What Is Yearn.Finance?

Yearn was launched in 2020 by Andre Cronje. Users deposit ETH, stablecoins or other tokens into Yearn vaults and in return receive yTokens representing their share of the vault. One or more strategies run in each vault; these strategies direct funds to lending protocols, liquidity pools or staking, sell the rewards earned to convert them into the base asset and reinvest them. This way, the user is spared the trouble of tracking yield opportunities one by one and paying transaction fees separately.

The YFI token was distributed to liquidity providers who used the protocol, with no allocation to the team or investors, and was therefore cited as an example of a fair launch. The initial supply was limited to 30,000 YFI; the supply was later increased once by a governance decision. YFI holders vote on decisions concerning the protocol's fees, strategies and treasury.

The risks of yield aggregators are layered: a bug in Yearn's own code, a vulnerability in one of the protocols the strategy uses or manipulation of price oracles can lead to a loss of funds; Yearn has also been affected by various security incidents in the past. The yield rates shown by vaults are variable, and past performance does not guarantee future returns.