The golden girl of the DeFi world is now Yearn Finance (YFI), which has managed to outperform Bitcoin in its price per unit. This two-month-old infant caused a stir with its meteoric rise. You don’t see 2,600% every day. And that we are not maximal. A correction was made but it wasn’t enough to silence us. Because that was incredible. At first glance, it all seems completely absurd. That is, a speculative bubble is inflated with pure air. In fact, it could be said that irrationality was the main cause of all this madness. But, Why Yearn Finance? Could there be something good and redeemable under all the noise?
Decentralized financing (DeFi) has grown significantly recently. And deep down, that’s great. Because that’s the whole point, I guess. In other words, it is believed that the entire crypto ecosystem will be created with the aim of providing an alternative and independent space for funding. It is a banking of the people, the people, and the people. At least that’s what was intended from the start. Of course, when we talk about DeFi here we are not referring to the gradual growth of the infrastructure of the future. Obviously we’re talking about the DeFi boom. It’s the frenzy of the past few months.
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This fashion thing is very common in crypto. We always have a boom. But it’s not always the same. In other words, the wave is coming and the wave is going. They are a kind of temporary love. They are forever until their end. Today is DeFi. But yesterday it was the IEOs and the day before yesterday it was the ICOs. And before that it was something else. We always change fashions, but there is always one. Seasonal revolutions. You grow mad and explode mad. After the euphoria comes the big pool of blood.
And it will certainly be the same with DeFi. Only the strongest will survive. And they will be part of the system, just as we have some survivors of the fashion of the past among us today. Not all DeFi platforms will survive today. Which will survive? We do not know that, yet. But in today’s frenzy, everything is the next big thing.
What is special about Yearn Finance? Why so much fuss? Why so much fuss? In addition to being born at the best of times, we can identify some favorable elements. It’s always healthy to be a little skeptical during these crazy moments. Because scammers party too often in times of greed and debauchery. The boom itself helped Yearn Finance’s YFI token. However, we cannot deny that there is also a singularity.
The DeFi platform Yearn Finance offers different functions in its universe. Its flagship is automatic yield farming, which moves funds between other DeFi platforms. So, We could say that Yearn Finance is the best of all worlds. Additional liquidity, leveraged trading and automated market maker. And now for sure. Yinsure Finance offers insurance for assets placed in DeFi. It uses a vault and governance system to support operations.
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All of this seems very interesting without a doubt. And of course everything is very useful too. But there are also very useful and interesting platforms that arouse less interest. That brings us to a second point. The team. Andre Cronje, the developer at the head of the project, creates trust and has managed to attract a lot of people. Beyond the range of products, it’s the spirit of the project. Certainly there is some coherence. And the gap between what it is said and what it does is so great.
This was a pretty honest ICO in many ways. There are several elements throughout the process that are sure to add to the trust problem. For example, There was no pre-release or awards for the founders. In almost all ICOs, the founding team charges a fee before starting. They share a lot of loot and become millionaires out of nowhere. There is no product yet, but they are already rich.
Many of the big names in the crypto world are using their fame and money to launch ICOs. They generate thousands of tokens (pre-approved) before launch and then distribute them among themselves. The token goes to the exchanges and the tokens sold define a price and thus form a total market capitalization. You can see them swimming in money overnight. Often they leave the project prematurely later and start a new one. With their respective ICOs full of pre-made tokens and prizes for them. IMHO, that’s not cool. It’s a common practice but essentially immoral.
The case of Yearn Finance is unique in that it does not follow usual practices. It is the decentralization of what is said and what is done. The tokens are sold to anyone who wants to buy them. This includes founders who certainly bought a lot of tokens on the first day. The point, however, is that there is an ethic of form and substance in the process that gives the initiative a lot of credibility.
The total range of tokens is also interesting. Only 30,000,000 units. When it comes to the price of the token, this scarcity works wonders. And it puts us at such a high price point even though we don’t have that large total market cap. The token outperformed Bitcoin in price per unit, but not in capitalization. YFI has a capitalization of nearly a billion. In contrast, Bitcoin’s capitalization is more than 200 times that. However, the high per unit value of the YFI token has a strong psychological element.
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The token has two main functions: Liquidity and governance. However, due to its scarcity, it is a speculative sign par excellence. Few can resist the temptation of a token that grows 2000x in a few months.
The platform has had technical problems in the past. Nothing special. And as far as we know, these problems did not cause any serious material loss. But the DeFi boom is scary. All of these millions depend on smart contracts. And we know there are dangers. The technology is not free from vulnerabilities. I don’t want to be a prophet of disaster, but I wouldn’t be surprised if we got a big hack in the future.
Security is an issue, but there are also financial risks. With so much collateral, a sharp drop in prices could trigger a chain reaction and in turn exacerbate the drop in prices. To be honest, I don’t have any exact dates. I only have anecdotal evidence. But I dare say that a very important percentage of all moves on DeFi platforms are speculative tricks. In other words, take money from here and put it here to earn extra points. That is, a sharp drop could lead to increased losses. Enthusiasm is natural. But it is probably a good idea to take it easy. Study the risks. And don’t be crazy. Wisdom never passes.