As the protocols for decentralized finance grow more and more, their infrastructure grows with them.
While The total value of the US dollar insured in DeFi recently hit a new record of $ 4.23 billionLiquidity problems were also a challenge that led to this Creation of decentralized liquidity pools such as Uniswap and Balancer. This means Provision of liquidity for DeFi platforms through intelligent contracts and offer interest to liquidity providers.
DeFi’s recent boom is partly due to the inclusion of credit incentives and the rapid increase in the popularity of yield farming. The process involves users playing with the reward token mining protocol by moving from one asset to another that is more profitable.
This appears to be on credit and credit logs such as connectionthat lenders rewarded with COMP tokens along with the base rate to improve liquidity.
In July, a new liquidity fund called Yearn Finance took center stage when 30,000 Yearn tokens (YFI) were minted and distributed to users, according to Flipside Crypto.
YFI distribution. Source: Flipside Crypto
DeFi comes with decentralized governance and fair distribution
To automate the yield farming process, Yearn.Finance has launched a number of smart contracts that maximize profits by automatically switching liquidity funds, depending on who is the maximum payer. Through a multiple betting mechanism, users of the Yearn.Finance protocol can also receive YFI, a governance token.
Governance tokens do not provide access to dividends or other monetary incentives. Instead, they are used as voting signs that allow users to jointly determine the course of the platform, which really makes it decentralized.
17th JulyThe founder of Yearn.Finance, Andre Cronje, distributed the entire initial supply of YFI to protocol users in three separate liquidity funds. If that’s correct. The entire YFI offering was distributed and the team had no choice.
According to the team behind YFI, the distribution was done to:
“Give up this control (mostly because we’re lazy and don’t want it), we introduced YFI, a completely worthless token. We repeat that it has no financial value. There are no pre-made, there is no sale, you can’t buy it. No, it won’t be uniswap, no, there will be no auction. We have none of it. “
Finally, The aim of the distribution was to delegate the rights (and duties) of governance to the community in a decentralized and fair manner, which is still pretty revolutionary for the post-ICO crypto space.
Does DeFI mature or is it in a bubble phase?
Since it appeared on Uniswap, The YFI price rose more than 4,000% in a single day and is currently $ 3,674. Cronje previously said to Cointelegraph that he had “no idea” why the price of the token had risen so much because he only wanted to “distribute the voting rights”.
In order to, The current phenomenon of DeFi and yield farming is somewhat reminiscent of the madness of the ICOs 2017, where worthless tokens were used for no apparent reason and even projects with names like “Useless Ethereum Token” could bring in considerable amounts of money.
Some might conclude from this Unbridled speculation is taking over the sector and the recent enthusiasm for yield farming will ultimately have a disproportionate negative impact on the entire DeFi ecosystem.
For example, in mid-July the compound reward mechanism raised the BAT (Basic Attention Token) price to an irrational level before COMP changed the mechanism.
While this is a legitimate concern Liquidity funds appear to add value and increase the benefits of numerous DeFi platforms.
The fact that YFI and an increasing number of governance tokens are operated entirely by their representative communities is undoubtedly a positive step forward. This will further democratize the crypto space and preserve the decentralized ideas on which the entire sector was built.