Initially, the lack of regulation was one of the advertised benefits of cryptocurrency. However, pitfalls of this came to light really fast as the lack of regulation means that you are lacking protection as well. And while money launders or terrorist groups definitely don’t care about it and focus on how this type of system … Continue reading Opinion: For Cryptocurrency to Strive It Must Be Regulated
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Everything You Need to Know About the Yearn Finance Projects
Have you heard about Yearn Finance’s YFI token? It acts as a governance token for its decentralized finance platform.
It broke Bitcoin’s record of the all-time high in terms of USD prices. The YFI token attained highs of over $38,000 in August and even peaked above $43,000 in mid-September 2020.
Do you know what’s the difference between the YFI project and other majority governance tokens in DeFi? Scarcity! Yes, there’s a very limited supply of YFI tokens. The maximum supply can never exceed 30,000 YFI tokens. At the moment, there are 29,968 YFI tokens in circulation already, according to CoinMarketCap.
This article takes a look at all the different Yearn Finance projects and forks. Let’s learn what’s unique about each project and why it has been created? If you are not very familiar with yield farming, check out our detailed guide on yield farming.
We’ll cover the following projects:
- Yearn Finance (YFI)
- Yearn Finance Fork (YFII) – DFI.money
- Yearn Value (YFV)
- Yearn Finance Link (YFL)
- Yearn Fuel (YFUEL)
#1. Yearn Finance (YFI)
Yearn Finance began its operations in February 2020 with another project known as iEarn Finance. Going further, iEarn was rebranded as yEarn by Andre Cronje. You can look at yEarn as the first professional attempt at creating a yield farming project. However, yEarn has a few more capabilities added to its arsenal.
Yearn Finance is a DeFi platform where users can deposit and stake their ERC20 tokens. In return, they receive daily interest. This is made possible by allocating the capital to staking pools offering best returns across the network.
Why was this so revolutionary? Before yield farming got mainstream, users had to stake individually with each protocol, having to learn about many projects. Using the Yearn project, users didn’t have to flip through multiple DeFi sites to get yield farming profits. Yearn solved this problem by integrating many different blockchain protocols. So, you only have to stake tokens once with Yearn to get access to many interest-yielding blockchain protocols. To maximize profits, the Yearn protocol continuously rebalances as yield-farming opportunities shift.
— Arthur Hayes (@CryptoHayes) August 30, 2020
#2. Yearn Finance Fork (YFII) – DFI.money
YFII was forked by the crypto community of China from YFI. YFII is YFI’s first fork. The YFII token is the hottest currency today in the Chinese DeFi ecosystem. The YFII fork has been created because a governance vote for YFI wanted to introduce weekly halvening to the project, referred to as the YIP-8 proposal.
However, this proposal failed to pass. Therefore, the YFII fork has been created, implementing the halvening proposal. In other words, the YFII project has a 98% code similarity with the YFI project.
The maximum supply of YFII has been capped to 40,000. The initial perception of YFII was that it is a scam. Hence, Balancer had blacklisted the token. However, the YFII token is doing quite well today, and its recent ATH was $6000.
#3. YFValue (YFV)
YFValue, denoted by YFV, is a fork of YFII. It was announced on August 16th, 2020, through a Medium post. So, what’s the role of the YFV token? It acts as a governance token of the YFValue protocol. They aim to make yield farming accessible to all users worldwide. They want to make yield farming more inclusive to achieve their mission of accessibility: “Bring farming to everyone.”
Now, the question arises – does YFV have any unique feature? It indeed does. YFV token grants its holders a right of voting to control the rate of the supply and also the referral system. The burning of the token is automated and happens fully on-chain. The maximum supply of YFV tokens has been capped at 15,750,000.
Furthermore, among YFValue’s mission, we can find “insurance.” The goal is to use “an insurance treasury through contributions of the YFV team and community funds to engage and integrate an insurance protocol, such as Nexus Mutual, to further reduce risk on behalf of all YFV stakeholders.”
#4. Yearn Finance Link (YFL)
The project wants to leverage the DeFi-backed governance token to achieve more for the Chainlink supporters. You must have already understood by now that this project has its origin in the Chainlink community.
