Yearn Finance
Yearn Finance is a suite of products in Decentralised Finance (DeFi) that provides yield generation, lending aggregation, and more on the blockchain. The protocol is maintained by various independent developers and is governed by YFI holders [1]. One of a number of emerging decentralized finance (DeFi) projects, yearn.finance provides its services using only code, removing the need for a financial intermediary like a bank or custodian. To do this, it has built a system of automated incentives around its YFI token [2]. Yearn makes the process of yield aggregation across DeFi platforms, such as Compound, Curve, and Aave, easier by minimizing gas fees and maximizing yield. In exchange, Yearn charges its users a management and performance fee [14].
1. Is It a Protocol or Token?
Both Protocol and Token.
yearn.finance is a group of protocols running on the Ethereum blockchain that allow users to optimize their earnings on crypto assets through lending and trading services. Users earn YFI tokens by locking cryptocurrencies in yearn.finance contracts running on the Balancer and Curve DeFi trading platforms, using the yearn.finance platform [2].
2. Category
Yearn.finance is an aggregator service for DeFi investors, using automation to allow them to maximize profits from yield farming. Its goal is to simplify the ever-expanding DeFi space for investors who are not technically minded or who wish to interact in a less committal manner than serious traders. Launched in February 2020, the service, formerly known as iEarn, has seen huge growth in recent months as new products debuted and developers released in-house token YFI [3].
The majority of yearn.finance’s services – Earn, Zap and APY – seek to enable users to lend or trade their cryptocurrency. Earn is a way for users to get the best interest rate on lending, and it works by searching across different lending protocols, such as Aave or Compound, to find the best rates.
Users can then deposit their DAI, USDC, USDT, TUSD or sUSD on the yearn.finance platform to receive those interest rates.
Likewise, Zap allows users to complete several investments with one click. For instance, a user can trade DAI for yCRV (another DeFi cryptocurrency) in one action, compared to three actions across the yearn.finance and Curve platforms.
This saves the user time, opportunity cost and transaction fees.
APY (which stands for annual percentage yield) searches across the lending protocols that Earn uses, and gives the user an estimate for how much interest they can expect to earn, on an annualized basis, for a certain amount of capital.
Vaults, yearn.finance’s most complex service, allow users to follow active investment strategies using the platform’s self-executing code. In this way, Vaults are like actively managed mutual funds.
As of March 2022, over 60 strategies are available on Vaults [2].
Iron Bank: This is a lending service for both users and the protocols. The service allows borrowing using the crypto as collateral. Collateral is a valuable asset pledged as security for the repayment of a loan. For particular whitelisted protocols, this service also offers zero-collateral loans.
3. Does it have TVL? -
Yes, total TVL is $3,501,101,778 as of 3 March 2022 [3].
Yearn Finance has the following distribution of TVL as of 21 January 2022 [5] [6].
Ethereum | $2.95b |
Arbitrum | $2.37m |
Fantom | $572.82m |
4. Provide the following information at a protocol and pool level where appropriate:
As of 3 March 2022
Assets Not applicable
Liabilities Not applicable
Reserves Not available
Treasury Not Available
Market Cap 789,679,227 [3].
Ratio of Reserves to TVL (deposits only; unleveraged) Not available
Ratio of Treasury to TVL (deposits only; unleveraged)
Ratio of native Market Cap to TVL (deposits only; unleveraged) 0.2264 [3].
Are they double-counting leverage? NO
5. Further details on the Token?
Markets where it’s available? YFI is a freely-tradable token, with pairs for cryptocurrencies, stablecoins and fiat currencies all widely available. Major exchanges trading YFI include Binance, OKEx and Huobi Global, as well as automated market maker (AMM) Uniswap [3].
Liquidity:
Circulating Supply - the total amount of tokens in circulation 36,637.72 YFI [3].
Total Supply - on-chain supply minus burned tokens 36,666 [3].
Max Supply - theoretical maximum as coded 36,666 [3].
6. What chain is it on?
Yearn Finance is MultiChain, it was initially built on the Ethereum chain but now supports Fantom and Arbitrum as well [6].
