How to use Yearn.finance: Step-by-step guide by QDAO DeFi
October 15, 2020
Add: Veronica Zubrii
The dominant platform in yield farming Yearn.finance enables maximization of returns on deposits by automating and optimizing lending. It routes liquidity to different sectors across the DeFi environment to offer the best interest rate. Read this step-by-step Yearn.finance tutorial by the Platinum Software Development company and QDAO DeFi team.
In August 2020, Yearn Finance’s YFI token increased by 300% and the Yearn.finance platform surged in popularity. Why did this happen? It happened all because of the new yield farming mania which started with COMP token distribution. However, Yearn.finance is something different.
It works in the following way:
- A user deposits their tokens.
- They are converted into ‘yield optimized tokens’, for example yDAI, yUSDT, yETH, etc.
- This allows users to earn not only on lending fees but also on trading fees from Curve’s yPool.
- The protocol moves liquidity through different sectors and yPools to ensure the highest lending rates.
Thus, Yearn.finance is moving cryptocurrencies across numerous lending pools – it acts as a balancer that maximizes interest rates. This process is automatic and runs in the background, so the user doesn’t have to redistribute their assets manually. Dan Khomenko from Platinum Development company states that, this is possible thanks to APR Oracles and automated smart contracts.
Currently, Yearn.finance works with four asset pools:
Say you deposit DAI token and receive yDAI in return. You supply it to Curve to earn trading fees together with your yield reward. Soon, the protocol discovers higher interest rates in AAVE. It withdraws the DAI tokens and replaces them with yDAI in Curve, then deposits DAI in AAVE. Now you have aDAI.
What is YFI token?
This is Ethereum-based tokens that govern the Yearn.finance platform. The protocol sends YFI to liquidity providers who supply particular yTokens. YFI was not meant to be exchanged – it’s rather used for voting. Yet curiously enough, on 30th August, YFI reached a new record high at $38,883 and its market cap spiked to $1+ billion.
It’s the fastest-evolving asset of 2020 and is already available in Uniswap and Binance. With its scarce supply (30K) and growing demand, it might become a unique investment opportunity available to DeFi service users only.
How to earn YFI
- Supply yTokens to the yPool in Curve Finance which will give you yCRV. Then you can deposit yCRV into the yGov pool back at yEarn.
- Deposit BAL or BRT into the yGov pool, which can be exchanged for YFI.
How to make deposits in Yearn.Finance
Open the main website and click on ‘Earn’. Proceed and connect your wallet. Yearn.finance supports MetaMask, several hardware wallets and some online ones too. Confirm connection – this is only required once.
Look at the list of available currencies on the Dashboard. The platform currently works with stablecoins (USDC, USDT, TUSD) and other coins. Please note that the interest rate is not stable – it varies because the protocol will keep distributing your assets over several liquidity pools!
Choose a currency and click on it. Define the deposit amount by: entering the sum manually or choose a percentage of your current balance. Click on ‘Earn’.
If you want to withdraw your deposit + interest rate earned, enter the yToken amount (your balance is shown above the field) and click on ‘Claim’.
One more way to earn YFI coin is by using the Curve DeFi service – check out the step-by-step tutorial by the QDAO DeFi team.
How to use Vaults
Open the main page and click on ‘Vaults’. Connect your wallet and proceed to the dashboard. It shows the list of currencies for yield farming strategies and their current ROI. This percentage is based on the value of the token compared to what you’ll actually earn as a return.
The process of depositing is the same as mentioned above. Choose the currency, enter the amount to deposit/withdraw and confirm the transaction fee.
Curve.fi liquidity pool here can be used instead of the Y pool on the original Curve platform. It’s more convenient because transactions (movement of tokens) are automatic. If you use Curve only, you have to pay a lot of gas for additional transactions like claiming your tokens and so on.
What’s the difference between regular deposits and vaults? When you make a deposit in Vault, you earn CRV coins which are sold automatically for profit added to your Y Curve. The tokens you’ve earned will be displayed in third-party platforms (like Curve) too.
Please, note that there’s a 0.5% transaction fee for withdrawal from any yVaults.
With the gradual adoption of DeFi services in 2020, ETH gas fees have become pretty high, not to mention that such things as yield farming are complicated. Anton Dzyatkovskii, the founder of Platinum Software Development company suggests that Yearn.finance makes the whole process easier by automatically distributing users’ tokens over liquidity pools for maximum profits.