Whether you're new to Yearn Finance investing, thinking of getting back in, or just want a refresher on why invest in Yearn Finance — this article is for you.
Yearn Finance is one of the most important projects in the decentralized finance space. It was the brainchild of Andre Cronje, an Ethereum developer, and is famed for maximizing investment returns. So why should you invest in Yearn Finance today? To understand why you first need to know how Yearn Finance works.
How Yearn Finance Works
Yearn Finance’s working mechanism is pretty easy to understand, even for someone new to crypto. The protocol has an application that constantly analyzes data on crypto lending projects. It then aggregates this data and gives the end-user updates on where to earn the most interest from lending. The idea is to help investors maximize their returns at any given time.
Yearn Finance also takes away the hustle of having to shift crypto through lending platforms manually. It handles this automatically and at all times allocates assets where they get maximum returns on investment. Besides its profit maximization function, Yearn Finance is also known for its support for multiple crypto assets. Some of the assets that the protocol supports include DAI, TUSD, USDC, SUSD, and USDT.
Essentially, Yearn Finance allows you to make money off your stable coin holdings. You can also speculate on the protocol’s governance token that is known as YFI.
For someone just getting into DeFi, and unsure of the projects to invest in, here are seven reasons why you should consider an investment in Yearn Finance now.
Below we cover 7 major reasons why you should invest in Yearn Finance and why YFI investing can be so powerful. First, let's start with the hard fact-based reasons to invest in Yearn Finance and then we'll transition into some less discussed, but still important, reasons to invest.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Seven Reasons Why You Should Invest In Yearn Finance
There are all kinds of reasons why you might want to invest in Yearn Finance — probably some you’ve never considered. Here are 7 that we found.
1. Yearn Finance has multiple earning streams
One of the benefits of investing in Yearn is that it offers investors multiple ways to earn from crypto holdings. This maximizes one’s potential to make the most of their crypto holdings. A Yearn investor can take advantage of any of them and grow the value of their assets. Since these multiple earnings streams are continually drawing in new investors, they guarantee long-term value growth for the Yearn. Finance token.
That said, some of the ways that investors can earn on Yearn. Finance are:
yVaults
yVault is a way to create and use the best yield farming bots in the market. The profits that these bots earn depend on the amount that one has put in the pool. At the moment, Yearn has nine yVaults, namely: USDT, YFI, DAI, crvBTC, crvBUSD, TUSD, YTUSD, YUSDT. YDAI, ETH/WETH, and YUSDC.
One of the most significant opportunities that yVaults offers to investors is the chance to buy and hold continuously. This means one can use the profits they make to purchase extra tokens and build their portfolio.
Earn
Earn is another highly innovative product from Yearn Finance that allows investors to grow their crypto holdings. Earn is basically a lending aggregator. It works by continuously looking out for the highest yields possible from the Yearn-supported cryptos.
Earn can get investors the highest returns possible because it can move coins easily within the coins listed on the lending platform. For instance, if an investor deposits USDT in the YUSDT, Earn seeks out the highest returns on popular lending protocols such as AAVE and Compound. If the expected return increases on one protocol relative to the rest, it shifts the tokens there. The result is that the investor gets a high return on capital consistently.
Zap
This is another highly innovative product that Yearn Finance investors can take advantage of and make money. Zap is designed to allow investors to move assets between yield-bearing pools. Some of the tokens that one can Zap into include BUSD, TUSD, DAI, USDT, and DAI. The key benefit of Zap is that it allows the investor to maximize their returns while cutting on risks. For instance, if an investor notices that a TUSD pool has more yields, they can move their tokens from the other pools to TUSD. This is pretty easy to do and is one of the key aspects of Yearn Finance drawn in investors since the protocol was launched.
yInsure
This is another highly innovative product from Yearn Finance. It is basically a smart contract cover and underwritten by Nexus Mutual. Insurance has three essential functions. The first function is called Covered Vaults and holds the assets that the insured wants to be covered. The second function is called Cover Vaults and handles the assets that are used to make claim payments. The last function to yInsure, and is basically the process of making a claim. It guarantees investors that their assets are safe. yInsure will play a role in drawing in conservative investors to Yearn Finance long term.
YTrade
This is a platform on Yearn Finance that allows investors to borrow for trading purposes. The platform works by lending USDT and other stable coins such as BUSD, USDC, and DAI. Traders can borrow up to 1000X on the amount of collateral they provide. It is a platform that has made arbitrage trading on Stable Coins easy for lots of investors. It could play a role in attracting investors to Yearn Finance long term.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
2. Yearn Finance is on an expansion path
Yearn Finance is a unique DeFi project in that it is looping in other projects as it seeks to dominate decentralized finance. Some of the projects that Yearn has looped in since its launch in 2020 are:
Pickle
The merger between Yearn and Pickle is quite an interesting one. It started when Pickle was compromised by hackers. The attack led to a loss of $20 million. Being a relatively new project, the attack threatened to cripple the project. However, the developer team did not give up. Instead, they consulted developers from all across the industry to chart the way forward. Some of those it consulted were from Yearn Finance.