7. Could it be exploited?
Yes, On February 4, 2021, an unknown entity reportedly stole $2.8 million from a shared digital or online vault via the investment platform Yearn.Finance. The hacker(s) exploited the vault using Aave, a decentralized finance (DeFi) platform that lets investors make flash loans. The vault attacked was reportedly Yearn’s v1 DAI vault, which had updated to a new investment strategy in January 2021. The vault’s strategy when the attack took place was to deposit all funds into the “3pool” on the automated market maker Curve which holds various stablecoins including DAI, USDT and USDC, and lets platform users swap any of these digital assets for each other at really low slippage. Michael Egorov, CEO at Curve, had explained that a bad actor had deposited to Curve 3pool in order to manipulate the DAI price provided by the pool [8].
8. What assets does it support?
YF Supports majority of popular assets. The list of supported assets in the vaults can be found here [9].
9. How does it combine the risks of those assets?
One can potentially lose value to slippage. Zapping a token into a vault will require more transactions than depositing the native token. This means you will be paying more in gas and potentially lose value to slippage when the token is swapped or deposited into a pool. Yearn limits slippage to 1% and the transaction will fail if slippage exceeds that, in which case you will have to swap or deposit the tokens manually [10].
10. Does it wrap and distribute assets?
No, it does not wrap assets.
11. What are the conditions for the wrapped assets to be liquidated? Back to the original portfolio or adjusted for value?
Not relevant for Yearn.
12. What are the dependencies of the protocol? How does risk bubble up?
Yearn depends on the Brownie framework, a Python-based development and testing framework for smart contracts targeting the Ethereum Virtual Machine, and Ganache along with yarn. It is also dependent on getting data from API via Etherscan and Infura. So risk may arise due to these dependencies [11].
13. Does it have a governance token
YFI is the governance token for Yearn [1].
14. How decentralized is
The Yearn ecosystem is controlled by YFI token holders who submit and vote on off-chain proposals that govern the ecosystem. Proposals that generate a majority support (>50% of the vote) are implemented by a 9 member multi-signature wallet. Changes must be signed by 6 out of the 9 wallet signers in order to be implemented. The members of the multi-signature wallet were voted in by YFI holders and are subject to change from future governance votes [12].
15. Additional Information
VAR - Not applicable yet
LCR - Not applicable yet
Are there any other metrics that might be useful?Like Sharpe Ratio
Annual percentage yield(APY) - APY searches across the lending protocols that yearn uses, and gives the user an estimate for how much interest they can expect to earn, on an annualized basis, for a certain amount of capital.
16. How is this exposed to layers in Defi:
What layers are upstream (built on top of the protocol)? Are there other protocols that use it as a source of data/pricing oracle, or put funds into it?
No layers are upstream
What layers are downstream (protocols/assets put into the platform). For example, yield farms are built on top of lending protocols
Yearn makes use heavily of Curve / Convex pools (especially on Ethereum Mainnet) for their Vault strategies, so any issue with Curve / Convex will float through to Yearn as well.
17. Smart Contract information
List the protocols' smart contract address
Yearn Finance ETH protocol address : 0x96d62cdCD1cc49cb6eE99c867CB8812bea86B9FA [13].
List the Token´s smart contract address
YFI token tracker address: 0x0bc529c00c6401aef6d220be8c6ea1667f6ad93e [7].
Are there any other relevant smart contracts?
List of all addresses can be found here [7].
References:
Coinmarketcap, https://coinmarketcap.com/currencies/yearn-finance/
Coinmarketcap, https://coinmarketcap.com/currencies/yearn-finance/
DefiLlama, https://defillama.com/protocol/yearn-finance
Defipulse, https://defillama.com/protocol/uniswap
Coinmarketcap, https://coinmarketcap.com/currencies/uniswap/
CoinBase, https://www.coinbase.com/price/uniswap
Uniswap, https://info.uniswap.org/#/
Credmark, https://credmark.com/
Uniswap, https://uniswap.org/ecosystem
Uniswap, https://info.uniswap.org/#/
Coingecko, https://www.coingecko.com/en/coins/uniswap
Coinmarketcap, https://coinmarketcap.com/exchanges/uniswap-v2/
Charm, https://charm.fi/
Contributors
| Discord Handle | ETH Address | Reward | Contribution |
|---|---|---|---|
Deadsec | 0x1A2E1d4553d33c080746A056AA3F832823fADB51 | 0 $CMK (internal) | Original version |
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