Analysis: Ethereum’s Yearn.finance (YFI) is one of the cheapest coins in DeFi šØ This article is 4 years old...
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Analysis: Ethereum’s Yearn.finance (YFI) is one of the cheapest coins in DeFi
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Updated: Nov. 7, 2020 at 2:17 pm UTC
Photo by Daniel Ćberg on Unsplash
YFI, the native governance token of the DeFi protocol Yearn.finance, has rapidly become a prominent cryptocurrency despite just launching weeks ago.
It made headlines for seemingly being the first cryptocurrency to appreciate 100,000 percent in a week. It also made headlines for becoming the first reputable altcoin to pass the price of Bitcoin. YFI now trades for $13,500, having surged to $16,500 last week.
What’s especially absurd about YFI’s ascent is that the creator, Yearn.finance developer Andre Cronje, launched the token with the premise that the cryptocurrency literally has “zero value.” YFI now has a market capitalization rivaling some of the top crypto projects in existence.
Even after this record-setting rally, analysts say that the cryptocurrency may be undervalued, at least when compared against other altcoins in its class.
Messari analyst: YFI may be undervalued relative to other DeFi projects
Core to the Yearn.finance protocol is a DeFi concept called “Vaults.” Vaults are pools one can deposit certain cryptocurrencies into (most stablecoins are supported) to earn a yield on their holdings; yields are generated by a “controller” utilizing the best yield farming strategies for the cryptocurrencies in the pools.
Although Vaults have been of great benefit to those that use the service, offering yearly returns of 9-90 percent, Vaults are also beneficial to holders of YFI as they charge withdrawal and performance fees on user holdings, which get sent to a treasury controlled by YFI holders.
According to an analysis by Messari analyst Ryan Watkins, Yearn.finance “currently produces cash at a rate of just over $21 million annualized.”Ā The analyst explained that this means that YFI, because it can control and gain access to the capital in the pool, has a price-to-sales multiple of around 20 times.
In 2 months Yearn went from a relatively unknown lending aggregator to a $390 million industrial scale yield farming machine.
Itās now returning ~$20 million annualized for YFI holders.
With such a sudden rise its worth exploring YFI's value, risks, and opportunities ahead.
— Ryan Watkins (@RyanWatkins_) August 24, 2020
This makes YFI the cryptocurrency with the lowest price-to-sales multiple in the decentralized finance space except for Terra (LUNA), which touts a 17 times multiple.
To put YFI’s valuation into perspective, here are the price-to-sales multiples of other DeFi coins:
- Bancor: 22 times
- Compound’s COMP: 32 times
- Balancer’s BAL: 56 times
- Maker: 740 times
- Curve DAO token: 1,568 times
Other fundamentals could push the coin higher
Watkins compiled this analysis with Yearn.finance’s current functions as a protocol, but with developments spearheaded by Andre Cronje, YFI holders may continue to see their earnings increase.
Due to demand for insurance in the DeFi space, which has been riddled with bugs and hacks over the years, Cronje is working on a new project for the Yearn.finance protocol called yinsure. The productĀ will be structuredĀ to allow more value to flow into the Yearn.finance ecosystem.
A 4 hour short story pic.twitter.com/7qpC0gQF2Z
— Kevin BĆ©langer (@kvnbelanger) August 17, 2020
Investors say that insurance in DeFi is not a trend that should be ignored. Paradigm co-founder Fred Ehrsam commented in a blog earlier this month:
āCrypto-native insurance – on-chain insurance covering protocols and DAOs – has the potential to be the next big financial primitive in DeFi. The market size could be enormous and the initial wedge is credible.ā
yearn.finance Market Data
At the time of press 2:17 pm UTC on Nov. 7, 2020, yearn.finance is ranked #37 by market cap and the price is up 10.12% over the past 24 hours. yearn.finance has a market capitalization of $452.08 million with a 24-hour trading volume of $84.23 million. Learn more about yearn.finance ›
Crypto Market Summary
At the time of press 2:17 pm UTC on Nov. 7, 2020, the total crypto market is valued at at $356.66 billion with a 24-hour volume of $91.92 billion. Bitcoin dominance is currently at 59.06%. Learn more about the crypto market ›
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Bancor
$0.69513
Bancor allows anyone to easily create completely liquid āsmart tokensā that calculate their own prices and enable a single party to convert any token to another, without requiring a second party to exchange with..
Terra Classic
$0.00010
Terra is aĀ blockchainĀ protocol that uses fiat-peggedĀ stablecoinsĀ to power price-stable global payments systems.
Compound
$53.6049
Compound (COMP) is an ERC-20 asset that powers the community governance of the Compound protocol; COMP token-holders and their delegates debate, propose, and vote on changes to the protocol.
Balancer
$3.80383
Balancer is a non-custodial portfolio manager, liquidity provider, and price sensor..
Maker
$3,069.63
Maker is a decentralized autonomous organization on the Ethereum blockchain seeking to minimize the price volatility of its own stable token ā the Dai ā against the IMFās international currency basket SDR.
Curve DAO Token
$0.42785
Curve DAO (Decentralized Autonomous Organization) is a decentralized platform built on the Ethereum blockchain that aims to provide a stable and efficient market for trading stablecoins.
Messari
Messari is a fast growth startup in New York that is building the next generation data layer for the global cryptoasset community.
Fred Ehrsam, born Frederick Ernest Ehrsam III, is an American entrepreneur and businessman who co-founded the digital currency exchange company Coinbase.
