YFI: BTC in DeFi?
Editor's Note: This article comes fromBlue Fox Notes (ID: lanhubiji), reprinted by Odaily with authorization.
Blue Fox Notes (ID: lanhubiji)AMPL: Alternative ScarcityRecently, YFI and AMPL are the two hottest encryption projects. Blue Fox Notes introduced AMPL a few days ago: one is to become a better bitcoin cryptocurrency "
What is YFI?
AMPL: Alternative Scarcity
". Let’s talk about YFI today, an encrypted token known as “Bitcoin in DeFi”. Both projects have garnered a lot of attention from the crypto community for their bold designs.
secondary title
What is YFI?
Specifically, what is YFI? Why does its mining seem a bit complicated?
Andre Cronje created yearn.finance about 4 months ago. Users can deposit stablecoins (USDT, USDC, TUSD, DAI) into the yean.finance protocol, and thus obtain yToken. For example, users who deposit USDC and DAI can get yUSDC and yDAI, which is the so-called yToken. Deposit stablecoins in Curve's ypool and convert them into yTokens to get yCRV, and pledge yCRV to get YFI. And YFI is the governance token of the yearn protocol.
A total of four different tokens have appeared here. Take the USDT stable currency as an example: USDT, yUSDT, yCRV, and YFI have appeared. This may be the place where initial contacts are more likely to be confused. What exactly is YFI? What does it have to do with stablecoins, yToken, and yCRV, and what does it have to do with yean, curve, and balancer?
yToken
All of this is related to its initial token distribution mechanism. YFI is different from the token distribution mechanism of previous DeFi projects. Before COMP, BAL and MTA provide liquidity mining, they all have the participation of investment institutions and the pre-mining of the team. However, YFI's initial token distribution is completely realized through liquidity mining. There is no team pre-mining and no share of investment institutions. This is a highly encrypted token distribution mechanism. This also destined it to be more concerned by the community and more legendary.
secondary title
yCRV
Liquidity mining of YFIWhy some people regard it as "Bitcoin in DeFi", the core is to understand YFI's mining mechanism, and to understand YFI's mining, understanding yToken, yCRV tokens, and three liquidity pools is the key.Users can generate yTokens with stablecoins, so what are the benefits of obtaining yTokens? yToken means Yield Optimized Tokens, which means Yield Optimized Tokens. So, how to optimize the income? We know that depositing USDC and other assets into lending agreements such as Compound and Aave can earn storage interest. However, the interest rate between different agreements is different.
So there is room for optimization here. Is it possible to deposit stablecoins such as USDC and USDT into the protocol with the highest yield? By adjusting the storage of different protocols in time to achieve optimal benefits. In other words, the yearn protocol optimizes storage revenue through algorithms. In short, the current yearn protocol is a revenue optimizer for token storage.
There is a yPool liquidity pool on Curve, and stablecoins such as USDT, USDC, TUSD and DAI can be deposited in yPool. These deposited stablecoins will be converted into yTokens and yCRV tokens can be obtained. Curve is a DEX that focuses on stable currency transactions, you can refer to the previous article "
". In other words, yToken (yUSDT, yDAI) can be traded on yPool.
As mentioned above, when yUSDT is deposited into yPool, yCRV can be obtained. So, what is yCRV token? yCRV is similar to an index of a set of yTokens (yUSDT, yUSDC, yTUSD, yDAI). Holding yCRV can obtain the storage interest of the stable currency and the fee for providing liquidity, which is the index of the stable currency in the yPool pool. Stake yCRV to participate in liquidity mining, and you can get YFI tokens.
To sum up, in order to obtain YFI at the beginning, the core is to provide manageable assets (AUM, assets managed by the agreement) for the yearn agreement to help the agreement capture more income. The more stablecoins users provide, the more value the yean protocol can capture. Therefore, the yearn protocol uses YFI mining to attract users to provide more stable currency assets.