The meeting saw the Pickle and Yearn Finance teams work together to secure the platform. It also birthed the merger between Pickle and Yearn. After the merger, the Pickle developer team joined Yearn and came up with strategies for Yearn Finance. It was a huge strategic move as it helped expand the rewards on Yearn, and as a consequence, draw in more investors to the platform.
Cream
The merger between Cream and Yearn Finance happened just a few days after the one with Pickle. The merger was a big deal considering that Cream had a market capitalization of $28 million at the time of the merger.
Besides the market capitalization, the merger was a huge boost for Yearn Finance. That’s because it gave Yearn access to an aspect to DeFi it did not have, and that’s leveraged yields.
The merger meant that anyone using the Yearn Finance protocol could double the amounts they were making from yield farming. It is a factor that has bolstered the level of investor adoption of Yearn, and one that will play a huge role in its long-term growth.
Cover
This was the next Merger that the Yearn Finance team announced after Cream. The merger happened in the early days of Cover. Like the rest, this merger was a positive addition to Yearn Finance.
That’s because Cover gives protection to people taking high risks in DeFi. It encourages investors to come up with ever more sophisticated yield farming strategies. It has played a huge role in drawing in risk-hungry investors to the Yearn Finance DeFi protocol. Its value to Yearn is boosted by the fact that it does not need KYC.
Akropolis
Akropolis is another project that merged with Yearn Finance and has been a positive addition to the project. The merger with Akropolis gave Yearn the platform to reach institutional investors. It’s a big deal because institutional players are a critical component to the long-term growth of DeFi.
Sushiswap
This is one of the most significant mergers that Yearn Finance has had to date. That’s because Sushiswap is an automated market maker and has hundreds of millions of dollars in daily volumes.
Besides integrating the two projects, Sushiswap core developer nicknamed 0xMaki joined Yearn to help push it to become a leader in the Automated Market Maker market. It is a big deal for Yearn as it helped deepen its market reach in DeFi, a major aspect of its long-term growth.
With such strategic mergers, it is easy to understand why Yearn Finance is an excellent project to invest in today. It has depth in the DeFi space, which gives it an edge over other projects in this market.
3. Yearn is continually innovating
One way to tell if a project is worth it long-term is to look at the level of activity going on in its ecosystem. For instance, Ethereum is a worthy project because it is taking measures to increase network capacity, lower the gas fees, and take care of environmental concerns. This has been instrumental to its exponential value growth recently.
Using the same parameters on Yearn Finance, the project comes across as highly innovative. Since its launch, it has been quite aggressive both in terms of mergers and internal technical developments.
A major innovation on Yearn Finance is the combination of three key aspects of its DeFi architecture, namely automated market maker, decentralized lending, and minting synthetic debt. The process is still in beta, but its advantages to Yearn Finance will be astronomical.
That’s because it will allow investors to deposit collateral assets to get stable USD credit, then use that credit to borrow assets. Once one has borrowed the assets, they will be able to swap the borrowed assets for other assets within the pool. This is a big deal and will help open up the adoption of Yearn Finance as a go-to platform in DeFi.
Several other innovations have come up on Yean Finance since it launched. Some of the more notable ones are:
Single-sided AMMs
The Yearn Finance team designed this based on the idea of tokenized token transfers. This simply means that investors can create tokens that are used purely as a bridge between assets. Such tokens do not need to have any value, and only need to abide by the contract specifications through which they are created.
Once it’s live, this will help unlock liquidity on Yearn Finance like never before. As liquidity grows, so will the underlying value of Yearn Finance in DeFi. This is a pretty good guarantee of Yearn’s growth going into the future.
Other innovations that are in beta testing on Yearn Finance are ySwap, yLiquidate, and yBorrow. While these are not yet available to the public, they are mainly targeted at institutional players.
Coming up with products that are aimed at institutions is a big deal for a couple of reasons.
First, institutional players help legitimize the projects in the eyes of regulators. There exists a regulatory loophole in DeFi, and major economies are yet to offer the way forward on the same. By looping in institutional money, there is a lower risk of adverse regulations. This means Yearn Finance is taking steps in the right direction, which is an excellent reason to buy.
Secondly, institutional money comes with liquidity. Liquidity is the main reason why the entire crypto market is excited about the entry of institutional money into the space. Looking specifically into DeFi, institutional money has the potential to bring in billions of dollars that could make borrowing and lending even more efficient.
For context on how big of a deal institutional money is in DeFi, last year Peter Thiel announced that he was backing a $10 billion exchange focused on DeFi. Such investments are likely to push DeFi to new levels. With Yearn Finance taking steps that make it attractive to institutional money, it is not hard to see why it is a project with a promising future ahead.
