YF Link ($YFL): Combining the best of Chainlink ($LINK) and Yearn Finance ($YFI)?

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YF Link ($YFL) combines Chainlink’s $LINK token with Yearn Finance $YFI’s yield farming/liquidity mining mechanics. The premise of this project was so it would be adapted it for use by Chainlink enthusiasts, known as “Link Marines”. Considering the LINK token itself has done quite well in 2020 so far with prices going from $2 to $15, both Link Marines and other cryptocurrency enthusiasts, of course, are interested in what YF Link is and what it had to offer. So in this article, we will take a look at the background of YF Link, the functions of, and how to get their native $YFL token.

Summary

  • YFLink ($LINK) is a fork of Yearn.Finance ($YFI).
  • It was created to incentivise and benefit ChainLink ($LINK) enthusiasts (Link Marines) since LINK tokens were required to be locked up to generate yield.
  • An automated market maker platform known as Linkswap is currently in development by the Team. It will be highly community-based and have more unique features and benefits to further incentivise YFL and LINK holders.

Background and History of YF Link

YF Link was forked from Yearn.Finance’s ($YFI) Yearn contract by switching it to accept LINK instead of yCRV tokens. It is a community-based project started by Chainlink enthusiasts, specifically, by a “Bobby Shaftoe” and 4 other anonymous developers who announced the existence of the project and its details in a Medium post “The Idea of YFLINK is Born” on 7th August 2020. Since LINK tokens were required to be locked up to generate yield, it is thought that the launch of YF Link had a positive influence on LINK prices as the demand for these tokens increased. Indeed in the few days following the Medium post, prices for $LINK almost doubled.

YF Link in a nutshell (Image credit: YFLINK)

Precursor – Yearn.Finance ($YFI)

The precursor to YF Link, Yearn Finance (YFI), was launched by Andre Cronje on 17 July 2020 as an experiment in yield farming and liquidity mining. It works by allowing the users to provide funds to a smart contract, which are then automatically distributed between dYdX, Aave, and Compound lending protocols, optimized for maximum yield.

In return, the users earn yield profits and acquire YFI tokens. The YFI token is used for governance. The total YFI tokens in existence are 30,000.

Learn more about Andre Cronje’s insights on the DeFi space in his interview with FTX exchange.

How does YF Link work?

YF Link’s YFL token provides liquidity to LINK pools on multiple Decentralised Finance (DeFi) protocols such as Aave, Balancer, and Curve Finance. Users provide funds by depositing them into these protocols, which then generate yield profits for the depositors. These users i.e. liquidity providers also receive YFL tokens as a reward, in turn, these YFL tokens can be traded on exchanges such as Uniswap.

The amount of rewards depends on the amount of liquidity provided and the duration which they are staked. And although users funds are locked in, they can be withdrawn at any time.

Alternatively, some people simply speculate on YFL tokens and trade them on exchanges.

The Concepts

The two underlying concepts used in YF Link are yield farming and liquidity mining. They both work together in synergy to incentivize users to provide liquidity. As we will see later, these 2 concepts come together to enable farmers to earn rewards and potentially gain from these activities.

Yield Farming

Yield farming is a method of using otherwise idle assets for beneficial purposes. It involves taking assets from users, lending them to different protocols, in exchange for gaining more assets than initially provided.

Liquidity Mining

Liquidity mining is a variation of yield farming, which allows liquidity providers to gain another governance asset, alongside their usual yield rewards.

The YFL Token

The $YFL token is the native token for YF Link with a maximum supply of 75,000 tokens. It must be noted that even creators of YF Link have said that the token should be valued at ZERO.

The YFL token is supposed to be used for governance purposes, i.e. it lets holders submit proposals to vote and make decisions. For example, one of the first governance proposals is to have a LINK meme competition.

At the outset, a total of 6 pools were emitting YFL tokens, with various parameters. The emission of tokens will last around 15 weeks with most of the emissions occurring in the first 4 weeks. After the YF Link contracts were deployed, the creators burned the contract keys so that no one can change this emission schedule.

YF Link Pools: What’s the difference?

As mentioned in the above section, when the YF Link contracts were first deployed, a total of 6 pools would emit YFL tokens. Note that as at 22 August 2020, pools 0, 1 and 2 have exhausted their YFL rewards, this means you cannot mint any new YFL tokens by staking in these pools.

Pool 0 also called the Genesis pool (15,000 YFL tokens available)— users provide LINK and YFL is returned. This pool has exhausted its YFL rewards.

Pool 1 LINK Balancer pool (15,000 YFL tokens available)— users provide LINK and YFL is sent to a Balancer pool. Users get BPT tokens and provide them to the YF Link pool. YFL and BAL are then returned. This pool has exhausted its YFL rewards.

Pool 2 yCRV Balancer pool (15,000 YFL tokens available)— uses yCRV. Returns include YFL, BAL, interest from Curve Protocol, and CRV tokens. This pool has exhausted its YFL rewards.

Pool 3 LINK Aave pool (15,000 YFL tokens available)— users provide LINK and deposit it to Aave.com to get aLINK tokens. Then you get those aLINK tokens and deposit it in an aLINK Balancer pool with YFL. From this, users will get BPT tokens which they can stake in the YFL pool. In the end, users can earn YFL, BAL and AAVE interest.

