Key Highlights
Yearn Finance has begun a YFI buyback initiative aimed at redistributing earnings to its token holders. Meanwhile, Bitwise has introduced the world’s inaugural NFT Index, marking a significant development in the NFT sector. Currently, Yearn Finance stands out as a prominent yield aggregator within the decentralized finance (DeFi) landscape, with a total value locked (TVL) of $5.24 billion and a 6.79% stake in the governance token of Curve Finance, known as veCRV. Since the proposal’s approval on November 12, the decentralized autonomous organization (DAO) has successfully repurchased 0.77% of the YFI token supply. Additionally, Shopify is rolling out its NFT marketplace’s beta version.
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An Overview of Yearn Finance
Yearn Finance (YFI) encompasses a collection of services within the DeFi ecosystem, offering lending aggregation, yield optimization, and insurance on the Ethereum network. The protocol is managed by a group of independent developers and is governed by the holders of YFI tokens, as outlined on its official platform. Presently, Yearn Finance features three primary product categories: Vaults, Labs, and Iron Bank. As a decentralized application, its governance structure allows YFI holders to propose and vote on various initiatives that shape the ecosystem. Decisions that achieve majority support (over 50% of votes) are executed through a multi-signature wallet consisting of nine members, requiring signatures from six members to enact changes.
Yearn Finance was among the pioneers of community-driven token distribution, unexpectedly distributing 30,000 YFI tokens to early users following a yield farming announcement on July 17, 2020. All 36,666 YFI tokens are currently in circulation, and notably, there was no pre-mining phase involved.
Yearn Finance Statistics
According to yearn.vision, Yearn Finance currently has $5.24 billion in total value locked (TVL) and possesses 6.79% of the Curve Finance governance token, veCRV. Curve Finance (CRV) functions as a decentralized liquidity pool built on Ethereum, similar to Uniswap (UNI), but specifically designed for stablecoin exchanges. Its primary objectives include enabling highly efficient trading with minimal slippage while offering a relatively safe and supplementary income stream for liquidity providers (LPs) without the risk of impermanent loss, which often occurs with fluctuating digital assets. Curve is recognized as one of the largest decentralized applications (dApps) by TVL, boasting $13.91 billion in liquidity. Given the critical role of stablecoins within DeFi, Yearn Finance’s influence in Curve’s governance is substantial. It ranks as the second-largest holder of veCRV among decentralized autonomous organizations (DAOs), granting it considerable sway over governance matters within Curve Finance, one of the leading automated market makers (AMMs) in the Web3 space.
YFI Buyback Program
Yearn Finance recently announced via Twitter the launch of an updated user interface, alongside ongoing beta testing for its V3 product. Community engagement has been strong; on October 6, a member of Yearn Finance sought feedback on enhancing YFI tokenomics to increase value for token holders. A variety of proposals were submitted and voted upon from December 7 to December 12. Following the community’s decision, Yearn’s official Twitter account revealed today that the protocol had spent $7,526,343 on YFI from the open market, acquiring 282.4 YFI tokens, which represents 0.77% of the total supply, at an average price of $26,651. The recent buyback activity has surpassed the amount repurchased in the previous year, and with a treasury exceeding $45 million and earnings at a record high, further aggressive buybacks are anticipated.
Adam Cochran, a partner at Cinneamhain Ventures, stated that Yearn is contemplating a fee distribution model to its holders, akin to the structures used by veCRV and xSushi. He also expressed confidence that a transition to a veYearn model would encourage DAOs to accumulate YFI in a manner similar to CVX and CRV.
Implications of the Buyback
With the introduction of a buyback program aimed at redistributing protocol earnings to stakers, traditional financial metrics can be applied, albeit imperfectly, to evaluate Yearn Finance. As of December 15, the protocol has reported $47.4 million in revenue over the last 180 days, with a price-to-earnings ratio of 7.65x, based on data from Token Terminal. The recent buyback of 0.77% of the YFI supply shortly after the implementation of the xYFI initiative, along with the potential adoption of the veYearn model to incentivize DAOs to gather YFI, sets the stage for favorable conditions for YFI investors. In comparison, Ethereum has seen approximately 1.2 million ETH burned, representing 1.01% of its current supply since the introduction of EIP-1559 in August. Unlike YFI, ETH does not have a capped supply, which can lead to either inflationary or deflationary conditions based on market dynamics.
For those curious about future yields from xYFI staking or potential YFI token pricing, a draft from the xYFI proposal outlines estimated yields and valuations. It states, “The first chart illustrates the anticipated yield of the xYFI vault based on market price-to-earnings ratios and the percentage of total tokens staked. For instance, if only 50% of all YFI tokens were staked and the market valued YFI at a P/E ratio of 35, the xYFI vault would yield 6%. The second chart depicts the price per token based on market P/E and actual earnings.” Recently, YFI traded around $24,750, reflecting a 19% increase for the day, making it the 126th largest cryptocurrency by market capitalization.
Non-Fungible Tokens (NFTs)
Tobias Lutke, the founder and CEO of Shopify, announced the launch of the beta version of an NFT marketplace via Twitter. Additionally, Matt Hougan, Chief Investment Officer at Bitwise, revealed the introduction of the world’s first NFT Index, with notable projects such as CryptoPunks and Bored Ape Yacht Club among the most heavily weighted assets. Trading insights from OpenSea and Solanalysis, covering leading Solana and Ethereum projects, can be found in the following sections.
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