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What Is Yearn Finance? The DeFi Gateway Everyone Is Talking About

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  • Yearn.Finance aspires to be the gateway to a bevy of yield-generating products in the Ethereum ecosystem.
  • After a rapid ascent in August 2020, there is now $650 million worth of crypto assets staked in Yearn, seeking the best returns in the booming decentralized finance (DeFi) sector.
  • The prospect of what one observer called an “intuitive interface to all of DeFi” is what makes Yearn and its YFI coin stand out from the recent crop of “Weird DeFi” projects.
  • But given that Yearn has several different elements, the platform is one of the harder ones for novice investors to understand.

Some $650 million has poured into DeFi’s Yearn.Finance since mid-August. DeFi is driving most of the excitement in crypto right now, and Yearn and its YFI token are central to the latest buzz.

That said, Yearn has a lot of moving parts and the platform is growing all the time, making it intimidating for rookie yield farmers to grok.

What is Yearn.Finance?

Most people who answer this question will say it’s a community-driven robo-adviser for yield (and it is), but the problem with this answer is that a DeFi n00b will go to the site and see all these options on the front page: Vaults, Earn, Zap, APR and Cover and wonder where to start.

So, really, Yearn.Finance is a portal to various DeFi products. And given that DeFi now has nearly $8 billion in crypto assets committed to it, mainstream traders could start rolling in any day. If that happens, a front door might end up being very valuable. 

“The unifying goal of all Yearn products is to create this simple intuitive interface to all of DeFi,” Jesse Walden of Variant Fund told CoinDesk in a phone call. 

Read more: What Is Yield Farming? The Rocket Fuel of DeFi, Explained

The one that generates the lion’s share of the conversation is Vaults, but Yearn has also built user interfaces to DeFi products from other teams, in order to make life easier for active traders.

For example, Zap is an access point for Zapper.fi (which simplifies taking complex positions) and Cover is an access point to Nexus Mutual (which allows users to hedge smart-contract risk on Yearn). APR is just a page that gives visitors one place to see the returns from depositing various assets into various products. Other products are currently being tested.

But Yearn.Finance, of course, also provides access to its own products, and that’s what people are buzzing about. 

What is the YFI token? Why has it traded as high as $38,000?

YFI is the governance token for Yearn.

It really grabbed people’s attention because Yearn’s creator, Andre Cronje, didn’t set any aside for himself. He gave all of it to folks who had deposits in certain key liquidity pools that benefited the project. 

There are only 30,000 YFI and they have all been distributed now. According to the YFI documents, more can be minted by governance.

Tarun Chitra of the Gauntlet Network (and also a member of Yearn’s nine-person multisig, the equivalent of a board of directors) does not believe that will happen, though. “I think the ‘no inflation’ meme is here to stay,” he said. “I think there are other ways for the system to monetize.”

So to get YFI now, users just need to buy it.

Read more: Troll Token? Why DeFi Yield Farmers Are Now All About YFI

To participate in governance, YFI holders have to stake their YFI; once they cast a vote they are stuck for three days. That’s the downside, but the upside is they will earn a small fee for voting. 

In a Telegram message to CoinDesk, Cronje described this as a “dividend, not a yield strategy.”

Yearn charges a 5% fee on a certain portion of a certain kind of withdrawal. It’s not really worth going into, but it’s used to maintain a $500,000 treasury. Usually, it has more than this, though, and when it does it distributes the excess to YFI holders. The amount a user is likely to earn from a vote seems to be rather unpredictable and right now it’s not substantial.

Chitra says that a lot of DeFi projects are thinking about how much to pay out to governance token holders and how much to set aside for future needs. As that gets sorted out, he expects yield on YFI to go up.

Notably, YFI only pays dividends to holders who vote their tokens in governance.

What is Yearn.Finance’s Earn product?

On Earn, users can deposit any of several stablecoins: DAI, USDC, USDT, TUSD, sUSD and wBTC. Then, Yearn will look for the DeFi platforms on which they can earn the highest yield. 

In the early days of yield farming, this is what Cronje built the site to do: move stablecoins around to the best place for growing them as conditions changed.

As it grew, Earn had to become more sophisticated.

Because of its size, Earn can’t simply look at the highest yield pool on Compound or Aave (two lending protocols that provide yield to stablecoin holders). If Earn dumped its holdings all in one place it would dramatically change the yield. So Yearn’s Earn product has to try to estimate the optimal allocation – and that changes constantly because other users are going in and out of these things directly.

