What is Yearn Finance?
Yearn Finance is a protocol that provides lending aggregation, yield generation, and insurance on the Ethereum blockchain. In simple terms, Yearn provides users with a wide array of DeFi options that we’ll further explore later, mainly making high Yield Farming accessible to everyone. The project has gathered a lot of attention since its launch in July of 2020, even peaking out at over $90,000 in 2021.
Yearn Finance can be hard to understand for newbies in the DeFi space. Heck, even I had to spend a couple of hours going down the rabbit hole to learn how it works, so let’s break it down a little, shall we?
As soon as you enter the platform, you’ll see five DeFi products on the front page:
Read on to find out more…
In this section, I’ll be judging the fundamentals of Yearn Finance based on four criteria use case, tokenomics, team, and community. Each will receive a score of a maximum of five points.
Like we already mentioned, Yearn Finance offers five DeFi products:
Yearn Finance is best known for its Vault product. It’s been their main selling point. Users can deposit crypto assets in Vaults and earn a yield from it. . Deposit Chainlink (LINK), for example, and with Vaults, you will gain more LINK from it. And the returns aren’t by any minor, and sometimes they can even reach 70-80%.
The process with which Yearn achieves these amazing returns is quite complicated, so we’ll try to break down as much as we can.
The first is to deposit a crypto asset, then the smart contract uses it as collateral and borrows stablecoins in its place. Yearn then uses these stablecoins to find and invest in yield farming opportunities. Automatically shifting the funds and rebalancing the investment once new circumstances arise. The protocol will automatically convert the profits back to the token you deposited.
And Yearn to be completely decentralized means that the community holds power. All the Vault yield-maximizing strategies are designed and voted by the community.
The whole thing works to minimize a tedious problem for the DeFi community, gas fees. In fact, by using Vaults, your gas fees will be significantly minimized than what they would be if you did it all on your own.
Earn allows users to deposit one of the following stablecoins:
With Earn, the protocol will transfer your crypto assets among the leading DeFi lending protocol platforms. Generally, Compound, DyDx, and Aave are all optimized to earn users the highest possible yield.
Yearn Finance has today grown to such a degree that Earn cannot simply dump all your funds in one pool. If it did, that would drastically change the yield. Today Earn finds the perfect allocation of your funds by constantly moving and balancing based on users adding and withdrawing from pools.
You could, of course, use a platform like Aave and supply the liquidity yourself, but you’d have to monitor it constantly. Earn solves this tedious problem and makes liquidity farming a lot more accessible and easy to understand for the average investor.
Zap, a DeFi product that allows users to convert crypto pools in no time. Just “Zap” in another pool
Users on the platform have five stablecoins at their disposal BUSD, DAI, USDC, USDT, and TUSD. ZAP can convert that into the y.curve.fi or busd.curve.fi pools. And they can also “Zap” out of the pools into the available stablecoins.
Cover a freshly added feature that ensures clients from losses resulting from hacks or bugs to Ethereum smart contracts. All is possible through a decentralized insurance model built on the Ethereum blockchain and is integrated with a project called Nexus Mutual.
The use case for this project is amazing, so clearly, it deserves five points out of five.
The native token YFI is the governance token for the Yearn.finance protocol. And from what we can tell, it’s worked flawlessly in allowing users to participate in the decision-making process.
YFI has a supply of only 30.000, which explains the high price. Although according to the white paper, it is possible to mint more. But no intention has been shown to do so by the community or developers.
Yearn Finance has also made it extremely easy for YFI holders to use their tokens for governance. To do so, users have to stake their tokens, and they can cast a vote. Holder’s funds will then be locked in the system for three days, but fortunately, they’ll earn a small staking reward.
Users will be charged 5% for withdraws. This is done to gain the $500.000 needed to maintain the treasury. All the funds earned on top of this figure are distributed in dividends to YFI holders. The more people use Yearn Finance, and the more holders make, a great way to incentivize the community to develop the platform actively. However, it is essential to keep in mind that only users who have voted earn the dividend.
I cannot see any flaws with the tokenomics of the YFI native token, so it deserves five stars.
The founder of Yearn Finance is a man well known to the DeFi space, Andre Cronje. Born in South Africa, Cronje has been around DeFi for years now and has achieved almost a cult status. Not only did he create a fantastic project, Yearn Finance, but he also launched it in the best possible way. In fact, at launch, all the tokens had been distributed to the liquidy providers, and none were locked away for the founder and his team. A move that solidified him as a DeFi good, you couldn’t ask for any better.
As of today, he claims he is no longer actively involved in every day of Yearn Finance, but he still is considered a sort of figured head to the community. As we mentioned before, team members are developers that the community executive powers have granted for a limited amount of time. And the system is proving to work wonders.