The innovations it is working on make it a good project to buy now and hold for the long haul.
Read Also: New Cryptocurrencies To Invest In
4. Yearn Finance has a very low token supply
For a speculative investor, there is probably no better reason than this to buy Yearn Finance. In crypto, as with all other markets, the coin supply matters to the long-term prospects of the asset.
The rationale is quite easy to understand. The lower the coin/token supply, the higher demand puts pressure on the price and pushes it upwards. It’s one of the key reasons why Bitcoin has grown from a few pennies to highs of $68k in just a decade. The demand for Bitcoin has been growing while chasing an ever-declining number of coins.
Applying the same rationale to Yearn Finance, one quickly realizes that Yearn has even better token dynamics than Bitcoin. That’s because, unlike Bitcoin, whose coin supply is capped at 21 million, Yearn Finance tokens are capped at 36,000. This means growing demand for Yearn chases a tiny amount of tokens.
This explains Yearn’s high token value. If the growth of DeFi continues on its current growth trajectory, Yearn tokens could easily trade in the hundreds of thousands of dollars, if not upwards of a million dollars a token.
Besides the speculative aspect to it, Yearn Finance token distribution is fair. It is probably one of the fairest in crypto. The reason it’s fair is that the developer team did not receive a large percentage of the tokens at inception.
Yearn Finance holders also get to earn a passive income from holding the token. That’s because any fees generated from the use of the protocol and distributed through the token. This is a huge incentive for more investors to want to buy the token. It is also the reason why it makes sense to buy Yearn Finance tokens today and hold. Chances of value appreciation are higher than most cryptos.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
5. Yearn is setting standards in crypto
In any market, whoever raises the bar with superior service always wins. Bitcoin became the behemoth it is today by being the first successful crypto project in the market. Similarly, Ethereum is the success it is today because it set the standards with the ERC-20.
Yearn Finance, too is standing out because it raised the bar in DeFi. This is the first project that offered investors a chance to borrow and lend and helps them make moves that maximize returns. This has seen it grow in stature and adoption within a very short time.
The benefits that investors can get from Yearn Finance will also keep growing over time. That’s because the project is continuously working on ways to give investors the best out of DeFi. It is doing this through mergers, and by building new industry-leading products for its investors.
As things stand, Yearn Finance is probably the most convenient and practical DeFi project for investors. In a rapidly expanding market, this puts Yearn Finance on the forefront in terms of potential for adoption.
This can only mean one thing, continued value appreciation for the project. Long term, this will reflect in its price. This makes it a good project to buy now in anticipation of future price appreciation.
Check Out: What Top 10 DeFi Cryptocurrencies Will Explode
6. Yearn Finance is easily accessible
Accessibility is as important as the core features of a crypto project. When a crypto project is easily accessible, it draws in liquidity, which plays into its demand and supply dynamics.
Like everything else about this project, Yearn Finance is doing very well in terms of accessibility. One can buy Yearn Finance on pretty much all the significant exchanges ranging from Binance to Kraken.
Yearn is also pretty easy to store. You can store it in any of the major hardware wallets, or online wallets such as Metamask.
Its ease of access makes it quite attractive to both traders and HODLERs who believe in the project’s long-term prospects. This will play into the long-term price dynamics of the token as new investors come into the market.
This makes it a perfect cryptocurrency to buy now and hold for the future. You can buy and store it in a cold wallet without having to deal with the anxiety of leaving it on an exchange.
7. Yearn Finance tokens give holders a voice in governance
The beauty of holding a governance token is that you always have a say in the direction of the project you are invested in. In Yearn Finance, the token is not just an asset for speculation but is also a governance token.
The more tokens you have, the more say you have in the direction of the project. At any given time, if you are among the 33% of token holders that vote for a given proposal, you can be sure that it will go through.
For Yearn Finance, there are lots of investors that want to take part in governance. This means that the buying pressure will always be high. For a project that has a highly limited token supply, this is a good reason to buy now.
You will have a say in the project direction while benefiting from its speculative value appreciation.
Conclusion
Based on all the above factors, it is clear why this DeFi token has a nominal value than that of Bitcoin.
Given that Yearn Finance continues to merge with new projects, while at the same time developing new features, its future is bright. So far, Yearn Finance has distinguished itself as one of the best DeFi projects in the market. It continues to stand out in terms of gains not just in DeFi, but in the entire crypto market as well. As more investors get into DeFi, the potential for Yearn Finance will only increase.
The biggest attraction to Yearn Finance remains its low token supply. At a capped supply of 36k tokens, Yearn Finance is the perfect option for big-money investors chasing high returns. Besides the low supply, the chance to earn a passive income off this crypto makes it even more attractive.
Simply put, Yearn Finance is a crypto that any investor chasing gains should seriously consider it.
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Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.