Yearn to Launch veYFI, a Catalyst for YFI Price Increase?

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TLDR;

• Yearn Finance, a decentralized finance (DeFi) platform, will launch its veYFI token on October 19th, 2023.

• veYFI is a locked version of YFI that gives holders more voting power, boosted rewards, and potential access to exclusive features in the Yearn Finance ecosystem.

• This is designed to incentivize long-term holding and participation in the governance process.

• We believe the launch of veYFI has the potential to be a major catalyst for YFI for several reasons, including increased demand for YFI, improved governance, increased rewards, and network effects.

Introduction

Yearn Finance, a decentralized finance (DeFi) platform, will launch its veYFI token on October 19th, 2023. The launch of veYFI is a significant event for the platform, as it will introduce a new voting and governance system that gives YFI holders more control over the future of the protocol.

Background

In late 2021, the Yearn community began discussing ways to improve YFI tokenomics. This led to the development of YIP-65, which outlines a four-step plan to funnel voting power and YFI to active, long-term holders.

The four steps are:

1. Staking vaults (xYFI): Distribute bought-back YFI to vault stakers.

2. Vote-locked YFI (veYFI): Curve-style vote locking. Voting power and rewards depend on lock duration (up to 4 years).

3. Vault gauges and voting: YFI rewards are distributed through gauges, where yVault depositors stake their yVault tokens (yTokens). Gauges receive YFI to emit based on bi-weekly veYFI holder votes, and YFI lockers earn rewards based on their veYFI weight and deposit balances.

4. “Useful work” features: Expand the scope of veYFI, in terms of protocol control/rewards.

The launch of veYFI, therefore, represents another step towards the vision outlined in YIP-65, and is designed to incentivize long-term holding and participation in the governance process.

veYFI Design

veYFI is a locked version of YFI that will be used to vote on proposals and earn boosted rewards. The longer YFI is locked, the more veYFI holders receive. To lock YFI, users must deposit it into a smart contract for a specified period of time. The minimum locking period is 4 weeks, and the maximum locking period is 4 years. The longer the locking period, the more veYFI users receive.

• veYFI locking: veYFI locking is similar to the Curve ve-style program. YFI can be locked up to 4 years into veYFI, which is non-transferable. The maximum lock duration is still to be determined, but it will be around 4 years.

• Lock duration weights: The lock duration gives the same linear weights, so if the maximum duration is 4 years, this is 100%, and 2 years = 50%, etc. Weights decay as the remaining lock duration decreases, but can be extended up to the maximum lock duration.

• Replaces xYFI: veYFI replaces xYFI, where a user must have a veYFI lock in order to continue to earn rewards. No lock leads to no rewards. A maximum lock, continuously renewed, maximizes rewards.

• Early lock exit: It is possible to exit the lock early, but a penalty must be paid. This penalty is allocated to the other veYFI holders. The penalty size may be fixed (i.e. 50%), or it may be depending on the remaining lock duration.

veYFI as a Catalyst for YFI Price Increase

Since announcing the launch date of veYFI, the YFI token has yet to begin pricing in this catalyst. The market, however, has begun to show some strength against the majors as traders become more aware of the event, and we believe that the launch of veYFI has the potential to be a major catalyst for YFI for several reasons:

• Increased demand for YFI: veYFI is a locked version of YFI, so users will need to purchase YFI in order to lock it and earn boosted rewards. This could lead to a significant increase in demand for YFI.

• Improved governance: veYFI will give YFI holders more control over the future of Yearn Finance. This is likely to make the platform more attractive to users and investors.

• Increased rewards: veYFI holders will earn boosted rewards on their YFI. This could make YFI a more attractive investment for users and investors.

• Network effects: The launch of veYFI is likely to attract even more users and investors to the Yearn Finance platform. This could lead to further growth and innovation at Yearn Finance, which could benefit all YFI holders.

Wrapping Up

The launch of veYFI has the potential to be a major catalyst for YFI for several reasons, including increased demand for YFI, improved governance, increased rewards, and network effects.

The rollout is a positive development for Yearn Finance and YFI holders and represents another step towards the vision outlined in YIP-65. It has the potential to increase demand for the token, improve governance, increase rewards, and create network effects. As a result, veYFI could be a major catalyst for a price increase in YFI.

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