Yearn Finance: The yield machine that puts values 1st w/ Facu Ameal

On this episode of On The Ledger, host Mo Sayed welcomes Facu, Communications Manager at Yearn Finance, and Iqbal Gandham, Ledger’s VP for Payment and Transactions, to discuss one of the most inspiring DeFi projects. They dive into Yearn’s story, its foundational ethos of decentralization, and its vision for the future, particularly as it becomes available in Ledger Live.

“[The overall goal is to] make crypto and crypto investing easy but in a secure manner”. – Facu

Key Highlights:

Yearn’s Ethos and Function

Yearn Finance is a yield aggregator that automates the process of farming, allowing users to deposit tokens into protocols and collect rewards. It does this automatically and in a cheaper way by socializing gas costs among all users in a pool. The core mission is to be user focused.

The yield generated by Yearn comes from depositing into other protocols, such as Compound Finance. Yearn’s magic of compounding involves converting governance tokens received as rewards (e.g., COMP) back into the deposited asset (e.g., DAI), thereby growing the user’s stablecoin holdings. 

This abstracts away the complexity for users who simply want their principal to grow, rather than manage various reward tokens.

Seamless Integration with Ledger Live

The integration of Yearn Finance into Ledger Live offers Ledger users secure access to yield-generating strategies. Iqbal Gandham emphasizes that combining Ledger’s security with platforms like Yearn highlights how this makes investing into crypto super simple, allowing users like himself, who lack the time to manually manage portfolios, to pick a strategy and seek a return.

Secure Vaults and Robust Strategy Implementation

Yearn’s operations revolve around vaults and strategies. 

Facu likens a vault to a transparent piggy bank where users deposit tokens. Multiple strategies then pull these tokens to invest them and collect rewards. A key benefit of having multiple strategies per vault is to diversify the risk, ensuring user funds are not concentrated in a single protocol.

“We always are on the security side of the of things (in web3)”. – Facu  

They employ an extensive process to approve new strategies and the underlying protocols, prioritizing security even if it means sacrificing some yield. This process includes:

• Strategies created by strategists (individuals who understand how things connect).
• Peer reviews to ensure more eyes on the code for security.
• Testing on an experimental platform with real, but limited, funds for several weeks.
• Approval by a safe farming committee that conducts deep investigations into new protocols, including audits and developer backgrounds.
• A final review by an internal security auditor.
• Multi-signature (multisig) approval, which ensures cross-checked security and prevents malicious strategies from being attached to vaults.

A New Model for Decentralized Governance

Yearn’s governance model is unique, rooted in its fair launch where creator Andre Cronje bootstrapped the project and gave away control for free by issuing the YFI governance token. YFI initially had no market value and had to be earned through participation.

Yearn shifted from slow, direct governance by YFI holders to delegated teams like YPeople (grants), YBudget (expenses), and YBrain (strategies). Holders still control team authority, but this system lets Yearn move faster while testing horizontal, boss-free organization.

Scaling to a Multi-Chain Future

Yearn has increased its capital efficiency through “tech merges” with other DeFi projects like Cream, Acropolis, SushiSwap, and Cover, which Facu clarified happened without any kind of legal paperwork but as collaborations between DAOs.

Looking ahead, the next significant milestone for Yearn is to become multi-chain. Yearn has already launched on Fantom and is actively exploring other Layer 2 (L2) solutions and side chains. 

The key criteria for selecting new chains are their ability to allow users to invest cheaper but in a safe way.

Key Insights on the Future:

Facu

• Facu believes DeFi mass adoption needs a security-first approach, better UI/UX, and a move to backend operations so users interact with Web3 apps without realizing it.
• He emphasizes the importance of self-custody while also catering to users who prefer not to manage their own keys.
• Despite challenges like criticism and a lack of open-source understanding, building in DeFi is “super exciting” because of its potential to replace traditional finance and improve lives.
• Mass adoption is both exciting and concerning due to regulatory challenges.
• Facu doesn’t anticipate a single “Amazon of DeFi” but rather long-lasting, collaborative “blue chip” protocols such as Aave and Uniswap, which rely on each other.

Iqbal Gandham

• Iqbal envisions DeFi mass adoption as a global replacement for traditional financial services, emphasizing secure access through hardware and software.
• He sees self-custody as empowering despite its intimidation, stressing the need for easier recovery and insurance.
• Ledger Live aims to integrate all six traditional finance verticals (trading, investing, saving, borrowing, sending, spending).
• Iqbal finds the battle between regulators and DAOs both exciting and worrying, viewing it as a fundamental shift in business.
• He believes regulators lack understanding and advocates for a blank sheet of paper approach to crypto regulation, questioning the sole focus on consumer protection.
• Ledger will not create a walled garden but will ensure secure access, believing the market will self-curate and emphasizing consumer education on risks.

Watch the episode here:

Reading List

Learn more about these topics mentioned in the episode, or explore our library of articles on Crypto, Security, and Regulation on Ledger Academy

• DeFi
• Yield Farming 
  What is a DAO?
• How to Understand yVault ROI