Introduction
On July 18th, the on-chain yield aggregator Yearn (formerly iEarn) launched its governance token, YFI. Distributed entirely through liquidity mining with no pre-mining or pre-sale, this innovative governance mechanism injected fresh energy into the already booming DeFi sector.
Key Features and Supply Details of Yearn's Governance Token
YFI possesses the following distinctive characteristics:
- No Financial Value: Yearn emphasizes that YFI holds no monetary value but serves as a tool to modify mechanisms, fees, and rules within the ecosystem.
Fair Distribution:
- No pre-mining.
- No auctions or pre-sales.
- Acquisition solely through liquidity provision.
To earn YFI, users must provide liquidity to one of the following platforms:
- yearn.finance: A yield aggregation protocol.
- ytrade.finance: A leveraged stablecoin trading platform (pending launch).
- iliquidate.finance: An automated liquidation engine for Aave.
- leverage.finance: A platform supporting 5x leveraged DAI trading with USDC.
- yswap.exchange: A stable automated market maker (AMM).
- *.finance: A smart contract credit delegation protocol (pending launch).
According to Etherscan data:
- Max Supply: 30,000 YFI.
- Circulating Supply: 6,633 YFI.
- Holder Addresses: 1,168.
As of reporting, YFI's price on CoinGecko was $1,443 (6.04 ETH), marking a 40x increase from its initial price of $34.
Governance Rights of YFI Holders
YFI empowers holders to make critical protocol decisions, including:
- Adding or removing lenders.
- Adjusting deposit/withdrawal fees.
- Modifying on-chain lender weightings.
- Allocating protocol yield percentages (up to 3.5%) to reward pools.
- Claiming rewards from enabled pools.
Diverse Revenue Streams in the Yearn Ecosystem
Participants can earn through multiple channels:
- Interest from yearn.finance.
- COMP tokens from Compound.
- CRV tokens from Curve.fi.
- Trading fee shares from ytrade.finance and yswap.exchange.
- Liquidation bonuses from iliquidate.finance.
- Unallocated interest or fees.
Rewards are collected daily/weekly, converted to aDAI via 1inch.exchange, and distributed to vault contracts. YFI holders can claim rewards by burning their tokens.
The Value Proposition of Yearn's Automated Market Maker (AMM)
1. Simplifying Complex Liquidity Mining Mechanisms
Before YFI's launch, Yearn founder Andre Cronje introduced "Stable AMM" (yswap.exchange) to address AMM complexities, such as:
- Inefficient liquidity mining token recognition.
- Requirement for dual-token deposits.
Traditional DeFi yield strategies had grown convoluted, involving:
- Depositing DAI into Compound → cDAI → Balancer (earning COMP + BAL + fees).
- Curve deposits → Synthetix staking (CRV + SNX + fees).
- mStable mUSD → Balancer pools (BAL + fees).
Yearn's solution streamlines these processes through yield-aware AMMs, optimizing returns without oracle dependencies.
2. Current AMMs' Inability to Recognize Liquidity Mining Tokens
Problem:
- Pools (not LPs) earn incentives like COMP/BAL.
- Interest accrues to pools, not providers.
- Dual-token deposits (e.g., BAT + ETH) are mandatory.
Solution: Yearn's yield-aware AMM enables LPs to:
- Earn optimal interest rates.
- Retain incentive tokens (e.g., COMP).
- Trade single assets (e.g., BAT/ETH) while holding cBAT/aBAT.
3. Dual-Token Requirement in Existing AMMs
Yearn's Stable AMM innovates by:
- Eliminating over-collateralization needs (e.g., DAI).
- Using "transfer tokens" to represent pooled asset values.
- Allowing single-asset liquidity provision.
👉 Discover how Yearn revolutionizes DeFi liquidity
FAQs
Q1: How is YFI distributed?
A1: YFI is distributed exclusively through liquidity mining on designated platforms, with no pre-sale or pre-mining.
Q2: What governance rights does YFI confer?
A2: Holders can modify protocol parameters, allocate yields, and manage reward pools.
Q3: How does Yearn simplify liquidity mining?
A3: Through yield-aware AMMs that optimize returns and reduce dependency on complex multi-protocol strategies.
Q4: Can I earn rewards without providing dual tokens?
A4: Yes, Yearn's Stable AMM supports single-asset liquidity provision via transfer tokens.