In addition, the YFI token itself also needs to enable price discovery and liquidity. The price discovery and liquidity of YFI are realized through the token pool on Balancer. Users provide liquidity for YFI-DAI and YFI-yCRV pools on Balancer, so as to realize YFI price discovery and sufficient liquidity. As of the writing of Blue Fox Notes, even if the YFI-yCRV pool no longer rewards YFI, its liquidity still exceeds 100 million US dollars. What is the concept? The liquidity of this pool alone is almost the same as the overall liquidity of Uniswap, and accounts for about 40% of Balancer's liquidity. (Uniswap's overall liquidity has been below $100 million before, and recently due to ampl, Uniswap's liquidity has soared to $136 million)
image description
(YFI-yCRV Pool, Source: Balancer)
Three Liquidity Mining Pools of YFI
As mentioned above, the way to obtain YFI is liquidity mining. It has a total of three liquidity mining pools, which are ypool on curve, YFI-DAI pool and YFI-yCRV pool on balancer. Each of the three pools allocates 10,000 YFI, and all of them have ended.
To participate in YFI liquidity mining, early users must first have stablecoin assets such as USDT; then deposit stablecoins such as USDT into Curve, and generate yToken (yUSDT, etc.) through the yearn protocol; when yToken is deposited into Curve’s ypool, you can Obtain yCRV tokens, and then obtain YFI rewards by staking yCRV; the remaining two pools can also obtain YFI rewards by providing liquidity for the YFI-DAI pool and YFI-yCRV on Balancer.
image description
(Assets locked on YFI, Source: DEFIPULSE)
At present, there are 3911 YFI holding users, and the largest YFI whale holds 915 YFI, accounting for about 3% of the initial total supply; such token distribution is completed in more than a week, and its token dispersion exceeds The vast majority of initial projects.
image description
(YFI's largest whale only has about 3% of tokens, Source: Etherscan)
secondary title
YFI is currently the only voting token governed by the yearn protocol. Since the distribution of YFI was generated through mining from the beginning. Since YFI's first 30,000 tokens were distributed, YFI has completely handed over all its governance to the community.
(Users participating in proposal voting in YFI, Source: DuneAnalytics)
The value of YFI
image description
(YFI’s community vote on the future issuance mechanism, Source: Yearn community)
The value of YFI
YFI is the governance token of the yearn protocol. According to Andre Cronje, it is a community governance token and has no value. I hope speculators stay away. However, YFI is a governance token, which means that it can control the future development direction of the yearn protocol. As for how YFI captures value, it is not only up to Andre Cronje to decide, but ultimately community governance has the final say.
The value of the governance token mainly comes from its governance. One is the security value of governance: it can protect assets on the protocol and prevent governance attacks. If the locked asset is large, this gives it a corresponding value. Additionally, governance tokens have potential yield value: protocol fees can be captured through voting. If yearn expands its business to a larger scope in the future and succeeds, then YFI will naturally have the opportunity to capture greater protocol value.
From this perspective, the ultimate value of YFI not only comes from the governance itself, but ultimately from the scalable scale of its business. Can community governance lead yearn to take a different path from other DeFi projects? This alone is worthy of attention, and this is what distinguishes it from other DeFi projects.
Since YFI involves many smart contracts, you can reap the benefits of composability. For example, through its liquidity mining, you can not only obtain YFI, but also have the opportunity to obtain CRV, BAL, etc.Liquidity Mining: Combinable Benefits and Risks》。
But it also has potential risks. It is related to protocols such as yearn, curve, compound, Aave, dYdX, bZx, Balancer, Maker...etc. If there is a problem with lending agreements such as compound or Aave, yToken will also have problems; if there is a problem with the Curve protocol, yCRV will also have problems; if yCRV has problems, YFI will also have problems. There is a risk of layers of nesting here.
As a result, YFI has obtained the high returns of composability, but also the high risks of composability. You can refer to the previous article of Blue Fox Notes "
secondary title
YFI's MEME
In the encryption community, there are several MEMEs (memes) that are very famous. In addition to BTC and ETH being the two MEME kings, other well-known MEMEs also exist in the Chainlink and Dogecoin communities, and they promote the development of Chainlink and Dogecoin memes in various ways.
