Hey Edge readers,
Navigating the world of DeFi can be overwhelming, but we’re here to help you cut through the noise. This week, we’re breaking down how you can simplify your yield farming strategy using Yearn, a platform designed to automate and optimize your returns.
In today’s edition:
- Simplifying yield farming with Yearn
Discover how Yearn automates complex strategies to help you maximize returns with minimal effort.
- TL;DR of investing in a Yearn pool
DIY approach versus the Exponential.fi way.
- Markets rally as Fed hints at near-term rate cuts 🗞️
Bitcoin staking mainnet launch, Trump teases ‘DeFiant Ones’ DeFi project, and more.
Stay sharp. 🫡
-The Exponential team
Simplifying yield farming with Yearn
Yield farming isn’t just another catchy crypto buzzword; it’s a way of life for many digital nomads today. Instead of just HODLing your digital assets, you can put them to work in the world of decentralized finance (DeFi). It involves lending or staking your crypto assets in DeFi platforms to earn rewards—like interest in a savings account but often with much higher potential returns.
However, with so many platforms and strategies available, navigating yield farming can be overwhelming. That’s where Yearn Finance comes in—a pioneer in DeFi that’s been automating yield farming since 2020.
What is Yearn?
Yearn is a decentralized suite of products helping individuals, DAOs, and other protocols earn yield on their digital assets.
Andre Cronje, a developer frustrated with the inefficiencies in early DeFi projects, initially started Yearn as an experiment. At the time, Cronje was an active yield farmer himself, constantly rebalancing his portfolio between different protocols to chase the highest returns. This manual process was time-consuming and inefficient, so he built Yearn to automate the process and maximize his crypto returns.
This led to the creation of Yearn’s flagship product today, Vaults. Think of Vaults like digital piggy banks. You deposit your crypto assets into a Vault, and Yearn’s smart contracts do the heavy lifting—deploying your assets across various DeFi strategies to maximize returns. These Vaults are designed to take the guesswork out of yield farming, making it easier for users to earn yields without constantly having to monitor the market.
How do Yearn Vaults work?
The concept of Vaults is pretty straightforward: you deposit your crypto, and the Vault deploys it across various DeFi protocols to earn the best possible returns.
For example, a Vault might lend your assets to earn interest rates from borrowers or put them to work in a decentralized exchange (DEX) to earn trading fees. However, while these strategies can be highly profitable, they aren’t without risk (e.g. users are still subject to impermanent loss when investing in DEX liquidity pools).
The majority of Yearn’s $240 million in TVL sits within its V2 vaults today. V2 Vaults were a game-changer when they launched, introducing multi-strategy functionality. This meant that instead of your funds being locked into a single strategy, V2 Vaults could allocate them across multiple strategies simultaneously (up to 20) and rotate between them.
Now, with the introduction of V3 Vaults, Yearn has taken things a step further. V3 Vaults give users even more control. You can still benefit from the multi-strategy approach, but now you have the option to customize how your funds are allocated.
Want to stick to a single strategy that aligns with your risk tolerance? Prefer a mix of strategies to spread out risk? V3 Vaults allow you to do both and much more. There are also upcoming V3 products such as Vault tranches, where you can take on more risk (act as first-loss capital) to earn a bigger share of profits.
Beyond Vaults
While Vaults are Yearn’s flagship product, the Yearn ecosystem has expanded to adjacent products. Let’s take a look at two of their other products:
- yETH: Yearn’s yETH is a liquidity pool token consisting of various Ethereum Liquid Staking Derivatives (LSTs). It functions as an Automated Market Maker (AMM) for these LSTs, automatically adjusting pool weights to optimize risk-adjusted yield. Users can stake yETH to mint st-yETH, which accrues yield and participates in governance, making it an attractive option for ETH holders looking to maximize staking returns.
- yLockers: Launched as a part of Yearn’s push to tokenize locked governance positions, yLockers provide liquidity for assets that would otherwise be locked up for years. These “liquid lockers” offer users tokens like yCRV or yPRISMA in exchange for locking their governance tokens with Yearn. The beauty of yLockers is that these tokens remain liquid and tradable, while still giving users access to governance benefits and yield opportunities.
YFI token
Yearn’s governance token, YFI, is another key part of the ecosystem. YFI is used to vote on protocol changes and to reward users within the platform. What’s unique about YFI is that it was distributed through a “fair launch”—no pre-mine, no ICO—cementing it as a symbol of true decentralization in the DeFi space.
Holders can lock YFI in exchange for veYFI, which boosts their rewards and gives them more voting power in Yearn’s governance. The longer the lock-up, the greater the rewards and voting power. Stakers also receive dYFI tokens, which can be redeemed for YFI at a discount in exchange for ETH. This ETH funds Yearn’s buyback program, which serves to balance YFI’s value against its inflating supply.
Conclusion
As DeFi continues to evolve, so does Yearn. The launch of products like yLockers and yETH shows Yearn’s commitment to simplifying DeFi yield. While Vaults are simple in concept, the user experience is still not great. It can get a bit tricky when you dig into the details. You have to think about things like fees, APYs, and which strategies your funds are deployed on to fully understand the risks. If you’re new to DeFi, it might feel like a steep climb, but the potential rewards make it worth the effort.
TL;DR of investing in a Yearn pool
Let’s compare investing in the Yearn ETH+ pool using the DIY approach versus the Exponential way.
DIY route
- Ensure you have enough ETH in a crypto wallet like MetaMask.
- Visit https://yearn.fi/vaults. Search for “eth” and select the “Curve ETH+ Factory” pool.
- Connect your wallet (MetaMask) to Yearn. In the deposit section, you’ll see “ETH+ETH-f,” which refers to the underlying Curve pool.
- Now visit https://curve.fi/#/ethereum/pools. Search for “ETH+” in the top bar and select the “ETH+/ETH” pool.
- Connect your wallet to Curve, enter the amount of ETH you want to invest, and click “Deposit.”
- Approve the transaction in your wallet and wait for it to settle.
- Return to the Yearn ETH+ page, refresh, and your wallet should now show the “ETH+ETH-f” balance.
- Enter the amount of “ETH+ETH-f” you want to invest or click “Max.”
- Click “Deposit,” approve the transaction, and you’re all set. But let’s be honest—that was a bit of a process, right?
Exponential.fi route
- Fund your Exponential Wallet using your bank account, USDC, ETH, or BTC.
- Visit https://exponential.fi/app. Select “Earn yield on ETH.”
- Choose the “Yearn ETH+” pool.
- Click “Invest” and enter the amount of USDC, ETH, or BTC you’d like to invest.
- Click “Next” and wait for your order to process. And that’s it—you’re done in just a few clicks.
With Exponential, investing in a Yearn pool is as simple as it gets. No need to navigate multiple platforms, no need to handle complex token swaps, and no need to worry about manually managing your DeFi investments. We take care of the heavy lifting so you can focus on what really matters—growing your assets with ease.
In the news
- Fed Chair Powell says the “time has come” for rate cuts - Read
- Institutions get in line for the mainnet launch of Bitcoin staking protocol Babylon - Read
- Bitcoin transaction fees spike 10x as users rush to deposit BTC in Babylon - Read
- Trump teases new DeFi project called ‘The DeFiant Ones’ - Read
- Aave launches on zkSync Era - Read