The YFL development team took Andre Cronje’s YFI project and forked it. They adapted it to allow for staking LINK. Later on, they also brought the concept of yield farming to LINK holders. The maximum supply is capped at 85,000. Many analysts call YF Link the connecting bridge between ChainLink and Yearn Finance.
To give a quick example, you can deposit LINK and YFLINK tokens into a Balancer pool, giving you BPT tokens. Next, those BPT tokens can be staked with the YFLINK pool. That means you can both earn YFLINK from the YFLINK pool and BPT from the Balancer pool. Moreover, Yearn Finance Link hosts five different pools, all with their unique configurations for increasing yield.
#5. Yearn Fuel (YFuel)
The project aims to make Yearn Finance genuinely accessible. It wouldn’t matter if a user is a big whale or small investor as Yearn Fuel wants to make Yearn Finance accessible to everyone.
It has some very unique features, which include the right of voting to control the inflationary rate of the supply. Additionally, the YFuel token will also grant the user a right to vote on the referral system. It comes with automatic burning, and the whole burning happens fully on-chain.
They are also implementing a new economic model of token burning. They have named it “Grafuel.” Under the Grafuel model, they will burn as much as 1% of the total token supply per month, starting from the 15th of each month. The idea behind this model of token burning is that it will lead to an increase in liquidity.
Wrapping Up the Yearn Finance Universe
It’s interesting to see so many Yearn Finance clones pop up to satisfy the different needs yielders might have. However, this has opened up another wave of crypto scams where people quickly create a new Yearn Finance clone with slightly modified rules. We see the same crypto craze as when the ICO boom happened. People throw in money blindly into those yield farming projects expecting significant returns.
However, we can’t deny that yield farming has proven to be an excellent case for DeFi and even got the momentum to convert bearish into bullish momentum for crypto markets.
YFI tokens were initially envisioned to be valueless, but that’s not going to happen anymore. It is quite obvious from the rising prices of YFI and its clones.
So, how long can this boom last? These tokens do have good use cases, and their limited supply is driving their prices high. The success of yield aggregation platforms has helped YFI clones take off as well. Some of the YFI clones may get lost in time. But we sure are witnessing something incredible.
EU research unit: a regulated crypto-asset sector could improve the bloc’s economic outlook
A study by the European Parliamentary Research Service claims that the digitalization of assets could benefit the European Union’s overall economy.
The post EU research unit: a regulated crypto-asset sector could improve the bloc’s economic outlook appeared first on The Block.
Bitcoin Could 14x to $3 Trillion Says Ark Invest Analysis
Ark Invest, which focuses on investing in disruptive innovation like AI and biotech, thinks bitcoin could more than 10x in the next five years from the current $200 billion market…
Ark Invest, which focuses on investing in disruptive innovation like AI and biotech, thinks bitcoin could more than 10x in the next five years from the current $200 billion market cap to $3 trillion.
In a comprehensive analysis they suggest bitcoin can capture numerous markets, starting with settlement networks for value exchange. They say:
“In the United States alone, deposits totaling $14.7 trillion generate $1.3 quadrillion in settlement volumes between and among banks each year.
If it were to capture 10% of those settlement volumes at a similar deposit velocity, we believe the Bitcoin network would scale more than 7-fold from roughly $200 billion to $1.5 trillion in value.”
They don’t quite explain why banks would use bitcoin to settle instead of their own Fed systems, but another potential market is asset protection.
“With good public and private key management, we believe bitcoin cannot be seized,” they say. Thus:
“In our view, a sensible allocation to bitcoin would approximate the probability that a corrupt or misguided regime will confiscate assets – whether by fiat money inflation or by outright seizure – during an individual’s lifetime.
If that probability were 5% on average globally, bitcoin’s market capitalization, or network value, could vault more than 10-fold from $200 billion to $2.5 trillion.”
This is further complemented by bitcoin being better than gold in the view of Ark Invest, stating:
“Supporters often refer to bitcoin as digital gold because it improves upon many of physical gold’s characteristics.