So each time someone deposits or withdraws from Earn, it also rebalances to optimize the yield for the whole pool. 

What are Vaults on Yearn.Finance?

This is the product that really has users excited, the part that best captures the description of “robo-adviser for yield.”

“Users enter pools in order to put their existing assets to work and earn yields that they likely would not be able to generate themselves,” Spencer Noon of DTC Capital told CoinDesk over Signal. “While these strategies aim to minimize risk, users need to understand there is essentially no way to escape risks related to smart contracts, liquidation (when leverage is used), and oracles.”

Read more: Yearn.Finance’s New Vault Leverages DeFi ‘Triforce’: ETH, MakerDAO and Curve

Vaults let users hold an asset they like while also earning yield on it (denominated in that asset, so they can grow it). For instance, people who love LINK can earn LINK by letting Yearn put it to work.

Users deposit the asset somewhere and then Yearn borrows stablecoins against the asset. The stablecoins are then used to seek yield-farming opportunities, constantly rebalancing as opportunities shift.

Crucially, though, as gains get realized Yearn converts them back to the underlying token. So someone who deposited DAI that ended up earning some yield in COMP will get all their gains back in DAI, because the COMP will be converted.

With assets like LINK and now ETH, this has additional implications. It means that the vaults are regularly buying LINK and ETH off the market and locking them up in the Yearn LP pools, diminishing the liquid supply.

There are lots of people who are long ETH out there who would like to earn yield-farming gains but don’t want to sell their ETH. That’s what makes the yETH pool so attractive.

As of this writing, Yearn’s stats page shows 212,930 ETH (well, wrapped ether (WETH)) in the yETH pool. That’s up from 132,000 shortly after launch.

What happens when a user deposits?

The user gets a token back that represents their share of the liquidity pool. 

It is one of the most basic characteristics of yield farming and one of the hardest for those who haven’t done it to understand. It’s powerful, but it’s confusing.

When people deposit money into a savings account, they don’t get anything back except maybe a paper receipt, which isn’t good for anything. The money is just there in the account. Deposits in traditional banks are redeemed with identities.

People naturally assume that products like Yearn work the same as banks but they don’t. We first wrote about this with the DeFi money market, Compound, and its v2, and then when we described the v2 for automated market maker Uniswap and its pools, but Yearn also does it.

Read more: Uniswap V2 Launches With More Token-Swap Pairs, Oracle Service, Flash Loans

Deposits yield tokens and anyone – or any smart contract – who holds those tokens can redeem them.

This is arguably the core of DeFi.

That means depositors of DAI on Compound get cDAI in return; on Aave they get aDAI; on Yearn they get yDAI. That token represents the deposit – and at any time it can be redeemed for the deposit plus any gains.

This is powerful because those tokens can be traded or deposited elsewhere. These secondary tokens are the essence of composability.

Yearn started with stablecoins but now it has begun building out vaults for other assets. It started with LINK and aLINK (the tokens from depositing LINK on Aave), and then ETH came next. More are likely.

What else can users do with their yTokens? 

There are always more places to put tokens in DeFi. 

Stablecoins are quite popular to deposit on Yearn because users can more easily understand how much money they are making. Deposits of USDC, for example, yield yUSDC, which is a certificate of deposit for the stablecoin but it’s not itself a stablecoin.

Yearn wanted to make it easy for holders of these CDs to move between its various stablecoin pools, so Yearn worked with the automated market maker (AMM) Curve to set up a pool of yUSDC, yDAI, yTUSD and yUSDT.

  • First, a user who has yDAI but would really rather have yUSDC can easily make the switch at Curve.
  • Second, a user who has yDAI can additionally amp their yield by adding it to this pool, thereby earning a portion of the exchange fees there. To account for the deposit, they will get back yCRV.

But it doesn’t stop there: They can deposit yCRV on Yearn and get yUSD (sometimes known as yyCRV).

So what’s Yearn doing with all these Vault deposits?

That’s the rub – and this is where less-sophisticated investors should be cautious.

Walden tweeted about how he would like to see more “plain English” explanations of what Vaults are doing, specifically this new yETH vault.

“If you look at how these vaults generate that yield, there’s very little information,” Walden said. “If you aren’t auditing the code yourself, you are just trusting the community to have enough eyes on it to make sure all the bugs are shallow.”