For these reasons, the team undoubtedly deserves five points out of five.
Being a DeFi project, so not in the hands of any central organization, the community is a vital part of the ecosystem. Changes are discussed and developed on Yearn’s governance forum. Members of the community are behind the creation of new Vaults strategies, as we’ve mentioned earlier.
Some members become part of the Yearn multisig and earn more executive powers. The measure is fortunately only temporary and is excellent to avoid power trips. It helps the project build and grows. And to simplify all the governance processes, Yearn has even set up a portal on Boardroom.
Additionally, Yearn Finance has also gained some clout on social media platforms. On Twitter, it has amassed a following of 120k, more than 15 thousand members on Discord, and almost 6 thousand on Reddit.
I hate to be repetitive but Yearn Finance has one the best communities in the DeFi space, so again five points out five.
In terms of fundamentals, Yearn Finance is impeccable, achieving a staggering 20/20.
Market price prediction
- Wallet Investor
Wallet Investor is bullish on YFI, it predicts the token reaching $115k in 2021. And even more optimistically, $322k in five years.
- Digital Coin Price
Digitalcoin predicts YFI reaching $118k in 2021 and $255k in five years, again very bullish.
- Long Forecast
Long Forecast has a similar prediction that YFI will reach $167k this year and $364k in five years
In Conclusion My YFI Price Prediction 2021
Yearn Finance has flawless fundamentals, scoring 20/20 by our criteria. Everything is as good as it could be. And that’s not an everyday occurrence, particularly with mid-cap altcoins.
But let’s look at the price shall we? At the time of writing Yearn Finance has just dipped below $50k. The project has a market cap of around $1.800.000.000, the 58th biggest.
Yearn Finance and similar projects such as Badger DAO are in the midst of a hype cycle. Liquidy farming and blockchain asset tokenization will be the center of attention in the crypto world for the following years. Such projects like this will blow up, particularly if they have some great fundamentals.
Yearn Finance is already increasingly being the TVL (total value locked) is around $3.600.000.000, which is roughly twice bigger than the market cap. Ideally, the market cap:TVL ratio should be around 1:1. So the picture is clear, YFI at this price is undervalued.
So for these reasons, I see Yearn Finance as a great investment. And I predict that YFI will be reaching the $120k-150k range by the end of the year and touching $500k by five. Suppose that crypto yield farming goes mainstream even further in the future and reaches the average investor, taking traditional conservative investments place. In that case, the sky is the limit for a project like Yearn Finance.
This is not financial advice. I’m only expressing my opinions, and you shouldn’t base your investment decision on them. Always do your research and trade responsibly.
Yearn Finance price prediction 2025
Based on the data and arguments laid out above, a price of YFI token in 2025 could be in the $200k-$500k range. A long term reasonable estimate: ~$300k
Yearn Finance price prediction 2030
We are still not sure if Yearn Finance and similar project do have a long-term future and YFI token could be worth ZERO in 2030 as the project might not exist by then. Chances are 50-50 in our eyes for that to happen. However, in case YFI keeps its place at the top of the yield farming food chain, it could very well reach $1M per token.
Is Yearn Finance worth investing in?
Yearn Finance is a good investment for the short-term when the market is in the BULL run. Usually these types of newer projects do extraordinary well when the overall crypto market is in the green and they outperform other better known projects by a lot. However, make sure to exit them in time as they tend to do get a beating during ranging and bear market cycles.
Why will Yearn Finance succeed?
Because it does propose a valuable service, it already built a name for itself in its niche and suffered no security breaches or other types of compromises (economic, reputational etc). The token itself does provide utility and makes sense which is not the case with many other similar projects.
Why will Yearn Finance fail?
Yearn Finance might fail because of the fierce competition, dynamic technological field and rocket-speed developments in its niche. Another common reason this type of project fails is team issues – either the team splits or outright abandons the project.
Will Yearn Finance reach $100k?
That is within the real of possibility, even in the short term period. It could very well reach $100k within a year.
Can Yearn Finance reach $200k?
Yearn Finance will almost certainly NOT reach $200k in the foreseeable future, unless we see a face-melting bull run that will see bitcoin at $100k and ETH at $20k.
Where to buy and how to store YFI
The best exchanges to buy and sell YFI are:
- Binance (buy/sell with USDT, BTC, BUSD, EUR, BNB)
- Coinbase Pro (buy/sell with USD, BTC)
- SushiSwap (buy/sell with ETH)
And the best wallets to store YFI are:
Read also our other predictions:
- Uniswap Price Prediction 2021-2025
- Future Forecast For ADA Price
- Aave Price Prediction 2021-2025
- AVAX Price Forecast
- Cosmos Price Prediction 2021-2025
CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com