As Decentralized Finance protocols continue to grow on all fronts, their infrastructure grows alongside them.
While the total value of USD locked in DeFi recently hit a new all-time high at $4.23 billion, liquidity issues have also been a challenge and this led to the creation of decentralized liquidity pools like Uniswap and Balancer. These pools provide liquidity to DeFi platforms through smart contracts and offer interest to the liquidity providers.
The latest DeFi boom is partially driven by the addition of reward incentives in lending and the rapidly increasing popularity of yield farming. The process involves users gaming the protocol to “mine” reward tokens by moving from one asset to whichever one is the most profitable.
This appears to have been kicked off by lending and credit protocols like Compound rewarding lenders with COMP tokens, along with the base interest rate in an effort to improve liquidity.
YFI Distribution. Source: Flipside Crypto
Decentralized governance and fair distribution comes to DeFi
In an effort to automate the process of yield farming, Yearn.Finance launched a set of smart contracts that maximize earning by automatically changing liquidity pools according to who the highest payer is. Through a multi-token staking mechanism, users of the Yearn.Finance protocol can also receive YFI, a governance token.
Governance tokens don’t give access to dividends or any other monetary incentive. Instead, they are used as voting chips that allow users to collectively decide the platform’s trajectory, thus making it truly decentralized.
On July, 17, Yearn.Finance founder, Andre Cronje, distributed the entire initial supply of YFI to users of the protocol in three separate liquidity pools. Yes, this is correct. The entire supply of YFI was distributed and the team kept none for…