· Why DeFi?
There are a lot of great sources about DeFI’s potential, so I’ll rather start with my own experience. I have a business background and work in traditional finance. My job involves asking for money from wealthy investors and deploying it in a special type of non-tech high yielding opportunity. The way things work today can become frustrating at times — lots of calls on a daily basis with banks, lawyers, accountants; lots of documents to sign; painfully watching money move slowly across the legacy financial system with many checks and confirmations along the way… And the worst of it is time. Any relevant investment takes a lot of time, weeks if you’re lucky, months usually. Trying to get some yield in traditional finance is remarkably inefficient and painfully slow.
· Why Yearn and YFI?
Enter Yearn. I perceive yearn.finance as an investing platform to connect very smart people — wherever they are in the world — with risk capital. That’s it, as simple as it sounds: No chain of expensive brokers, no banks, no lawyers, no accountants.
A platform is a very good business because it’s very scalable, and usually highly profitable. But in order for it to work you need to make sure both sides are correctly incentivized to work together, yet are unable or unwilling to connect independently.
One could argue that Yearn is a great platform. The “investor” is willing to pay a small % of profits for access to prime yield optimization opportunities, smart contract security, economies of scale and the value of Yearn’s brand and partnerships. DeFi is becoming too complex for any single person or entity to navigate — smart contracts are complex and usually vulnerable, information flows very fast and is concentrated among few insiders, and transaction costs can be very high. On the other side of the platform analogy, the “strategy writer” receives fast access to significant capital and earns a lot of the value created but is under intense competition to maximize returns. YFI holders are incentivized to grow and care for the protocol, including establishing an equilibrium between investors’ and strategy writers’ interests.
Yearn’s fair launch was the work of a genius and requires an additional note. It provides a strong defense against being labeled a security, and has concentrated YFI in the hands of those that understand the protocol’s potential. I believe that this could be the beginning of a huge a new era of corporate governance. Why can’t all investors and users participate in day-to-day governance? Since Ethereum addresses are public, over the past few months I’ve watched sophisticated players and insiders accumulate as much YFI as they can. We all started from the same point but smart capital is winning the race.
· So, where is Yearn heading?
Yearn is truly the only financial organization I know that has no limits. This is a very powerful statement. Assuming the world becomes increasingly interconnected and digital, we would need new international and interdisciplinary financial organizations able to work across chains, across economies, and across paradigms — without any limits other than their own ambition, skill and capital. Yearn has a lot of those three attributes.
Yearn is a highly scalable organization in a new exciting digital economy, managed by a talented team and governed by a bunch of very smart and driven people. This is something that I believe had never existed before in the history of humanity, and it leaves me a very strange feeling — part amazement, part excitement, part curiosity, part greed.
If there’s interest, I could write some more articles on the specifics of Yearn from a traditional investing perspective — products, partnerships and developments as they happen.
Disclosure — I own some YFI