YFI, explained by weeb

weeb
5 min readJul 20, 2020

What is YFI

YFI is a sub-governance token of yearn.finance created by Andre Cronje and his team. No pre-mine. No pre-sale. No investors. Only DeFi.

Andre describes YFI as “0 financial value” token.

In further efforts to give up this control (mostly because we are lazy and don’t want to do it), we have released YFI, a completely valueless 0 supply token. We re-iterate, it has 0 financial value. There is no pre-mine, there is no sale, no you cannot buy it, no, it won’t be on uniswap, no, there won’t be an auction. We don’t have any of it.

yearn.finance is an ecosystem that relies on other DeFi services such as Aavesome, BalancerLabs, Curve.fi, Compound, Uniswap, Synthetix, and many more.

One of the main usage of yearn is that you can stake your stablecoins such as DAI, USDC, TUSD, USDT, etc to earn passive income — a way to participate in crypto without exposure to volatile assets!

YFI is awarded to certain liquidity providers in yearn ecosystem. For more information scroll down to “Yield Farming” section.

How Do You Buy YFI?

The easiest way to get YFI is to buy with DAI or ETH on 1inch exchange — a decentralized trading platform or so called DEX.

For more experienced DeFi users, buying from Balancer directly with DAI will cost least gas and slippage most of the times.

1inch exchange UI. Shows that DAI-> YFI is routed via Balancer for the most optimized trade.

How do you start “Yield Farming” with YFI?

You may have heard that currently yield farming with YFI is 🔥. At one point APY for staking in one of the pools in ygov.finance was around 5000% (!!!) At the time of writing the highest APY is 900%. For more information about APYs, you can check out https://yieldfarming.info.

Criminal level alpha leaker caught in the wild. Words on the street says there is a bounty of 10000 LINK on his head

Currently there are 3 main pools available:

Pool #1 yCRV staking pool

Earns y curve fees and lending fees. Earns YFI and CRV as rewards.

  • First you need to be a liquidity provider of Y Curve pool. After staking your stablecoin, you will recieve Curve iearn LP (yCRV) token that you can redeem to get back your initial investment + trading fees collected by curve.
  • With your yCRV token, you can now stake them in ygov.finance to earn YFI.
  • Curve is planning on releasing its governance token CRV and you will also be eligible for this reward as well.

After you’ve successfully staked yout yCRV token in ygov, you can use this dashboard to check the APY and current value of your investment.
https://yieldfarming.info/ygov_ycrv/

Pool #2 BPT (98% DAI 2% YFI) staking pool

Earns balancer fees. Earns BAL and YFI as rewards.

  • First you need to be a liquidity provider of 98% DAI 2% YFI Balancer Pool. Easiest way to enter this pool is to use Zapper.fi or 1inch.exchange. (For more experience DeFi users, I recommend staking DAI as a single asset deposit on the Balancer UI)
  • After staking your DAI, you will receive BPT (98% DAI 2% YFI) token that you can redeem on Balancer to get back the staked investment. Note that this value will change when YFI or DAI price changes too.
  • With your BPT token, you can now stake them in ygov.finance to earn YFI.

After you’ve successfully staked your BPT token in ygov, you can use this dashboard to check the APY and current value of your investment.
https://yieldfarming.info/ygov_balancer/

Pool #3 BPT (98% yCRV 2% YFI) staking pool

Earns y curve fees, lending fees, and balancer fees. Earns BAL, CRV, YFI as rewards. Owning more than 1000 BPT (yCRV 2% YFI) grants you ability to stake YFI to earn yCRV.

  • First you need to be a liquidity provider of 98% yCRV 2% YFI Balancer Pool. Easiest way to enter this pool is to use 1inch.exchange. (For more experience DeFi users, I recommend staking YFI or yCRV as a single asset deposit on the Balancer UI)
  • After staking in the Balancer pool, you will receive BPT (98% yCRV 2% YFI) token that you can redeem on Balancer to get back the staked investment. Note that this value will change when yCRV or YFI price changes too.
  • With your BPT token, you can now stake them in ygov.finance to earn YFI.
  • Additionally if you own more than 1000 BPT of this pool, you are eligible to stake earned or bought YFI at Pool#4 — which distributes yCRV collected from yearn ecosystem.

After you’ve successfully staked your BPT token in ygov, you can use this dashboard to check the APY and current value of your investment.
https://yieldfarming.info/ygov_ycrv_balancer/

Visual representation of Pool#3

Pool #4 YFI staking reward pool

Only eligible to individuals with more than 1000 BPT (98% yCRV 2% YFI) staked in Pool 3. Also need to participate in voting proposals.

  • If you have participated in Pool #3 with enough capital, you can stake YFI at ygov.finance to earn additional yCRV!

You can track this info at the bottom of this dashboard.
https://yieldfarming.info/ygov_ycrv_balancer/

ygov.finance — looks nice and comfy. You can stake your yCRV, BPT, or YFI tokens here!

What about the “Impermanent Loss”? Wouldn’t I lose money if YFI value dropped significantly?

Since both pool is weighted with 2% YFI, you can calculate the loss using this formula.

Lets say YFI value drops 5x then the value of your staked asset (BPT) becomes
0.2 ^ 0.02 =
0.96832378572 (3.2% decrease)

Lets say YFI value drops 10x then the value of your staked asset (BPT) becomes
0.1 ^ 0.02 =
0.95499258602 (4.5% decrease)

Lets say YFI value drops 100x then the value of your staked asset (BPT) becomes
0.01 ^ 0.02 =
0.91201083935 (8.8% decrease)

As you can see the impermanent loss is very forgiving in this setup. It allows LPs to stake with less worry about potentially losing all of their investments.

Governance Proposals

Anyone can suggest a proposal at https://gov.yearn.finance/. There are lots of interesting conversation going on. We are still deciding whether to keep the supply capped at 30,000 YFI or to mint more. Voting system needs to be ironed out a little bit more but Andre Cronje is working on it and will be ready in near future.

Currently, in order to be able to vote, you need to be staking BPT (98% yCRV 2% YFI) in Pool#3. This is the real “governance token” as it grants power to you to be able to vote / create new proposals.

YFI can be best understood as a sub-governance token because unless you are a staker in Pool #3, you cannot stake YFI to earn yCRV fees. By itself, it does not grant you any extra power in yearn governance system currently.

Of course all of this can be changed by proposals!

More resources

Another guide on farming YFI:
https://twitter.com/Darrenlautf/status/1285228046232940545

Andre Cronje’s medium:
https://medium.com/@andre_54855

Unofficial yearn discord:
https://discord.gg/xqKmMV5

My twitter for latest yield farming updates:
https://twitter.com/Weeb_Mcgee

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