$YFI YINSURE - KYC Optional Insurance

Gems from @DeFiGod1 on Twitter regarding yInsure and YFI in general.

Introduction

Information below originally shared by @DeFiGod1 on Twitter. It's here because few understand, but this is the way.

Any commentary from myself or otherwise noncanonical information will be indicated as such.

I don't care about the details, just how does it make money?

Insurance providers receive passive income in the form of insurance premiums. Insured users receive coverage on the monetary value of assets they insure.

yInsure Offers A Non-KYC Insurance Option

Insurance offerings in DeFi's current state are still quite sparse, with NXM really being the biggest player right now.

However, NXM requires KYC which is problematic if you are running the largest dark-net market in the world in the basement of a Cambodian whorehouse and value your privacy. Not pointing any fingers, just saying. Well, with yinsure you can now get insurance with no KYC.

How does yInsure work?

  1. Insurers will deposit an asset (likely a stablecoin like USDC) into the insurance vault and in return receive yiUSDC.

  2. Users desiring insurance will deposit the asset to be insured (LINK, for example) and will receive yiLINK.

  3. In the event of a claim the insured will stake their yiLINK and upon a governance vote will receive the USDC from the insurers.

Fees?

Obtaining insurance will require a 0.1% initiation fee and also require ongoing premiums of 0.01% (weekly).

(Editor's note: On $100,000 of assets, that would be $100 initial and $10 a week!)

This is all subject to change by governance ($YFI holders) of course.

Insured assets means I can't get that sweet yield, right?

You may think wait, if I need to deposit my LINK to the vault doesn’t that eliminate the purpose of insurance because now I can’t do anything with my LINK.

Wrong.

You can deposit any tokenized asset to be insured, thus, all you would do is deposit aLINK or yaLINK to the vault in order to obtain insurance.

You would take your ERC-20 Jason Parser deposit it to AAVE and receive aLINK, which is an IOU for your Jason Parser token.

Then you would deposit the aLINK to the iearnfinance aLINK vault, which would be optimized to continuously purchase more LINK.

To obtain insurance for the monetary value of your LINK you would take your yaLINK and deposit it to the vault to receive yaiLINK.

All without KYC.

What's up next for YFI?

They (Andre) are also building yliquidate (automated liquidation engine), yleverage (stablecoin leverage trades), and yswap (AMM) among others.

DefiGod's Take On YFI In General

Our explainer I wasn't good enough? Oh my...

Here's DefiGod's, formatted for readability.

(Original Twitter thread posted here, August 2nd, 2020.)

From the beginning

The @iearnfinance y pool launched on @CurveFinance in February.

This pool has consistently been the most liquid pool on the biggest stablecoin DEX since it launched.

The y pool currently has around $230m in liquidity locked.

A Honest Ol' Farmer Grows Up

During the initial YFI farming phase it (y pool locked liquidity) was upwards of $500m. The y pool is a lending aggregator and it automatically shifts stablecoins between AAVE, Compound, and dydx.

This gets you the highest yield in DeFi on your stablecoins and is built with the power of smart contracts.

Lending providers earn roughly 10.4% APY, and the pool itself accrues roughly $60k in earnings weekly to the iearn protocol.

Since then, @iearnfinance has been creating an entire suite of products focused #DeFi yield farming.

This led to the launch of YFI, which is a governance token that overseas the entire iearn protocol.

YFI holders - through governance - ultimately determine how protocol earnings are allocated, and if any incentives are to be generated (YFI inflation).

A Selfless Sacrifice From Andre

Instead of allocating a large portion to himself or solicit VC funding @AndreCronjeTech chose to give away control of this protocol, which was already earning $60k weekly, and IMO is a $1b+ protocol.

Andre Genius Moves (cont.)

YFI couldn't be purchased, there was no premine, the only way to obtain it initially was to "farm" it by providing liquidity to the y pool on curve.

He also made an ingenious way to farm several tokens at once: $BAL, $CRV, $YFI.

This is in addition to earning interest on stablecoin deposits and yCrv trading fees. During the initial $YFI farming phase the APY was 10-16% per week when factoring in the $YFI rewards.

This is 1m DeFi IQ.

@AndreCronjeTech stated in the initial blog post that it was "valueless" and had "zero financial value"...

but that was an IQ test and smart money knew right away that a token controlling a protocol with $400m TVL locked and earning $60k weekly was not worthless.

Satoshi Similarities

This is essentially the fairest, most decentralized launch since $BTC, and has quite a few similarities.

Genius lone founder, no premine, no VCs, only earned through mining, and technological complexity only deeply entrenched participants would understand.

Further Implications For Future Protocols And Opportunities

There are only 30k YFI tokens in existence, making it incredibly scarce and nearly no large holders will sell their shares - they can just hold and earn a % of protocol fees which are almost guaranteed to grow as new products are released.

This is an absolutely gamechanger and will result in tons of capital being locked in the iearn ecosystem.

Why deposit USDC on Aave when you can deposit to the yVault and have it be used to farm strategies that are yielding multiples of the interest rate you would earn on Aave?

The implications of this are that @iearnfinance has now just raised $200m+ in liquidity to do as it pleases.

There is going to be hundreds of millions of dollars allocated to yVaults that will be used to farm the most optimal opportunities in DeFi.

Almost any new liquidity incentive program now will be dominated by @iearnfinance as they will be the largest liquidity provider and will farm a substantial amount of any rewards.

This was already seen first hand with the YFI forks: YFII, YFFI, etc.

The positive feedback cycle which will MOON YFI

As more capital is locked, the iearn ecosystem will generate more yCrv fees. This will boost earnings.

As earnings of the ecosystem grows, investors and speculators will purchase $YFI to gain a % of the protocol fees.

As $YFI starts pumping, LPs will deposit more capital to iearn products to receive the high APY (assuming $YFI inflation restarts).

A positive feedback loop will boost the TVL to very high numbers. You didn't fall for the "token is valueless" fud did you?

"Smart Money" Is In, Why Aren't You?

Smart money figured this out weeks ago. A self-identified user named yfi_whale on the governance forum is a collective group of individuals that farm based on optimal farming opportunities.

Some deeper research indicates that they are a professional MM and trading firm.

Smart Money Example 1

Here is another interesting purchase. $1m spent to buy ~300 YFI at $3k. Likely a VC fund. Why would they buy a purportedly "valueless" token for nearly $3k?

Because they figured out everything outlined and above.

TX 1 and TX 2

Smart Money Example 2

This is smart money and they have been accumulating heavily. Here’s another interesting holder: 17m LEND. They were purchasing YFI hand-over-fist a few weeks ago, even when YFI farming was on-going.

Are all these whales – who are heavily entrenched in DeFi – wrong?

Unlikely.

This is a $1b+ protocol and the centerpiece of DeFi.

An automatically optimizing high-yield divided mutual fund. Except without the high expense ratio, is completely permissionless, and no KYC required.

Built using $LINK oracles and secured on the $ETH blockchain. All you have to do is buy 1 $YFI now and next year you will be able to buy a harem of waifus.

(Editor's Note: Since posting, the yflippening has occurred, and as of 8/19/20, one YFI is more valuable than one BTC.)

I'll dig more into the yswap product offering in the near future.