Market Thoughts: The YFI Community Just Did Something That Many Other DeFi Leaders Haven’t Done (And Should Do)
YFI’s Vaults now measure interest in what’s likely the ideal way, with consistently updated statistics on the yearly, monthly, and weekly growth of your deposits.
Welcome back to another installment of my market thoughts, this time on YFI!
When you search that name, you’ll come up with a cryptocurrency that’s currently valued higher than Bitcoin itself. This is both because of its significant potential as well as the current chaotic bull market surrounding everything that’s branded “DeFi.” To understand both of these value drivers, it’s important to start with being clear on what the YFI token is and what it’s meant to do.
In the most basic sense, YFI is a governance token. That means when you hold 1 or more YFI tokens, you can vote on the future of the YFI protocol(ecosystem). The YFI protocol, in turn, is a group of smart contracts that take in certain cryptocurrencies and lend them out on behalf of their owners to maximize APY.
What’s the upside of YFI?
The YFI smart contracts automate yield farming, which refers to using strategies to maximize the return you earn on the crypto you offer up as capital to lending platforms. That means that instead of switching your crypto capital between all of DeFi’s lending platforms like Compound and Aave as their interest rates change to find the best offers, YFI does all of the work for you.
Think of it as like an ETF for cryptocurrencies that are supported by DeFi lending platforms and you get the basic picture.
Couple that together with the fact that Andre Cronje and other community members continue to update the YFI suite of products at a blinding pace and you’ll begin to see why it’s DeFi’s darling (next to Uniswap, of course!).
One-Way How YFI’s Useful to Every Crypto User
Because the YFI token’s currently priced at over $32,000, it’s out of the reach of the average crypto user. YFI(yearn) vaults, on the other hand, allow anyone who owns supported collateral to earn interest while their funds get used in loans all around the DeFI ecosystem. Take Ether for example.
If you had deposited a few weeks ago, you would’ve seen APY listed at 66%(or even higher depending on how early you arrived). Still, this sort of metric has been a persistent problem across the DeFi space since liquidity mining, yield farming, and all similar activities became popular this year.
Seeing it, I was on the early users of YFI’s YETH vault, a contract that takes in ETH and then essentially lends it out across multiple DeFi ecosystems based on a preset strategy. After a little over a week, I saw almost no gain at all in my deposit, though I quickly learned that, of course, this was due to the gains being realized in decimal places that weren’t displayed by the vault’s interface.
Though this helped me grasp how YFI’s “APY” worked, it still seemed like the interface could display interest in a better way. Now that day has come.
With the new and improved interface, you can view the current yearly, monthly, and weekly interest, expressed in a percentage, that your deposits are earning. This applies to YFI’s Ether vault, as well as all others.
The fact that YFI’s updated their interface while they continue to sit in the top ten of the DEFI lending space in total value locked, bodes well for the usage of DeFI services by wider numbers of average investors as time goes on.
Now it’s time for other protocols/services to follow suit.
Now, hopefully, this trend can extend to DeFI services being as transparent with all that they offer as they were meant to be.
Stay tuned for more market thoughts as the weeks go by. I’m altering my content here to make it more informal and more based on my reactions to crypto market trends (mostly DeFi). If that interests you, reach out any time for topics you might like to be covered, here or on Twitter.
— — — — -
Finally, most of my free time is being taken up with my newsletter, which is completely free and focused on how the rise of the Metaverse improves things for everyone. Sub here.
Disclaimer: None of this is meant to be financial advice. I’ve researched and worked in crypto since 2016 and I aim to merely educate people on the upsides and downsides of all sorts of projects and the market itself. Additionally, I’m a student just as all of us are. Therefore, my thoughts on projects evolve naturally over time as I learn more about them. Last but not least, none of these posts represent the thoughts of NBX unless otherwise stated and this includes all posts that preceded this one.
