In July 2020, Yearn.Finance was introduced to the crypto world. As the Defi boom kicked in in 2021, Yearn.Finance became one of the most precious Defi coins alongside Aave, Curve, and Sushi Swap – all of them posting triple-digit gains, rising capital inflow, increasing on-chain activity, and interest from investors.
Launched by Andre Cronje, Yearn.Finance is a platform that maximizes yield farming revenues earned via digital assets by the users. It won’t be an exaggeration to say that yEarn, the governance token of Yearn.Finance might explode in 2022. However, its current price trend shows overbought conditions, the coin having slid from a massive $42,000, witnessing 100% gains in just three weeks post the buyback announcement on December 16. Yearn.Finance has registered a phenomenal growth trajectory in its short lifespan.
But what was the idea behind the token’s inception? What are its USPs that allot such an exalted position amongst the breed of Defi tokens? And, what does the future entail for the veteran Defi protocol?
Let’s discuss these questions one by one.
The Idea behind Yearn.Finance
Our story starts with the founder Andre Cronje increasingly becoming frustrated with silos within the Defi infrastructure. Cronje used to invest in stablecoins through Defi lending protocols to earn yields. Each time he had to make an investment, he had to manually search for the best option, transfer the stablecoins from one protocol to another, and pay gas fees on the same every time he had to invest.
Until that time, the protocol was called iEarn.Finance. Cronje took the matter into his own hands, being the profound technical developer he was. He built a smart contract protocol on Ethereum – a yield optimizer that would automate the yield farming process. And opened the floodgates of earning opportunities for everyone. In doing this, he knew that this act would make the protocol more efficient. The project was rebranded shortly as yEarn.Finance. Soon after, the governance token was announced – yEarn or the YFI token that had a truly limited supply of 39,999 tokens only!
The YFI platform is a set of protocols serving a slew of utilities, including yVaults, yInsure, yETH, COMP yield farming, StableCredit, and many others. The community members approve all the releases before they go live on the platform. yVaults have a 0.5% withdrawal fee and a 5% performance fee. These fees are redistributed to the members of the YFI platform, thus creating value that accrues directly to the YFI token holders.
The token could not be purchased or pre-mined; it had to be earned by using the protocol – Cronje’s idea of a fair launch that clicked well with users, and within a week, YFI’s market cap reached $100 million.
In less than two months, the token had climbed from the initial price of $30 to $40,000 while reaching a market cap of $1.3 billion. Its on-chain transaction volume had crossed $500 million by August 2020. The average balance of a YFI holder was above $1,00,000 – the highest among the defi tokens. The black horse of Defi had its best run ever!
The Current Market Standing
After the buyback announcement, YFI’s prices skyrocketed by 30% in a day. The protocol revealed that they had bought back 0.77% of the tokens at an average price of $26,651 and that the Yearn treasury now had more than $45 million, and members can expect more aggressive buybacks in the coming days.
The token gained by 100% in less than three weeks approaching $42,000. Lack of sufficient investor interest coupled with a risk of overbought conditions made the YFI token undergo correction soon afterwards.
As of 14 February 2022, the YFI token is being traded at $23,097.06 with a market cap of $846,097,066.
Where is the Coin Headed?
‘As per our long-term price prediction, the coin might get slightly affected by bears but will see the bull ride around 2024, and the coin may trade between the Maximum price of $55179 and the lowest price of $47959.’~Long Forecast
Source: The Switzerland Times
The majority of the experts share a positive outlook about the YFI token given its tight security protocols and advanced algorithms that add superior utilities to the Defi ecosystem in general and yield farming rewards to the users in particular. Let’s binge ourselves on the YFI’s current and upcoming delights that make it a favourite amongst the Defi tokens.
Why is the YFI token a Top Contender in the Defi Race Despite the Current Slowdown?
Despite the current slump in the YFI token’s growth charts, the token holds stupendous potential for investors and users in the Defi arena, given the critical problem areas it touches upon. The first is bringing the best yield strategies under one list for you to choose from
The second is the yield optimization via automated yield farming APYs plus multiple other utilities accessible to the members.
- The unique, fair, and all-inclusive tokenomics of the YFI token as a governance coin.
- The share in the revenues of the platform for which each YFI token holder is eligible.
- It’s recurring buyback programs that would, to some extent, keep the YFI token’s prices booming in the long run.
Besides the fundamentals driving the robustness of the Defi protocol, there are several significant metrics that would give you an idea of why the token will stay relevant in the long run:
- Vault fees: the YFI platform earns on an average $100 million a year from vaults fees alone. And none of this amount concerns any incentive schemes running on the platform or tokens whose values get diluted with time. What does this mean for an investor? They have a treasury of $100 million, including the interest earned! And the holders will get a share in this revenue as per their governance model. The recently concluded buyback program was another move towards a fee distribution to holders, similar to veCRV and xSushi models.
- TVL: The total value locked (TVL) is a direct measure of the liquidity of any token. The higher the TVL, the higher is the liquidity. The platform currently has a 5 billion-plus TVL in the form of digital assets on its platform.
- Low Market Cap, High Growth Token: The current market capitalization of the YFL token is $846 million only. Still, the platform earns one of the highest fees per TVL. Investors should always prefer coins with a low Market cap and high growth potential to use the early mover opportunity to their advantage. As the coin gains momentum and market cap, so do your investments.
- P/E Ratio: The Price to Earnings Ratio is a ratio useful for measuring the financial health of any enterprise. In crypto, this would mean the price at which the investor must pay per unit of annual earnings. It gives the investor insights into the value of the crypto asset by portraying the market’s expectations (Apollo Capital). In the case of the YFI token, the P/E Ratio is 7.9x, which means for 1 unit of annual earnings, an investor would have to pay 7.9 units currently. These numbers, when compared to other payout-based protocols, are pretty rewarding – Curve has a P/E ratio of 143x. This means you would be paying a whopping 143 units for 1 unit of annual earnings.
- The Upcoming veYearn model: The platform will soon launch its veYearn model. Post the shift, DAO treasuries are likely to start accumulating the YFI token, just like the CVX and the CRV token, hence, adding more value to the platform as well as the token.
Being probably the only 100% Decentralized Defi platform, given that no team members or founders have any pre-allotted shares, Yearn.Finance has delivered an incredible yet utilitarian product that has made Defi easier and profitable for all the stakeholders within the ecosystem. They have launched their V2 frontend, and their V3 phase is being built currently.
The protocol is also going multi-chain while having started with incubating projects such as tesr.finance on the Polygon Network. The protocol is continuously striving towards developing better and more diverse Defi products while adding inclusivity and revenue-sharing in its governance model.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.