Feel the Yearn shows very rough descriptions of the strategy for each vault with a link to the smart contract address, but that doesn’t really cut it at this stage.

But just glancing there, here’s an example: The YFI pool goes into C.R.E.A.M., a money-market member of the new Weird DeFi crowd (with a Wu-Tang twist). 

Read more: Yearn, YAM and the Rise of Crypto’s ‘Weird DeFi’ Moment

It’s fair to ask whether many users really know that’s where their YFI is going to earn a small additional return.

Such descriptions would be a starting place for a user to decide whether or not they could handle the risk.

Chitra said this question of helping users better understand risk is a key reason his company is involved. 

“Right now there’s not really a good way unless you’re doing a lot of analysis on it,” Chitra said. Even looking at the code only tells part of the story, because people also need to understand market conditions. Making this more legible is something he said his company and the Yearn community are working very hard on. 

On some level, though, Yearn’s obtuseness is its own kind of consumer protection. The normies aren’t in yet. It’s a community of DeFi believers. “If you’re in fringe finance, you’re in fringe finance. You are probably not the average user,” Chitra said.

How does governance work?

Yearn has a governance forum on its site just like most DeFi projects do. It has a very active community with lots of proposals.

A big part of the governance process is people posting strategies for different vaults. Users post them and if they get voted through by YFI holders, they get put into action. A portion of those profits goes to users. 

Read more: Crypto VC Firm Assesses the ‘State of Blockchain Governance’

Chitra said he thinks Yearn has one of the most active governance communities. “The cool thing about it is it’s brought together people from all walks,” he said. Chitra serves a member of the Yearn multisig, sharing some additional executive powers temporarily approved by the community, in order to help the project move quickly and grow.

Users excited to participate in governance might want to look at Boardroom, which recently integrated YFI. It’s a portal for participation across many projects in this space.

How can users hedge their risk?

Yearn is starting to build its own set of insurance systems, relying on Nexus Mutual.

A recent Medium post described how users can earn returns on USDC for insuring the yUSD contract.

Regulators would probably wave their hands here and say it’s not insurance it’s a hedge. Fine. Whatever word folks want to use. The gist is this: Anyone who wants to mitigate risk on the yUSD pool can drop some USDC in this cover pool and get paid if the pool gets drained maliciously.

Someone told me about YDAO. Is that a secret society where the real money gets made?

YDAO is for people who are so long Yearn that they are willing to give YFI away in order to fund developers with good ideas for the space, inspired by MolochDAO, which funds improvements for Ethereum itself. Putting in 0.1 YFI will give the user one share in YDAO. YDAO will then consider proposals for funding projects that would benefit the Yearn community and shareholders can vote on whether to fund them or not. 

Read more: Ethereum’s DAOs Continue to Gain Momentum

Another way people are expressing their views about how Yearn should work? They are making forks. “There are already are a bunch of competitors. A bunch of Yearn forks have a few hundred million in them,” Chitra said, such as YFII, Wifey and even the fraudulent YYFI.

In DeFi’s early days, he said, people spent a lot of time “overthinking how these things might work.” But in 2020, “We now have the tools for people to do these experiments.”

After that, Chitra added, comes the hard part: “From there we can figure out how to make it more usable to the general audience.” 

Can Yearn really reach the masses?

Maybe. And the complexity of liquidity mining is why.

When a DeFi project rewards users with some new token for lending it funds, that’s called liquidity mining. Users “mine” a new token by supplying assets rather than supply cryptographic work, as with bitcoin.

We explored this somewhat in the early days of COMP, but just to say it simply: liquidity mining usually distributes tokens at a fixed rate per block, divided proportionally between deposits held in a given block. So each depositor gets less as more deposits go in. This is why it’s hard to predict yield for a hot liquidity mining project.

Read more: Some Numbers That Show Why Yield Farming COMP Is So Seductive

So Yearn gives regular people access to advanced strategies. That’s why Chitra said it is sort of like Betterment or Wealthfront, mobile-friendly web 2.0 companies that help people have easy access to strong investment strategies.

DTC Capital’s Noon said the value proposition will remain even after “these ridiculously high yields” fade.

“DeFi is poised to create considerable value long-term,” he told CoinDesk. “Compared to CeFi, DeFi will always have a lower cost of capital and be less rent-seeking in equilibrium – this is undeniably a recipe for mass adoption.”





