In the world of cryptocurrencies, Yearn Finance (YFI) is a notable project known for its innovative yield aggregation strategy. This article will delve into the workings of YFI, especially its performance in the recent st-ycrv liquidation event, and analyze its impact on the market.
Basic concepts of Yearn Finance
Yearn Finance is a decentralized financial platform designed to help users maximize returns on their crypto assets. Through automated strategies, Yearn is able to allocate user funds to different DeFi protocols to obtain the best interest rates and returns. As the native token of the platform, YFI allows holders to participate in governance and obtain platform benefits.
Background to the st-ycrv liquidation event: On May 1, 2024, Yearn’s Ajna Board was forced to conduct a liquidation to avoid the risk of bad debts. The incident primarily involves the yvAjnaDAI strategy, which lends DAI to the st-ycrv pool. The process of liquidation is challenging as market conditions are constantly changing and the healthy proportion of borrowers is declining rapidly.
Lending status
Before the liquidation occurred, Yearn's two strategies were lending DAI at 0.34051 per st-ycrv, while the market value was 0.6787. Based on market prices, this means borrowing with a loan-to-value ratio (LTV) of approximately 50%. Initially, the LTV at the start of the loan was only 20%. Over time, the borrowing pool reached 29.25% and increased by 10% every 12 hours.
Liquidation decision-making process: Faced with pressure to liquidate, the Yearn team acted quickly. So, on May 2, they formed a task force to handle the liquidation. The team decided to allocate DAI to the auction, bid at a base price, and start bidding when the auction price is below the market price.
The challenge of liquidation
The liquidation process was not smooth this time. There was a lack of participants in the market, especially no MEV robots participating in the auction, because st-ycrv lacked direct liquidity. The team tried to contact the borrowers and continuously raised the borrowing interest rate to force them to repay, but ultimately failed.
The outcome of the liquidation: Ultimately, Yearn achieved some success in the liquidation process and made a small profit from it. This incident not only shows Yearn’s resilience in the face of difficulties, but also reflects the risk management challenges in the DeFi field. As liquidation progressed, another borrower paid off their debt as quickly as possible after liquidation began, demonstrating the sensitivity of market participants.
YFI’s future outlook: YFI’s future is full of uncertainty, but this liquidation event has provided it with valuable experience. Yearn Finance must constantly adapt to market changes and improve its risk management strategies to protect the safety of users' assets. As the DeFi ecosystem grows, Yearn’s ability to innovate will be key to its success.
in conclusion
In summary, Yearn Finance and its YFI currency play an important role in the DeFi space. Through continuous innovation and the ability to cope with challenges, Yearn is expected to continue to lead the development trend of cryptocurrency in the future. While the liquidation event brought short-term volatility, it also provided Yearn with opportunities for further improvement. As the market matures, Yearn will continue to explore new possibilities in risk management and return optimization.
I hope this article helped you gain a deeper understanding of the YFI coin and its importance in the DeFi ecosystem. As the cryptocurrency market develops, it will make sense to continue to follow Yearn Finance’s developments.