Yearn Finance’s native YFI coin saw a 39% increase in trading volume from Friday to the following week. Developers announced that they are soon introducing a product that will allow users to access a variety of liquid staking derivatives via one token.
YFI jumped from $7,200 earlier in week to over $10,000 on Friday morning Asian hours, climbing to levels not seen in September 2022.
On Tuesday, Yearn developers stated that the token will allow users to access a range of ether liquid staking derivatives. This is as the sector gains popularity among investors.
“Introducing yETH. An LSD of LSDs. You can get exposure to all LSDs with one token. Spread your risk. Increased yields” Yearn Tweet. Yearn didn’t immediately respond to requests for more comment.
Analysts believe that these tokens could help active crypto investors diversify their risk, which may drive demand for YFI.
“yETH essentially spreads risk across Ethereum LSDs while also earning extra yields through Yearn’s large veCRV situation for Curve Pools,” DeFi Maestro, a pseudonymous cryptocurrency investor, told CoinDesk via Twitter. This means that yETH will always yield higher yields than other LSDs, and places Yearn in a prime position to capture large portions of the LSD market which will result in additional fees for veYFI stakers.”
Curve is a stablecoin trading service. VeYFI, veCRV and veYFI are derivative tokens that stakers hold for a time in order to increase platform liquidity and yield rewards.
Understanding Yearn and Liquid Staking
Yearn is a collection of protocols that work in tandem with the Ethereum blockchain. It allows users to maximize passive income on crypto assets by lending and trading. Yearn’s governance token is YFI. It is used to vote for protocol upgrades and the introduction of new products or yield strategies.
Liquid staking is the exchange of staked Ethereum for tokenized versions that can be used in Decentralized Finance (DeFi) applications. These can be used as collateral for loans, margin trading or to earn yield.
LSD has performed well in the last two months, ahead of Ethereum’s Shanghai upgrade. This will allow investors to withdraw their Ethereum blockchain-backed ether. Staked ether can’t be withdrawn at the moment and cannot be freely traded.
As they gained popularity among investors, tokens in this sector such as Lido’s LDO, Stader’s SD, and Rocket Pool’s RPL have seen their prices quadruple over the past few months.
All these tokens can be used to increase yield or protocol governance based on how many tokens an investor holds – which in turn drives value for tokens.