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DeFi Deep Dive: Yearn Finance, Cronje’s Diamond in the Rough

5 mins
Updated by Ana Alexandre
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In Brief

  • Yearn Finance is considered one of the DeFi space's first movers.
  • Its lead developer, Andre Cronje, popularized the "test in prod" approach to DeFi development.
  • As the DeFi space continues to experiment and evolve, Yearn Finance is likely to continue to play a leading role.
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As part of BeInCrypto’s decentralized finance (DeFi) deep dive series, we’ll take a look at one of the space’s first-movers: Andre Cronje’s Yearn Finance (YFI).

The cryptocurrency and decentralized ledger technology (DLT) space is heating up right now, both in terms of value and development.

The market’s total market capitalization reached $1.7 trillion, last month. Bitcoin (BTC) alone hit $1 trillion market cap. Moreover, the number of cryptocurrency projects now sits at 8,697 according, to data from CoinMarketCap.

Furthermore, a recent analysis by The Block Research revealed that the DeFi space was the market’s fastest-growing area. This is after the Total Value Locked (TVL) in the space tripled this year.

Indeed, the DeFi space’s surge in popularity stems from the impressive development in the space, led in part by Andre Cronje’s Yearn Finance. The committed DeFi developer was also named by DeFi Prime as DeFi Person of the Year 2020.

In this article, BeInCrypto takes a deep dive into Cronje’s flagship project, Yearn Finance. We examine its pioneering fair release launch, delve into its infamous Vaults, and explore the now meme-ified “test in prod” approach to development.

We also have a look at what might be in-store for YFI and the wider DeFi space.

A fair release

Launched on July 17, 2020, YFI was a key proponent of last year’s “Summer of DeFi.” Its platform, developed on the Ethereum (ETH) network, was Cronje’s answer to the loosely tied world of DeFi staking.

At the time, exploring and researching the plethora of staking pools in the space took considerable time and resources. This rendered the space inaccessible for crypto-newcomers.

Cronje’s idea was to make Yearn a hub for all pools in the space, meaning yield farmers, as they’re called, only had to be in one place. Whilst not a completely new idea, Yearn also had an extra trick up its sleeve: the fair release model.

YFI had a maximum supply of just 30,000 tokens. Unlike many other platform native tokens, including BTC, YFI made all of these tokens available at the beginning.

However, the really unique thing with YFI, was that everybody, including Cronje, the other developers, and eager Yearn participants, had an equal chance of receiving a portion. The developers reserved no tokens for themselves.

Indeed, this instantly gave the platform star popularity, with the DeFi community dubbing the approach “The Fair Release Model.” The maximum supply has since expanded to 36,666 tokens, following a community vote to reward developers.

Summer heights

But of course, the initial release and still relatively small supply only did wonders for YFI’s price.

YFI/USDT (Binance) TradingView – Pi

Initially valued at just under $30, in less than two months, YFI soared to a value of $40,000 per token. This put its market capitalization at over $1.3 billion.

Fast forward six months, YFI ranks 58th out of the 8,697 cryptocurrencies, according to its market capitalization. Moreover, the platform currently has just under $310 million in TVL, giving it the 18th spot in the DeFi space, at the time of writing.

Sure, the fair release model is novel with admirable intention and justifiably the cause for the platform’s popularity. But what about the platform itself?

Into the Vaults

Yearn’s platform consists of several elements. The first is an Annual Percentage Yield (APY) table which shows the yearly interest rates available via staking in a number of lending pools across the DeFi space.

Yearn orders this table by APY size in a product called Earn, allowing users to quickly and easily see the best rates. But the platform’s flagship products are the Vaults.

Yearn Vaults are a collection of investment strategies which aim to extract the highest level of income over all of the lending pools linked to the platform. They work by automatically selecting the top Earn pools or via a custom strategy, and investing their users’ funds.

Essentially, the Vaults automate the yield-farming process. Indeed, the products really do simplify the DeFi earning process, reducing the learning curve which historically acted as a barrier to entry.

Accordingly, this is the principal reason why the platform is so popular. In fact, Yearn recently included in an upgrade another product called Zap, which bundles all of the above into just one click.

Whilst the terminology often associated with both Yearn and DeFi might seem complex at times, Yearn has really excelled at the simplification process.

However, despite the enormous achievements in development over the past nine months, Yearn — as is often emphasized by Cronje himself — is still an experiment.

Test in prod

This can be seen in Cronje’s infamous “I test in prod” quote. Essentially, the determined developer is exclaiming that the development of Yearn, and the existing platform are both experiments.

He makes this crystal clear on Twitter stating, “When I build software, I build it for myself. If you do insist on interacting with it, please use caution, there will be bugs.”

This, however, escapes some of the platform’s “investors,” or as he calls them “apes,” who are quick to hurl abuse at the developer following exploits or the discovery of bugs.

Indeed, Cronje recently wrote about his experiences in a Medium piece, which also prompted the aforementioned supply inflation to reward Yearn’s developers.

Whilst these “investors” are likely only in it for the money, it could be argued that testing in production dangerously exposes unwitting crypto-users to risk.

Just last month, a hacker exploited one of Yearn’s vaults for $11 million, with the hacker walking away with $2.8 million. Several other DeFi platforms following Cronje’s approach also saw exploits.

These included SushiSwap (SUSHI), Alpha Finance Labs (ALPHA), and CREAM Finance (CREAM). However, the test of a good experiment, is not perfection in experimentation, but how it adapts to new information.

All of the above-mentioned projects came back from those attacks, and still carry on today.

The future of finance

In fact, Cronje is praised not only for Yearn but for his aid in investigating all of the above exploits mentioned. To that end, popular DeFi-focused publication, DeFi Prime, named Cronje DeFi Person of the Year in 2020.

Moreover, not only do the exploit patches make these platforms stronger, but Cronje and Yearn are both encouraging a new DeFi sub-sector: platform insurance.

For this, Cronje and Yearn Finance will likely continue to lead the DeFi space, both through technological development and the development of new ideas.

In the truest form, Yearn Finance could be the future of finance, just as French oligarch DeFiGod is the “Futur of France.”

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Emmanuel Young
Emmanuel entered the cryptocurrency space in 2013 as a cryptocurrency broker. He is a crypto-enthusiast, entrepreneur, and investor, who has built and led several projects and communities in the space. He is CEO and co-founder of Provence Intelligence, a boutique crypto-consultancy firm that aims to bridge the gap between the cryptocurrency and DLT space and the traditional world. Interests include DeFi, non-blockchain DLTs, and the synthetic derivatives space.