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Wealthfront Says Clients Can Now Invest in Grayscale BTC and ETH Funds

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With the uncertainty in the current investment ecosystem, Wealthfront says it is set to offer its customers an expert-backed recommended portfolio.

Robo-adviser Wealthfront has made a bold move to offer its clients a means to gain exposure to Bitcoin (BTC) and Ethereum (ETH) through Grayscale investment funds. Per a blog post published by the firm, its expanded product offerings include the Grayscale Bitcoin Trust (OTCMKTS: GBTC) and Grayscale Ethereum Trust (OTCMKTS: ETHE). The firm noted that its clients can invest as much as 10% of their total portfolio in the trusts, citing risk and volatility as the reasons for the restrictions.

“You can add GBTC and/or ETHE to your portfolio by following the instructions here and selecting a combined allocation of up to 10% of your total portfolio. We limit your allocation to GBTC and ETHE because, as a fiduciary, we act in your best interests at all times, and these investments can be riskier and more volatile than most ETFs,” Wealthfront said in the blog post.

The maturity of the cryptocurrency ecosystem has seen a growing clamor for exposure or investments in assets like Bitcoin and Ethereum by both retail and institutional investors. Several economic fundamentals have contributed to this rising embrace of nascent assets including the pangs of inflation which has continued to contribute to the devaluation of fiat currencies like the US Dollar. More than ever, the investment community is seeing a more flexible and promising means of hedging against inflation through digital assets.

The move by Wealthfront to integrate the GBTC and ETHE is geared toward enhancing the quality of investment options by its clients. While there is no obligation on customers to invest in these offerings, their availability implies the Robo adviser is moving in line with the trends in the growing digital world.

Wealthfront Grayscale Funds: Value Added Services to Owing Crypto

The Wealthfront system uses advanced automation to take “chore out of managing your portfolio and works to maximize your after-tax returns at no extra cost.” Just like the investment manager is offering GBTC and ETHE investment options, it also gives its clients the way to acquire other investment products including ARK ETFs as well as other vehicles that represent innovative tech and social advancements.

The firm said the newly added products are complementary to the existing products as customers “can now choose from a bigger selection of ARK ETFs, pick ETFs that are specific to industries like cannabis or self-driving cars, or choose from a larger pool of socially responsible investments, adding that “the choice is yours.”

With the uncertainty in the current investment ecosystem, Wealthfront says it is set to offer its customers an expert-backed recommended portfolio. As a value-added service, the firm said its clients can bring over investments from another firm and they will handle the details that is billed to drive productivity. 

Wealthfront is arguably one of the largest Robo advisors in the world with about $25 billion in assets under management. Grayscale also holds as much as $25.5 billion in the GBTC trust and $7.47 billion in its ETHE trust.

next Altcoin News, Bitcoin News, Cryptocurrency news, Ethereum News, Funds & ETFs

Benjamin Godfrey is a blockchain enthusiast and journalists who relish writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desires to educate people about cryptocurrencies inspires his contributions to renowned blockchain based media and sites. Benjamin Godfrey is a lover of sports and agriculture.



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Tourism Industry to Adopt Crypto Payments as They ‘Will Really Matter for Travel’

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The list of tourism companies accepting crypto payments is constantly growing. You will find the names of tourism players currently transacting in crypto below.

It is quite difficult to name at least one sphere that has not been touched by blockchain. The impact of cryptocurrencies on our life has been inevitable, and now industries can not but accept this fact and think of ways to get deeper involved in crypto-related activity. One of the industries that have been recently adopting cryptocurrencies is tourism. Now, when travel companies are still recovering from the COVID-19 pandemic, all of them are looking for ways to expand their activity and get back to pre-pandemic revenue. And cryptocurrencies can serve as a means of doing that. Therefore, the tourism industry is adopting crypto payments, with more and more travel providers warming to this idea.

According to many industry experts, cryptocurrency, first of all, appeals to younger generations of travelers. As Johannes Reck, CEO and co-founder of GetYourGuide, stated, cryptocurrency transactions “will really matter for travel”. He explained:

“People want to put their crypto back into the system [and] travel is one of the biggest categories there is. We take dogecoin now into the real world; you can apply it and actually get a real-world, kinetic experience.”

The list of tourism companies accepting crypto payments is constantly growing. You will find the names of tourism players currently transacting in crypto below.

Who Accepts Crypto Payments?

