speak of a great success here, the more so that it ranks seventh among the TVL protocols.