Everything you need to know about Yearn V2 Cryptocurrency

Yield farming isn’t as simple as it used to be. Chasing APR is no longer the primary strategy, and there are far more factors involved. Liquidity mining entails optimizing investments to squeeze every last drop of profit from them, and while it’s tedious and risky, it’s ridiculously efficient.

The advent of yield farming has driven billions of dollars into decentralized finance, with the total value of assets locked into DeFi platforms growing from around $200 million in January 2019 to over $20 billion today. Among the many projects that have sprung from this trend, most of them focus on facilitating lending and borrowing on a single platform.

Risk is a real problem in the DeFi space, and not every opportunity is conducive to creating a healthy portfolio with steady growth. The liquidation of assets on decentralized exchanges during price volatility can lead to extreme losses, and many users turn to more safe investments like Centric for more predictable gains.

Its dual-token system allows for excellent liquidity, cheap payments, and measurable growth over time. Liquidity mining is far more complicated, spanning across platforms, and requiring a keen eye on where the best offers are.

It requires periodically paying attention to your investments, but one decentralized platform is trying to turn this idea around. Instead of allowing you to borrow and lend assets directly, year.finance offers users YFI tokens in return for locking up funds into contracts running on multiple DeFi trading platforms.

The more assets locked into contracts, the more YFI tokens earned. Within the first month of operations, year.finance had over $800 million in assets locked into its smart contracts. Its model cuts out the need to continually keep track of the most optimized strategy and is one of the fastest-growing projects in the DeFi space.

yearn.finance’s upcoming update hopes to bring an array of new features to the platform to help existing users and attract new ones. Where projects typically raise funds through investments from venture funds before assembling a team to develop the protocol, yearn was launched by Andre Cronje. This independent developer received no funding and kept no tokens for himself before launch.

YFI and Bitcoin are currently trading at around the same price , but this doesn’t mean they’re worth the same. There is a vast difference in their market capitalizations, and with only 30,000 YFI tokens in existence, it would need to be worth a lot more to compete with Bitcoin’s $700 billion market cap.

Bringing Networks Together

Following a series of mergers and partnerships with various DeFi protocols, the platform now provides best-in-class ‘vaults’ or trading strategies to invest in.

Starting as a governance token for yearn’s platform, the v2 YFI token will afford users access to many services across the entire DeFi ecosystem. It will also allow users to suggest their own strategies and make yield farming as a whole more accessible.

The earlier iteration of yearn allowed stablecoin deposits into individual smart contracts to receive YFI tokens. The contract then issues funds to yield farming platforms to provide predetermined returns. In V2, yearn has broadened how the YFI token functions, tweaking its fundamental structure to connect three core components: yVaults, Strategies, and Controllers.

yVaults allow the deposit of assets in return for yTokens (e.g., yUSDT for USDT) and let users stake DeFi tokens from other platforms for interest-earning stablecoins. This is in contrast with most other platforms, which only provide interest-earning versions of the deposited assets.
Strategies essentially function as smart contracts, allowing traders to propose their strategies with the community and even create official strategies once approved. Additionally, official strategies can claim a portion of the system’s fees, creating a collaborative environment that generates value sustainably.

Controllers are the smart contracts that actually deposit assets into yield farming opportunities and distribute the farmers’ returns. Each user’s yield correlates with the number of assets deposited. v2 also has several improvements under the hood, such as the automatic integration of vaults from v1, in-house management of vault token assets, updates in real-time.

The team has also developed a lite mode to provide a more user-friendly experience. A new back-end infrastructure called Firehose has also been built. This enables the seamless and automatic addition of assets according to on-chain data, removing the need to manage it manually.

Yearning for More

While the launch of v2 will likely bring better incentives to liquidity providers and bring a boost to YFI prices, a release date has yet to be announced. However, development updates show the team is making steady progress and collaborating with various projects.

Yearn and Cover have been working together from the start, and now users have access to Cover’s full coverage for its entire product suite. Pickle has worked out a structure that enables its team to work together with Yearn, merging its Pickle Jars with Yearn’s V2 Vaults. Cream is bringing leveraged yield to yearn and will also act as a launchpad for future collaborative products.

In collaboration with Alpha Homora, yearn is also launching a cross-platform strategy allowing for up to 90x leverage on stablecoins and 80x on ETH. New techniques encourage yield farmers to hold their farmed tokens and reinvest them for more returns, lessening the users’ likelihood of dumping YFI later.

yearn has also been testing a product that protects against impermanent loss by enabling single-side liquidity for AMMs (automated market makers). High price volatility can increase the risk of impermanent loss by a lot, and such a product could be vital as the DeFi trend continues upward.

There has also been mention of a yVault alert bot that will track deposits and withdrawals and report the vault that received the highest earnings of the month. As the team continues to roll out development progress updates, YFI v2 could become the platform of choice for maximum convenience yield farming.

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