Not only is bitcoin scarce and durable, but it also is divisible, verifiable, portable, and transferable, all of which protect from the threat of centralization.
According to our research, if it were to take 10% share of the physical gold market, bitcoin’s network value could increase nearly $1 trillion, 5 times its $200 billion base today.”
This somewhat overlaps with the inflation related potential market, especially in medium to under developed countries:
“While Bitcoin has not evolved enough to service an entire economy, we believe demand for bitcoin in emerging markets should increase as its infrastructure reaches critical mass.
If bitcoin were to capture 5% of the global monetary base outside of the four largest fiat currencies – US dollar, yen, yuan, euro – its market cap could increase by $1 trillion, as shown below, a 6-fold increase from $200 billion today to roughly $1.2 trillion.”
Then we get to the most interesting part of the analysis which is worth reading in full because our highlights can’t do justice to that thorough analysis of bitcoin as a strategic investment.
“Untethered from traditional rules and regulations and, generally uncorrelated to the behavior of other asset classes, bitcoin could serve as a strategic allocation in well-diversified portfolios, despite its volatility.
We believe the low correlations among traditional asset classes and bitcoin should minimize idiosyncratic risks and lower overall volatility, resulting in higher risk-adjusted returns.
To illustrate bitcoin’s low correlation relative to other asset classes, we calculated the 90-day rolling correlation between bitcoin and nine other assets over the 10 years from May 2010 through June 2020, [pictured, featured image]. As suggested by this sample, for the most part bitcoin has been uncorrelated to traditional asset classes and various stocks.”
This quality of bitcoin as an uncorrelated asset class has long been established now with this report also concluding “the correlations for each asset tend to center around zero, indicating little to no correlation.”
But then they look at other factors which an interested institutional investor might consider, like trading volumes. They say:
“Aggregated in different ways, bitcoin’s trading volume ranges from $200 million to $12.4 billion per day.
For a buy-side institution deploying fresh capital, U.S Dollar Markets on major exchanges is perhaps the most relevant. Given $200 million in daily trading, a buy-side institution limited to 10% of the volume could deploy roughly $20 million per day.
Including the major fiat currencies, however, bitcoin’s daily trading volume triples to $600 million, the U.S. dollar accounting for roughly half of the total.
Stablecoins more than triple bitcoin’s daily trading volume once again to $1.9 billion, thanks primarily to Tether. Adding cryptocurrencies to the mix increases trading volume by $700 million.
Finally, accounting for nearly 80% of the total, derivatives expand bitcoin’s daily volume more than five-fold to $12.4 billion, giving institutions limited to 10% of the volume an opportunity to deploy $1.2 billion per day.”
Bitcoin trading volumes are however small compared to an entire asset class like equities which handle about half a trillion a day with bitcoin’s trading volumes being more like that of a stock, higher than Google for example but lower than Facebook.
In addition, “bitcoin often is more liquid than the average publicly traded equity,” they say.
Then they analyze what all this means in their view regarding capital allocation in line with the modern portfolio theory.
“With hindsight, to construct a portfolio with bitcoin while maximizing the Sharpe Ratio or minimizing volatility at the efficient frontier, an investor would allocate between 0.27% and 6.55% to bitcoin,” they say. Looking forward:
“According to three 5-year simulations, each a function of bitcoin’s total addressable market (TAM) opportunities,
- 1% of TAM, or $1.1 trillion
- 5% of TAM, or $5.5 trillion
- 10% of TAM, or $11 trillion
…the suggested bitcoin allocations range from 0.03% to 26%.
Based on this analysis, investors seeking to minimize volatility would allocate between 0.03% and 1.28% to bitcoin.
Investors seeking to maximize Sharpe Ratio would allocate between 4.8% and 25.78% to bitcoin.”
A quarter of the portfolio is at the low end for many cryptonians, but for investment managers dealing with billions or even trillions, it sounds like the low end for the braver ones is 5%.
So general advice now perhaps should evolve to allocating between 1% to 5% of investable capital for maximum potential reward while minimizing potential risk.
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