What is yearn.finance?
yearn.finance (Yearn) is a DeFi vault and yield aggregator that helps you generate the highest yield farming profits. When you deposit assets into Yearn products, you gain access to the best automated strategies for swapping funds between DeFi protocols, such as the Synthetix Network Token ($SNX) and Compound ($COMP). Yearn optimizes token lending by algorithmically finding the most profitable lending services and the highest yields, making farming accessible to the masses and giving new users access to advanced strategies. Specifically, Yearn vaults (which Steakwallet integrated) can be best described as actively managed mutual funds where the investment strategies are performed by Yearn's self-executing code.
The Yearn ecosystem is governed by YFI token holders
$YFI is a governance token that allows holders to submit and vote on off-chain proposals that govern the ecosystem. Proposals that generate a majority support are implemented by a nine member multi-signature wallet. Changes must be signed by six of the nine wallet signers in order to be implemented. The members of the multi-signature wallet were voted in by YFI holders and are subject to change from future governance votes. You can check out Yearn’s FAQ for more information about their governance process.
Don’t have your assets sit idly by when they could be put to work in Vaults and earning tasty returns 🍽 💸
Yield farming is a passive investment strategy that allows you to lock your assets in a protocol and earn more crypto with your crypto. Yearn Vaults give you access to robo-farming strategies and allow you to maximize returns on your assets. You do not need to have a deep understanding of the underlying protocols involved, which makes it easy for beginners to participate and start earning.
When liquidity providers add funds to liquidity pools, which operate on smart contracts, the liquidity pools automatically generate yield based on opportunities present in the market and shift capital as different opportunities arise. Think of Vaults like savings accounts for your crypto. All you have to do is deposit your funds and then they are routed through strategies which seek out the highest yield available in DeFi. Immediately upon depositing, your funds first go to the vault contract and then are deployed to one or more strategy contracts. Guardians and strategists monitor deposits in order ensure optimal returns and to be available during critical situations.
You will earn rewards for providing liquidity to any given pool in the form of Vault Tokens. These tokens are essentially deposit receipts and represent a share of the Vault you are participating in. If the Vault you are participating in earns profit, then the price of your tokens will increase.
The socialization of gas costs provided by Vaults minimizes the high cost of transactions on Ethereum. Since capital is pooled through one account, only that account (the controller of the Vault) has to pay gas fees to yield farm. This mechanism allows all users to earn at the same time and reduce cost, regardless of how much money they’re putting into the protocol.
Calculating your estimated returns
Yield farming returns are calculated annualized, so returns are estimated based on how much you could earn over the course of a year. Annual Percentage Rate (APR) does not take into account the effect of compounding, while Annual Percentage Yield (APY) does. Compounding refers to reinvesting profits to generate even higher returns. APY analyzes lending protocols and gives users an estimation of the amount of returns they should expect to earn annually for a specific amount of money. Being that yield farming is such a fast paced market, it’s important to know that these APYs are difficult to calculate and the projections can fluctuate rapidly.
This sounds similar to staking...
Even though staking and yield farming are both passive investment strategies in crypto, they are not the same technique. Unlike yield farming, staking does not provide liquidity to a protocol. Rather, you lock up your assets in a network to uphold and help secure the network by acting as a node that confirms blocks, and earn rewards for doing so. Generally, staking is less risky compared to yield farming. However, Yearn vaults have proven to be very secure and low risk.
Yield opportunities and juicy APYs right at your fingertips with Steakwallet 🥩
Steakwallet takes the simplicity of earning yield through Yearn a step further by allowing users to deposit funds into pools with the click of a button on mobile. Simply choose the vault you’re interested in and confirm your deposit. Once your transaction is approved, your Steakwallet will contain a token that represents your stake in the Vault (for example, you will receive yvSNX when you deposit $SNX) — there will be nothing else you need to do except sit back and watch your yields accumulate, hassle free.
Steakwallet users can currently deposit into Yearn vaults for $USDC, $USDT, $LINK, $UNI, $SNX, $DAI, and $COMP. We'll be adding support for $1INCH, $wBTC and $wETH vaults next week with more scheduled for the future.
Lastly, on the topic of withdrawing funds…
You should always be aware of gas prices when you want to withdraw from a Vault, as Ethereum gas prices get very high. For you to be profitable, you should leave your deposit alone in the vault for as long as possible before you are subject to a withdrawal fee.
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