Yearn Finance (YFI) has been a leader in the decentralized finance (DeFi) space since its launch in 2020. The “fair release” model of its native governance token YFI makes it stand out among many tokens. With the upcoming launch of the new veToken (voting custody) model, Yearn will further enhance its governance mechanism and income distribution methods to attract more long-term holders.
YFI’s background and development
YFI was fairly released through a liquidity mining program in mid-2020, with an initial total supply of 30,000 YFI. The token is not pre-mined but is distributed directly to liquidity providers, developers and early backers. The success of YFI lies in its strong community support and active governance mechanism, and holders can submit and vote for proposals (YIP) through Snapshot.
Although YFI's performance has been ups and downs in 2021, Yearn strives to strengthen the connection between YFI's value and protocol earnings by changing token economics. YIP-65 proposes a new token economics model that aims to grant governance rights directly to active long-term holders.
Implementation of the veToken model
The upcoming veToken model will introduce vote locking and vault meters to optimize the distribution of protocol revenue. YFI holders can increase governance power and ownership shares by locking up their tokens. In this way, Yearn incentivizes users to align themselves with the long-term health of the protocol.
Voting Lock: The voting lock mechanism allows YFI holders to lock their tokens into non-transferable veYFI. Lock-in periods can range from a minimum of one week to a maximum of four years. The longer the lock, the higher the holder's weight in governance, up to 100% of the weight. This mechanism encourages holders to hold YFI for the long term, thereby enhancing the stability of Yearn.
vault meter
The introduction of the Vault Meter enables users holding veYFI to receive rewards based on their yVault deposits. In this way, YFI rewards will be distributed based on users’ deposits and veYFI weighting. This mechanism not only increases user engagement, but also enhances Yearn’s ecosystem.
Yearn’s core competencies: As the largest DeFi revenue aggregator, Yearn manages approximately US$500 million in assets. At its core are yVaults, dynamic, community-developed yield strategies that enable users to earn higher returns. Yearn’s success lies not only in its technological innovation but also in its active community engagement and governance.
Buyback and Build Yearn (BABY)
Under the BABY program, Yearn began buying back YFI and keeping it in the treasury instead of distributing it as staking rewards. This change is intended to maintain the value of YFI and provide support for the future development of the protocol. However, market volatility and expectations for the new veYFI model make BABY’s impact difficult to assess.
Evolving YFI Token Economics: With the passage of YIP-65, Yearn’s token economics have entered a new stage. The proposal lays out a four-step plan to aggregate voting rights and buy back YFI to long-term holders. Specifically include:
Staking Vault (xYFI): Distributes repurchased YFI to stakers.
Voting Lock YFI (veYFI): Through curved voting locking, voting rights and rewards are related to the locking period.
Vault Meter and Voting: YFI rewards are distributed via a meter, and yVault depositors can participate in voting.
"Useful work" function: Expand veYFI's application in protocol control and rewards.
in conclusion
The future of YFI is full of potential, and with the launch of the veToken model, Yearn will further consolidate its position in the DeFi field. By incentivizing long-term holders and enhancing governance mechanisms, Yearn can not only increase user engagement but also inject new vitality into its ecosystem. The development history of YFI proves the infinite possibilities of decentralized finance, and the future road will be brighter.