Pool 4 Governance staking pool (20,000 YFL tokens available) — This pool will go live at 26 Aug 2020 at 1400 (UTC). Users have to stake YFL, in order to be able to vote in the Governance contract for the duration of the vote. Users are rewarded with more YFL tokens.

Pool 5 Unintended pool (5,000 YFL tokens available)— the team deployed this pool accidentally. The creators will mine from this pool to fulfill their early mining program obligations and potentially other purposes which are to be announced.

Linkswap: Coming Soon

Linkswap will be an Automated Market Maker (AMM) platform governed by the community and focused on safety and capturing value for LINK holders. In particular it will have several unique features intended to resolve some of the issues with second generation AMMs.

Quantstamp will be conducting the audit of Linkswap in September 2020.

Linkswap teaser
Linkswap teaser (Image credit: YFL Medium)

Linkswap unique features

Impermanent loss reduction

Impermanent loss is a real and painful situation that can result in huge losses. Linkswap attempts to reduce this by implementing Continuous Liquidity Pools (CLPs) based on the work of Thorchain and Blackhole Swap. For this, users will be able to provide liquidity for tokens paired with LINK or /ETH pairs and Linkswap will protect these yields from being offset by impermanent loss. In particular, /LINK pairs will have special reduced Liquidity Provider (LP) fees of 0.25% and will correspondingly result in reduced trading fees (currently 0.30%). LINK pair traders will also enjoy lower than average LP fees.

The team however do acknowledge that the downside of impermanent loss protection will be lesser liquidity mining yields compared to traditional AMMs.

Listing and protocol fee benefits for YFL holders

A common scam in the DeFi ecosystem is to list fake tokens on decentralised exchanges. These fake tokens can be bought with real assets and traders who fail properly verify the contract addresses end up buying these tokens believing that they were the real asset they intended to buy. To counteract this, Linkswap will require listing fee to add a new liquidity pool pairing against /LINK or /ETH.

Ultimately YFL holders benefit from these listing fees. 80% of the listing fees will be distributed to YFL holders that are staking their YFL tokens in the YFL Governance Vault. The remaining 20% will go to the YFL treasury, and how this will be spent is also determined by the governance decisions of YFL holders.

The listing fees will be a USD rate payable in: ETH (USD$3,000), LINK(USD$2,500) or YFL (USD$2,000). As can be seen, there are discounts for payments in LINK and YFL at 16% and 33% respectively.

The Team will also be implementing a “protocol fee” structure. The Protocol Fee will be 0.05% of the 0.30% trading fee. This Protocol fee will be initially allocated as follows: 80% to stakers on the YFL-LINKSWAP Governance Vault, and the remaining 20% to the YFL treasury for future projects.

In true community governance fashion, these fee parameters can all be updated via governance vote without multi-sig approval. So, for example, if the community wants more of the protocol fees to go be allocated to the treasury, it would only require a 20% quorum and over 50% “Yes” votes to pass the vote.

Custom liquidity pairs

This will allow anyone to add any pair to Linkswap without any listing fees or lockup- this can be LINK or ETH pairs, and even non-LINK or non-ETH pairs. However, to do this, they would need to create and successfully pass a governance proposal.

RugLock

This will, according to the Team provide “Proof of Trust” by imposing a minimum lockup period and minimum lockup amount (denominated in USD) on the LP creator. The LP creator can opt for an even longer lockup period and/or lockup amount. In return, the LP creator will get an increasing listing fee discount, which can be up to 100% discount on the listing fee.

The YFLink team are also teasing a feature called “RugLock Score” which will incentivise communities and other LPs to add additional liquidity. More details will be released soon but for now it seems like the RugLock Score will be displayed for each pair so that users can do their own risk assessments. There will also be a list of top RugLocked liquidity addresses for each pair.

Conclusion

YF Link is an interesting variant of Yearn.Finance. It is likely to enhance the utility and the liquidity of the LINK tokens as well. Some analysts are even terming it the “missing link” between the two most widely used DeFi protocols – Chainlink and Yearn.Finance.

Since its deployment, the project has functioned normally without any bugs or exploits. It has amassed an impressive Total Value Locked (TVL) in a short period of time. It may even become the go-to protocol for people looking to stake LINK tokens for rewards in the future.

Decentralised Finance (DeFi) series: tutorials, guides and more

With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. We also take a deep dive into popular DeFi topics such as Yearn.finance ($YFI), Balancer ($BAL) and ($COMP).

The DeFi series on this website also covers topics not explored in YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

Learn about Yearn.finance ($YFI) and all its various hard forks and iterations:

For in-depth information other specific DeFi projects, check out our DeFi token guides:

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The information provided in this article is intended for general guidance and information purposes only. Contents of this article are under no circumstances intended to be considered as investment, business, legal or tax advice. We do not accept any responsibility for individual decisions made based on this article and we strongly encourage you to do your own research before taking any action. Although best efforts are made to ensure that all information provided herein is accurate and up to date, omissions, errors, or mistakes may occur.

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