At first glance Yearn Finance may seem a little confusing for beginners but in reality it is a very simple DeFi protocol that anyone can use. In this guide we will be covering all of the services Yearn Finance provides and how you can access them in a few easy steps.
What Is Yearn Finance? #
Yearn Finance is a DeFi protocol running on the Ethereum and Fantom blockchains. It provides a set of different strategies that are designed to provide passive income for Yearn Finance’s users.
All strategies are automated and designed to extract the maximum value from other protocols, all with the goal of providing a high yearly return on your deposited assets through Yearn. It is worth mentioning that these strategies are not risk-free so it is highly advised that users get familiar with all potential risks before investing.
How To Use Yearn Finance? #
Before starting you will need Metamask (or any other Web 3.0 wallet) and enough Ethereum or FTM tokens to cover the gas fees. The easiest way to acquire some is to purchase them on centralized exchanges and withdraw directly to your wallet.
If everything is in order, start by opening the home page and clicking on the “connect wallet” button in the top right corner. Select the corresponding wallet and once you are connected you will have access to all features provided by Yearn Finance.
These features include:
- Wallet Management
- Iron Bank (Lending)
Clicking on Wallet will give you an overview of your assets that are available for deposits on Yearn. Some will have native strategies while others can only be exchanged for different currencies through Zaps.
If you select the Deposit option for any of them Yearn will provide you with a zap function that allows direct deposits into vaults with any token you may have in your wallet, as long as it is tradable.
The process is exactly the same as swapping tokens on a decentralized exchange. To begin, select the deposit option and then select the vault you want to use.
To complete the transaction first approve the contract and then deposit your funds. Both will count as separate transactions so be sure to have enough Ethereum/Fantom in your wallet to cover the gas fees.
Once both transactions are confirmed your funds will be deposited in the corresponding Vault.
Vaults mostly offer single-staking for crypto assets such as stablecoins and more popular cryptocurrencies such as Curve and Ethereum. They are accessed the same as from your wallet, using the deposit option.
You can either choose to deposit a cryptocurrency you already have in your wallet or swap into it using other tokens like in the example above.
Labs is where you will find more riskier strategies that also offer higher payouts. These strategies are mostly experimental so getting familiar with potential risks is highly advised.
To enter one, simply select the strategy of your choice and click on the deposit button. In some cases, strategies in Labs will include token lockups like the ones that manage your CRV deposits. These will remove the option to withdraw funds until a set date, so it is very important to plan ahead.
For these specific strategies there is no option to swap from your existing tokens. If, for example, you want to enter the yveCRV staking strategy you will need to have CRV tokens in your wallet.
Iron Bank is basically a lending protocol on Yearn Finance. Users can supply the protocol with crypto in exchange for passive income or deposit their holdings as collateral and take out loans based on that same collateral.
The APY is dynamic and can vary based on market conditions, but using the protocol itself is very straightforward. In order to deposit funds simply click on the supply option, approve spending and deposit your funds.
If you already have funds deposited and they are enabled to be used as collateral, you will be able to use the borrow function and take out a loan. Borrow APY is also dynamic and highly dependent on the available liquidity. Tokens with lower liquidity will usually have higher borrow rates.
To take out your collateral deposits you will need to repay your loans first.
Settings is where you can change your personal preferences and slippage tolerance. Yearn Finance allows you to choose one of many different themes and even change the preferred language. Currently the protocol is available in English and Spanish.
With the help of zaps and a very straightforward user interface, Yearn Finance has managed to bring DeFi closer even to users that aren’t very familiar with this concept. Entering and exiting strategies is very simple and most of the time you will only need to confirm one or two transactions to complete the process.
Once again, it is very important to understand the risks before using DeFi protocols such as Yearn Finance.