In brief

  • Ethereum users are lauding a new Yearn Finance product, yETH, launched today.
  • yETH automatically generates the highest interest or “yield” across DeFi protocols when users stake Ethereum holdings.
  • Traders believe that demand could be huge, and may even create a "liquidity crisis" for Ethereum's token ETH.

Launched just hours ago, yETH is a new product, from the Yearn Finance stable, that allows its users to automatically generate the highest interest or “yield” across decentralized finance (DeFi) protocols when they stake Ethereum holdings.

yETH is a so-called “vault,” which means that users earn yields together. It was voted in by the community last night, and early signals about its effects are extremely bullish.

“Anyone who owns ETH can earn the best yield automatically by HODLing yETH,” tweeted Alex Saunders, founder of crypto intelligence site, Nugget News. “It could also mean other protocols find it harder to compete with Ethereum when offering staking rewards,” he added. 


Others predicted that, with the advent of yETH, the total value of cryptocurrency “locked” into DeFi applications, and used to create liquidity or to gain a yield would rocket even higher. Known as Total Value Locked—TVL, the amount of crypto locked in DeFi topped $8 billion over the weekend, and has doubled over the past month. 

Since Yearn Finance came on the scene, its governance token, YFI, has been on a tear. Over the weekend, its value grew from $14,300 to over $38,000—thanks, in no small part, to the low total supply of 30,000 (compared to Bitcoin’s 21 million). Now, traders believe the addition of a yETH vault promises to supercharge the DeFi space some more. 

“The sheer amount of eth that is going to get locked up in this @iearnfinance yETH vault I feel will be astronomical, not only bullish for $yfi but the juggernaut $eth itself,” tweeted one trader. 


But others speculate that the large amount of ETH the vault is likely to attract could present Ethereum with a supply-side liquidity shock—especially when combined with the upcoming launch of the base layer, Phase 0, of the Ethereum 2.0 upgrade. 

“The yETH vault from @iearnfinance is going to be a black hole for ETH,” tweeted Anthony Sassano, product marketing manager at Set Protocol. “That is, once ETH goes in, it is going to be very hard for it to come out, he explained. 

On the surface of it, that’s not such a bad problem to have? 


The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

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