Yearn.finance automates yield earning. It started out as a “yield bouncer” called iearn.finance, automatically moving stablecoins like DAI from one lending protocol to the next across Compound, dYdX, Aave, and more to maximize lending yield.
Then the idea evolved when founder Andre Cronje combined this yield bouncing strategy with a stablecoin pool in Curve. Anyone could deposit into the Curve Y Pool and their idle stablecoins would be lent across pools to earn lending interest while accruing trading fees as an LP when traders swapped between stablecoins in the Curve Y Pool. This was one of the earliest examples of yield farming –earning multiple forms of yield thanks to stacked incentives connecting multiple DeFi applications.
In the summer of 2020, Cronje unveiled a new and rebranded yearn.finance.
- He would decentralize control of yearn.finance by distributing 30,000 YFI tokens, which he said had no value–even though the market would think differently.
- Yearn.finance would continue on this mission of automating yield earning with a concept he called “vaults” to make it as simple as depositing tokens to earn yield using a series of sophisticated strategies engineered by him and other Yearn.finance developers.
- The 30,000 YFI would be distributed over a few days of yield farming where users could stake their Curve Y Pool LP token to earn more YFI.
- Additional pools required staking, providing liquidity in Balancer and staking the LP token to bootstrap liquidity for this newly minted YFI token.
YFI, yearn.finance’s governance token, was ultimately distributed only to users who provided liquidity. With no pre-mine, no pre-sale, and no allocation to the team, YFI set a standard for the most decentralized token launch. Although most of the ecosystem was built by Cronje, control of YFI was transferred to a multi-signature wallet, which requires 6 out of 9 participants to agree on changes.
The end result is one of the most epic stories in DeFi. YFI became the fastest asset to grow to over $1B in market cap in history, including stocks and other asset classes. yVaults enabled users to deposit tokens like DAI, USDC, ETH, and even Aave interest earning tokens like aLINK. Additionally, yVaults were devised to enable depositing popular LP tokens like for the Curve Y Pool and Curve sBTC Pool.
Yearn leveled the playing field for DeFi newcomers and DeFi pros. It took the power of a quant trading firm, automated it, and enabled anyone to benefit from it on Ethereum.