What is Yield Protocol? Yield Protocol is a DeFi protocol built and developed on Ethereum. The protocol allows users to borrow and lend at fixed interest rates. The project is supporting both the Ethereum and Arbitrum networks.
To avoid confusion, you need to note that this is a project dealing with Lending, Borrow and does not have a Token. There is also a project with the same name with the Token code YIELD, which belongs to the Yield Aggregator segment.
To understand this article better, you can refer to the Notional Finance article here.
What is Yield Protocol?
Yield Protocol is a protocol that allows users to borrow and lend at fixed interest rates for a term. Borrowing and lending operations on the protocol through fyTokens assets. ETH, DAI, USDC, FRAX are assets accepted on the protocol.
Mechanism of Action
Lending
To lend at a fixed interest rate, lenders simply purchase fyTokens at a discount from their face value. The discount you receive is equivalent to the interest rate you receive after the selected term. Lenders can also withdraw assets before maturity without penalty.
For example
If on September 31, 2021, the lender purchases 100 fyDAI maturing in December 2021 for 98.8 DAI that is the exchange rate added to the 5% APR that the lender will receive after maturity . Until maturity, the lender exchanges 100 fyDAI to receive 100DAI. Lenders can also exit lending positions early by selling their fyDAI for the underlying asset. Since fyDAI is freely traded, changes in interest rates may affect the amount of the underlying asset received upon early redemption.
Borrowing
To borrow, Borrowers deposit collateral into the protocol and mint new fyTokens based on the collateral. Borrowers continue to sell fyTokens for the underlying token and lock in the borrowing rate. Yield Protocol has a built-in automated market maker (AMM) called YieldSpace to enable efficient trading of fyTokens in the Pool.
At maturity, the borrower must repay the loan to get back the mortgaged property. Of course, it is also possible to repay the debt earlier than the deadline by returning the withdrawn fyTokens. After maturity, if the borrower does not close the loan position, a floating interest rate will be charged to keep the position open.
For example: Borrow DAI with ETH collateral (assume ETH price is $400)
1.The borrower deposits 0.5 ETH collateral (worth $200) into the system. This allows borrowing up to 132 fyDAI of any tenor available.
2.You decide to borrow 100 fyDAI on September 31, 2022 (fyDAI will expire on December 31, 2022).
3.The borrower redeems fyDAI in the Pool for 98.79 DAI. In fact, borrowed 98.79 DAI today and have a debt of 100 DAI due in 3 months. In other words, the borrower borrowed at 5% APR.
4.After maturity on December 31, 2022, the borrower can turn around and repay the 100 DAI debt and get his collateral back.
Liquidity
On Yield Protocol, the liquidity added to the Pool is a pair of the underlying asset and fyToken (e.g. DAI/fyDAI). And the assets supported in the Pool for borrowing and lending are USDC, DAI. People who add liquidity to the Pool will receive fees from borrowing and lending activities. In the Liquidity Pool there are always more fyTokens than the underlying assets so the interest rate is always positive. Interest rates will be calculated based on the amount of underlying assets and fyTokens in the Pool.
Core Team
Alberto Cuesta Cañada: Co-Founder | Technical Lead
- He is a Computer Science and Artificial Intelligence Engineer who graduated from Universitat Politecnica de Valencia.
- After graduating, he started working at Instituto Tecnologico de Informatica as Researcher, Developer and Administrator. After that, he became the Founder of Cygnus Web Design, building more than 10 websites for small businesses. Next, he had a long time working for companies such as Royal Bank of Scotland, Excelian, ANZ, Regional Liaison, Blockchain Architect, Tech HQ, AllianceBlock, OpenZeppelin, Blockchain Expert.
- In 2020 he and Allan Niemerg founded Yield Protocol. He is responsible for smart contract design and implementation as Yield’s Chief Engineer.
Allan Niemerg: Co-Founder
- He studied at the University of Illinois Urbana-Champaign and Chicago-Kent College of Law, Illinois Institute of Technology.
- After completing his studies, he began working at Niemerg Patent Law as Principal.
- Next, he worked at a number of companies such as BrightEdge Solar, Cardinal IP, Richards Patent Law, DRW/Cumberland Mining, DRW/Cumberland, bloXroute Labs.
- In 2020, he and his colleagues founded the Yield protocol and have been operating until now.
Bruce Donovan: Lead Front-End Engineer
- He studied at Rhodes University, successfully obtaining Bachelor’s and Master’s degrees in fisheries science and management.
- After graduating, he started working at the African Environmental Observation Network with the positions of Research Internship, Research/General Contract, Junior Systems Engineer.
- Next, he worked as Product Manager at 4Di Technologies for nearly 2 years, Sales Director and Business Development at ESET East Africa for nearly 2 years.
- In April 2020, he started working for Yield Protocol until now.
Investors
June 23, 2021: The Seed round successfully raised $10M led by Paradigm and several funds such as Framework Ventures, Symbolic Capital Partners, CMS Holdings, Variant, DeFi Alliance.
Tokenomics
Updating…
Exchanges
Updating…
Yield Protocol Information Channel
- Website: https://yieldprotocol.com/
- Twitter: https://twitter.com/yield
- Medium: https://medium.com/yield-protocol
- Discord:
Summary
Yield Protocol also brings a solution to the problem of fixed interest rates on DeFi. But the project has not really been noticed by the community and faces competition from Notional.
So, I have answered the question What is Yield Protocol? Yield Protocol cryptocurrency overview. Hope this article provides you with a lot of useful knowledge.