DeutschThe DeFi platform “Yearn Finance” is a so-called aggregator service that is aimed at investors who invest in the field of decentralized finance (DeFi). Yearn Finance allows investors to bundle their cryptocurrencies and use automated investment strategies, so-called “yield farming”. The platform was founded in February 2020 by Andre Cronje and has since gained considerable popularity.
Yearn Finance was developed to automate the process of yield farming. Yield farming is a popular practice in the crypto world where investors contribute their cryptocurrencies to a pool and in return receive rewards in the form of additional cryptocurrencies. However, yield farming is often complex and requires a deep understanding of cryptocurrencies and financial markets.
Yearn Finance simplifies this process by allowing users to contribute their cryptocurrencies to a pool on the platform, which is then automatically invested in various DeFi protocols. The platform uses an intelligent system that compares the returns of different DeFi protocols and automatically invests in the most profitable one.
Yearn Finance has its own cryptocurrency called YFI, which is controlled by the community. The cryptocurrency was launched in July 2020 and has since gained value. YFI is one of the few cryptocurrencies that was launched without an ICO (Initial Coin Offering), which means that all YFI tokens were earned through mining on the platform.
How Yearn Finance Works
Yearn Finance works with various DeFi protocols, enabling the bundling of cryptocurrencies and automated trading. The platform uses an intelligent engine that constantly compares the returns of different DeFi protocols and invests in the most profitable one. The following explains the 3 most important products of Yearn Finance. These are the so-called “Vaults”. These vaults represent pools on the platform whose goal is to generate returns for investors. The advantages for investors here are that the transaction costs can be reduced thanks to “crowdsourcing”.
Vaults are basically a compilation of investment strategies whose goal is to generate the highest possible return from a large selection of DeFi projects. The first vault from Yearn Finance is called “Earn” and was launched by Yearn Finance back in June 2020. It is a credit aggregator. Capital is transferred between different DeFi protocols such as AAVE or Compound with the aim of getting the highest interest rate on the capital invested.
The second main product is “Zap”. Zap enables investors to swap on the liquidity pools on the CurveDAO platform. Zap essentially bundles several trading transactions into one, which saves users a lot of costs and effort. As a third main product, Yearn Finance offers “Cover”. This is an insurance product that is designed to protect users against financial losses. This insurance cover only relates to certain smart contracts or protocols on the Ethereum blockchain.
Yearn Finance is currently working with various DeFi protocols, including Aave, Compound, Curve, DyDx and MakerDAO. The platform also integrates new DeFi protocols to further expand and optimize its service.
Advantages of Yearn Finance
The most important advantage of Yearn Finance lies in the ability to generate passive income with cryptocurrencies. Users can invest their cryptocurrencies in various pools and automatically generate returns without having to actively trade or make decisions. Compared to traditional banking products, Yearn Finance also offers a higher return, as Yearn Finance invests in various DeFi protocols. Due to the relatively high volatility of cryptocurrencies, this also leads to higher risks.
Another advantage is the ability to bundle and diversify different cryptocurrencies. This allows investors to diversify their portfolio and minimize their risk. Yearn Finance also offers a transparent and decentralized platform. The platform is open-source and the YFI cryptocurrency is controlled by the community, which means that decisions are not made by a central company, but by the community itself.
Conclusion
Yearn Finance enables investors to generate passive income with cryptocurrencies, higher returns than traditional banking products, the ability to bundle and diversify different cryptocurrencies, as well as a transparent and decentralized platform.
However, it is important to note that investments in cryptocurrencies are associated with higher risks and investors should carefully review their investments before investing in Yearn Finance or other DeFi platforms. It is also important to find out about the tax implications of investing in cryptocurrencies.
Overall, Yearn Finance has the potential to change the way investors invest in cryptocurrencies and generate passive income. The platform is expected to continue to grow and introduce new features to optimize the bundling and investing of cryptocurrencies.
