【Dapp Pocket】DeFi Weekly Report - Week 3 of July: What's behind the rise of YFI and yearn?

Dear DeFi enthusiasts,

This week, liquidity mining has taken the spotlight by storm with the launch of YFI liquidity mining by Andre Cronje, becoming the hottest topic. The TVL of YFI fund pool on Balancer increased 67 times in one day, and the token price soared up to 50 times. We have a detailed overview of our perspective on this.

Another standout in token price is Aave, which received a $3 million investment from two major venture capital firms this week. ConsenSys also released its quarterly DeFi research report this week, delving deeper into WBTC and ETH insurance. Other news this week includes Tang Feng and Vitalik participating in the online ABS event; Compound launching a new governance forum comp.xyz.

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For the expert opinions section, we have curated insights from Andre Cronje on the TVL changes across various platforms related to YFI, Eric from Ethereum on the YFI explosion, and Elon Musk's response to accusations of his account being used for Bitcoin scams, which consequently led to a 20% surge in a certain token.

1. Our Perspective | 4000% Growth in Two Days, What's Behind YFI and yearn?

What is yearn?

yearn.finance (formerly iearn.finance) is a stablecoin yield farming platform that automatically allocates deposited funds to the protocol with the highest yield. Supported platforms include Compound, dYdX, Aave, and DDEX. The platform currently manages approximately $8 million in assets under management (AUM) with an Annual Percentage Rate (APR) of about 10.58% since its launch. The platform is still in the beta testing phase, so users should assess risks before investing.

What is YFI?

YFI is the governance token of the yearn.finance ecosystem, allowing holders to participate in decision-making, voting, and sharing profits generated within the yearn ecosystem. Notable platforms within the yearn ecosystem include the stablecoin yield farming platform yearn.finance, iliquidate.finance providing an Aave liquidation engine, ileverage.finance for stablecoin leveraged investments, and ipool.finance for setting up Curve pools, among others. In an article releasing YFI information, Andre Cronje emphasized that YFI has no inherent value, will not be listed on Uniswap or sold, and is 100% distributed through liquidity mining. The reason for designing this governance token was because their team was "lazy" to manage these platforms. Currently, the YFI supply is limited to 30,000 tokens, with future issuance subject to decision by YFI DAO.

How to Obtain YFI?

Users can provide liquidity in the Y Pool of the stablecoin trading platform Curve to receive yearn-exclusive LP Token Curve.fi ytoken, which can be staked on the Curve platform to yield YFI. Alternatively, providing liquidity in the Dai/YFI pool on Balancer will earn users BPT Tokens to stake on ygov.finance for YFI rewards.

Why is YFI Surging?

Despite Andre Cronje claiming that YFI has no financial value, the market seems to think otherwise. The price has surged from an initial Coingecko listing of 34.53 to 40 times that amount at $1514 within two days, leading to a significant increase in locked funds in pools offering YFI mining. YFI's success can be attributed not only to AC's reputation in the DeFi community but also to the token's limited one-week release timeframe and capped supply of 30,000 tokens, driving the demand.

Considerations for YFI Investment

However, while YFI offers access to various platforms as a governance token, most of these are still emerging protocols in beta, and the security and reliability of the contracts remain to be tested. The potential fee revenue for the YFI community in the future is difficult to predict. If the YFI DAO chooses to increase the token supply, it could exert pressure on YFI's price. In conclusion, while acquiring YFI through liquidity mining may be worth trying, trading on exchanges requires careful risk assessment.

Further Reading

• AC Introduces YFI

• Curve Introduces YFI

• Balancer's Dai/YFI Pool

• Curve's Y Pool

2. This Week's Highlights

yearn Founder Andre Cronje Launches Governance Token YFI, Fully Distributed Through Liquidity Mining

Founder of yearn, Andre Cronje, announced the launch of the governance token YFI for the series of products, stating that it holds no value but can be used to alter mechanisms, fees, and rules of all his developed projects. The token has no pre-mine, will not be sold, and acquiring YFI only requires using their platforms and providing liquidity to receive a daily allocation.

Decentralized Lending Protocol Aave Raises $3 Million

Decentralized lending protocol Aave announced a $3 million fundraising through token sales, with investment from venture capital firm Framework Ventures and crypto hedge fund Three Arrows Capital. These institutions purchased 30 million native Lend tokens at $0.1 per token, which are now valued at over $7 million.

ConsenSys Releases 2020 Q2 DeFi Report Covering WBTC, ETH Insurance, Yield Farming, and More

ConsenSys Codefi published the 2020 Q2 decentralized finance report summarizing and analyzing the Ethereum DeFi ecosystem in the past quarter. The report covers various topics, including Bitcoin tokens on Ethereum, COMP and liquidity mining, overall DeFi data and summaries, major security incidents, and more.

Decentralized Exchange Protocol Bancor V2 Features Released

Decentralized exchange protocol Bancor introduced the features of its Automated Market Maker (AMM) liquidity pool, highlighting concepts such as single reserve pool tokens, deposited and current balances, dynamic weights, price feedback, among others. They also updated the Bancor V2 smart contract code with various improvements to assist users and liquidity providers. Bancor has announced the launch of a bug bounty program to incentivize the community to discover system vulnerabilities before deployment.

Binance to Launch Binance Smart Chain Mainnet Compatible with Ethereum Smart Contract Functionality in Q3

Binance will launch the Binance Smart Chain mainnet in Q3 this year, compatible with Ethereum and featuring smart contract capabilities. According to the roadmap, Binance will release a new version testnet, Millau, next month. The Binance Chain mainnet completed the Nightingale hard fork upgrade in early July, adding support for BEP8 token protocol and introducing a new trading venue to host BEP8 tokens for small or micro projects.

Others Include:

• Reflections on DeFi Investment Frenzy from mStable Auction Failure, How Long Will the Craze Last?

• Compound Launches New Governance Forum comp.xyz

• Is the Chainlink Short Report from partner Nexo?

• Highlights of the ABS Summit: Discussion between Tang Feng, Vitalik, and "Radical Markets" Author Wei Er on Square Fundraising, Democracy and Digital Technology, Privacy

3. Data Indicators

This week's data covers from 7/14 to 7/20, with price snapshots taken around 5:30 PM. TVL refers to Total Value Locked, indicating the total value locked in the platform. Data Source: DeFi Pulse.

Lending Platform Scale

DEX Scale

4. Industry Leaders' Perspectives

Andre Cronje: Look at the TVL Data Changes Within a Day

iearn Founder Andre Cronje shared the TVL changes of three liquidity pools on 7/19, including Curve's y pool, Aave, and Balancer's YFI pool. The YFI pool surged from $200,000 to $13.67 million within a day.

Eric Conner: Trying to Understand What's Happening with YFI

Eric Conner of EthHub and Gnosis shared a gif on Twitter, indicating his understanding of the YFI surge.

Elon Musk: Dogecoin Storm Unstoppable

Elon Musk, CEO of Tesla and SpaceX, responded to a tweet questioning the whereabouts of his Bitcoin, stating that he only sells Dogecoin (DOGE). He then shared a meme about the Dogecoin storm, leading to a 20% surge in DOGE.