With cryptocurrencies and blockchains revolutionising the financial system, blockchains have expanded to include smart contracts. This development led to the creation of Decentralised Finance (DeFi). DeFi systems operate with smart contracts at the core and with little to no human intervention. In this article, we discuss the DeFi token Yearn.Finance (YFI), how it works, plus how to invest in YFI through Zipmex.
What is Yearn.Finance?
Yearn Finance contains a suite of products in Decentralised Finance (DeFi) providing lender aggregation, yield generation and insurance on the Ethereum blockchain. Various independent developers maintain the protocol and the YFI holders govern it.
The current core products of Yearn Finance include:
Vaults help create a passive-investing strategy. Unlike other DeFi projects, end users don’t need to have expert knowledge about the underlying protocols. Instead, by investing in vaults, users can generate yield automatically based on the opportunities available in the market.
This is what vaults can do this:
- Use any asset as liquidity.
- Use liquidity as collateral and manage collateral at a safe level in order to avoid a default.
- Borrow stablecoins.
- Put the stablecoins to work on some farming.
- Reinvest earned stablecoins.
The vault benefits users by socialising gas costs, delivering automatic yield generation and rebalancing processes and shifting capital based on opportunities. This results in the Vaults representing a passive-investing strategy without the need for expert knowledge.
A lending aggregator was the first product from Yearn Finance. As interest rate changes between protocols, the funds shift between dYdX, AAVE and Compound automatically. Users deposit money to the lending aggregator’s smart contracts via the Earn page.
Earn optimises the interest accrual process for end-users to ensure they receive the highest interest rates at all times. It’s another one of Yearn.Finance’s products that ensure high yields for users who deposit into Yearn.Finance.
Zap is a tool that enables users to swap to and out of various liquidity pools available on Curve. These pools earn their profit from lending aggregators and by collecting user trading fees by participating as Liquidity Providers on Curve. Currently, the users have access to five stablecoins (BUSD, DAI, USDC, USDT, TUSD) and can “Zap” into one of the two pools – y.curve.fi or busd.curve.f. Another option is to “Zap” out of these two pools and into any one of the five base stablecoins.
Underwritten by Nexus Mutual, Cover provides an insurance facility for users to obtain coverage for financial losses incurred from smart contracts or protocols on the Ethereum blockchain. It has three components – Cover Vaults, Covered Vaults and Claim Governance.
Just like any other decentralised network, YFI also has its own governance rules. YFI token holders control the ecosystem through voting on proposal submissions. The proposals must meet the following quorum requirements:
- >20% of the token staked in the governance contracts
- Majority support of >50% of the vote, and
- Implemented by a nine-member multi-signature wallet
The members of the multi-signature wallet are voted in by the YFI holders. They may change from future governance voters.
What is DeFi?
The Ethereum blockchain introduced DeFi to the public. It operates with the help of smart contracts and provides various financial applications such as loans, trading, asset management and much more. Smart contracts are lines of code that execute automatically when the terms of the agreement mature.
The current traditional financial system is flawed, and DeFi aims to fix that. DeFi provides a platform for applications that operate beyond just trading crypto assets. These applications are commonly known as Decentralised Applications (dApps). The dApp developers have total control over their applications without the interference of centralised governance.
Smart contracts operate on an ‘IF-THEN’ principle. The way this works is IF the condition is met, THEN perform the required action.
With traditional financial institutions being highly centralised, DeFi and dApps aim to provide a transparent and mediator-free financial service. You have access to better investment strategies, staking opportunities, and loans, with no middle-man eating away at your profits.
Similar to how cryptocurrencies have revolutionised the transaction meta, DeFi is improving our financial ecosystem. DeFi has led to the creation of stablecoins, which are backed by physical assets such as the US dollar, gold, etc. It is slowly creating a decentralised, transparent, robust financial economy.
The different uses of DeFi are:
- Decentralised Exchanges (DeXes)
- Asset Management
How to Invest in Yearn.Finance Through Zipmex
You can buy, sell or trade through Yearn Finance using our cryptocurrency exchange. If you are unsure of how an exchange works, visit this article which provides a simple overview.
To trade YFI in real-time, follow these steps:
- Head over to the trade page and scroll down to select the YFI trading pair. On this page, you will see a price chart of FYI in real-time.
- Then you will see a New Order section at the bottom right of the page where you can trade YFI. This shows the current price of YFI in your local currency.
- Then enter the amount of YFI you want to trade-in or invest and click on “Buy.”
- If you want to sell YFI, enter the amount of YFI you wish to sell and click on “Sell.”
Once you buy YFI, you can access any of their four products. You can earn profit by investing, lending and staking your coins on the YFI network.
What Yearn.Finance Means For The World?
The more people realise our traditional financial system’s flaws, the more they will be inclined to Decentralised Finance. Unfortunately, our economic system is highly centralised, and this is a major issue. However, DeFi has strong potential and can be the perfect alternative to our existing financial ecosystem.
DeFi also provides financial access to those without bank accounts as all you require is a smartphone.
Sign up for a Zipmex account today to access the benefits of DeFi such as Yearn.Finance. We are a leading digital cryptocurrency exchange, and we charge minimal fees (0.2% maker/taker fees).
You can invest or trade YFI and earn profits. It is one of the most highly valued assets on the platform (with a market price over $54,128.54 USD at the time of writing). So, what are you waiting for? Head over to our website to begin your DeFi experience now!