There are a lot of travel companies that allow you to purchase your plane ticket or hotel via Bitcoin (BTC) or other cryptocurrencies.

An American online travel agency that finds affordable rates for flights, hotels, and car rentals by searching through significantly more low-fare options that other websites might miss. CheapAir lets you pay with cryptocurrencies like Bitcoin through BTCPayServer processor.

The world’s leading full-service online travel company was the first major travel organization to have payments in digital currency. It started accepting Bitcoin payments back in 2014. The cryptocurrency payment option was available until June 2018. Then, the company stopped it. However, Expedia Partner Solutions (EPS) partnered with crypto-friendly travel booking platform Travala.com. As a result, more than 700,000 Expedia Group hotels and accommodations became available via Travala.

Travala accepts several cryptocurrencies including BTC, Bitcoin Cash (BCH), Ethereum (ETH), Binance Coin (BNB). It also distinguishes itself by hosting a native cryptocurrency on its platform, the AVA token. It incentivizes the use of the token with benefits such as discounts on your bookings, bonus rewards, and a loyalty program to foster a healthy internal economy.

Alternative Airlines is a website that offers over 600 global airlines that accept cryptocurrency payments for secure and verified transactions. You can complete your booking entirely through its website and find the best prices due to alternative flight options through small airline carriers in lesser-known regions.

Destinia allows you to use cryptos to book hotels, flights, cars, buses, trains, or even skiing trips in more than 90 different countries. This website also lets you enter your budget parameters and organize activities and locations to create thematic vacations ranging from festivals to honeymoons.

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Daria is an economic student interested in the development of modern technologies. She is eager to know as much as possible about cryptos as she believes they can change our view on finance and the world in general.



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Lloyds Banking Group Set to Acquire Embark for £390 Million as Q2 Pretax Profits Rise

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In line with the move, Lloyds increased its net new money target to around £40 billion in 2023.

British financial institution Lloyds Banking Group PLC is set to buy major WealthTech player Embark Group for £390 million. The UK banking giant will acquire £35 billion of assets under administration from the Dundee-based retirement solutions provider. The deal, which is Lloyds’ biggest since it returned to private ownership four years ago, will also see it inherit about 410,000 customers. However, Embark’s Rowanmoor SIPP and SSAS administration are excluded from the package deal and will be retained by existing shareholders.

Lloyds Banking Group’s Plans to Buy Embark

The newly acquired business consolidates Lloyds’ existing partnerships which caters to the more complex financial planning and investment requirements of mass-affluent and high net-worth customers. It currently provides this offering through Schroeders Personal Wealth and Cazenove. The banking group hopes to leverage the technology platform that Embark provides to increase its investment offerings using WealthTech. Under the arrangement, Embark will become a wholly-owned subsidiary of Scottish Widows Group, with the acquisition expected to complete in the fourth quarter, subject to regulatory approval.

Lloyds 2021 Financial Numbers Against Past Results

On Thursday, Lloyds posted a 2.1 billion pound ($2.92 bn) pretax profit for the second quarter of 2021. This figure was substantially higher than the projected profit estimate of £1.23 billion for the said period, according to its compiled consensus. At the same time last year, the financial institution lost £676 million, considering the prevailing circumstances with the pandemic. In 2019, the British bank reported a profit of £1.29 billion for the same period.

In addition to its reported Q2 pretax profit for 2021, Lloyds also indicated impairments of £333 million, showing a recovering economy up from £323 million in the previous quarter. There was an increase in net income from £3.46 billion to £3.90 billion at the same time in 2020, and to £4.40 billion back in 2019. This was higher than the 3.69 billion pounds projected by the bank’s compiled consensus. Lloyds ended the period with a common equity Tier 1 ratio of 16.7%, a key measure of balance sheet strength. It also declared an interim dividend of 0.67 pence per share.

Lloyd’s WealthTech Ambitions With Embark

In line with the move, Lloyds increased its net new money target to around £40 billion in 2023. This is in line with its 2021 strategic review,  to reflect its increased growth and potential.

The new Lloyds arrangement will see Embark a new chief executive. The new CEO will be Widows Group managing director for pensions, stockbroking, and distribution, Jackie Leiper. Furthermore, Lloyds also intends to “work closely” with Embark’s existing asset management partners, BlackRock and Franklin Templeton. The banking group intends to a top-three position in different facets. These include direct-to-consumer, robo-advice, and self-directed businesses. 

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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.



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