YFI token is captivating and attracting all the yield farmers present on the DeFi platform. It is a governance token for the yearn.finance. The YFI token has traded as high as $2,374, according to the latest reports. Until now, there are only 30,000 YFI that have been distributed by now. The users who deposit the liquidity in the Yearn pools can receive yTokens for the deposits made by them. Let us now understand what Yearn Finance, YFI, is and how they work?
Insight Into Yearn Finance and YFI
Yearn. Finance is a type of DEX ecosystem that uses lending services like Compound, Aave, Fulcrum, and Dydx. They help in optimizing your token’s lending. When the users deposit their tokens to the Yearn.Finance, they are converted to the yTokens and are balanced periodically to render the most profitable lending service.
Whereas, YFI is the token of the yearn.finance, which is only distributed to the liquidity providers or users who provide liquidity with certain types of yTokens. There is no pre-sale, pre-mine, or allocation done to the team. Therefore it is an essential decentralized token. It is single-handedly founded and launched by Andre Cronje. He became fascinated with the DeFi protocol and platforms due to the profitable yields it provides with the help of stablecoins.
Moreover, the fortune of the YFI has reached almost $1 billion by the end of September 2020. This higher earnings and profits through yTokens have upgraded the Yield Farming activities—the Yearn’s target market. Finance is the investors who do not possess the time to learn the complex DeFi phenomenon but wants to optimize their returns.
How Does Yearn. Finance Works?
The DEX DeFi has experienced rapid growth over a few months, and most liquidity providers and the users prefer yTokens. Here is how Yearn. Finance works:
- The interest-earning is relatively high through the yTokens as the yield farming is carried out on the DeFi exchange platform. The Yearn. Finance helps the investors to carry out yielding through the Marker’s DAI savings rate services or Aave’s lending.
- Moreover, when the user withdraws or deposits funds from the liquidity pool, the smart contract verifies the APR. YFI operates similar to Oracle, but it operates on the on-chain.
- While doing yTrade through DAI, users can use fixed coins like TUST, USDC, sUSD, and USDT. Their leverage rate is up to 1000 times. If you want to trade for free, you must use the leverage ratio of almost 250 times.
- The trading platform of Yearn.Finance is relatively automated. So, you can move your funds within the liquidity pool and earn interest on any token. For example, when you deposit DAI coins, the smart contract will find the maximum APR. If that is on the Aave, then your DAI tokens move to Aave, and you earn interest over Aave tokens.
This is how this rapidly growing DEX platform is providing higher interest to the users through the liquidity pool. If you want to increase your capital and revenue, you must add new tokens to the liquidity pool and carry out yield farming using the new system.