What does it do?
YFI has been coined the ‘Bitcoin of DeFi’. This is because it was the cryptocurrency that brought mainstream attention to the decentralised finance ecosystem, and mostly notably, yield farming. In short, yield farming is essentially ‘staking’ your own cryptocurrency in liquidity pools in order to receive a form of ‘interest’ on your ‘stake’.
The yearn system works by acting as an ‘aggregator’ for yield farming. The way this works is that yearn uses on-chain smart contracts to automatically direct invested liquidity to the highest yield pool, providing the ‘farmer’ the highest return on their ‘stake’.
Where does YFI come into it?
YFI is the governance token for the yearn ecosystem. YFI can be used by holders for voting on ‘YIPs’, basically proposals for the future of YFI. Furthermore YFI can also be ‘staked’ to receive interest in yearn Vaults.
Yearn has a growing ecosystem and has added several finance products since its inception. Please see a brief description, as per the yearn website, below:
- Vaults – Vaults follow unique strategies that are designed to maximize the yield of the deposited asset and minimize risk.
- Earn – Earn performs profit switching for lending providers,