Thread by @korpi87

1) @iearnfinance TVL crossed $3B. This is a big milestone. It grounds Yearn's 1st place in the competition between yield aggregators - amazing achievement taking into account that it's the only protocol which doesn't incentivize TVL by issuance of its native token $YFI.

2) With hindsight, I think that distribution of total $YFI supply in a single farming event last summer was a big hurdle for the development of the protocol. How can you compete with others who fork your code and add token issuance on top of it to increase APY for users?

3) Yet, this lack of $YFI inflation led @iearnfinance to the place where they are today. They had to be creative to offer competitive returns for depositors. Let's summarize what they did.

4) Firstly, they invented Backscratcher vault to incentivize users to lock their $CRV in @iearnfinance. It created a moat - Yearn has a lot of $CRV locked in Curve which boosts $CRV rewards for their strategies.

More about Backscratcher: medium.com/yearn-state-of…

5) Other protocols simply can't get such high APYs from $CRV farming as Yearn without locking a substantial amount of $CRV in Curve. A really substantial amount. Currently Yearn has 11M $CRV locked!

https://twitter.com/iearnfinance/status/1381793464216653830

6) Secondly, they offered generous incentives for strategy builders to work for Yearn. Yearn collects 2% management fee on assets held in the vaults and 20% performance fee on profits generated by strategies. Half of performance fee (so 10% of profits) goes to strategists.

7) A strategist is a person with skills to develop an automated strategy which generates profits. This person could work solo, for competitors or for Yearn. Economic incentives determine their choice. 10% of profits generated on huge TVL in Yearn vaults are very encouraging.

8) That's why big brains want to work for Yearn, create profitable strategies, bring more TVL and earn more. More TVL means more profits for the protocol too. This is a symbiotic relationship between Yearn and strategists. Big brains collection is another Yearn's moat.

9) Thirdly, they found a smart way to use protocol profits. At the beginning profits were shared among $YFI stakers but it was a bit wasteful. Therefore, 99.5% of $YFI holders who particiated in the voting decided to adopt BABY - Buyback And Build Yearn. What does it mean?

10) Protocol profits are used to buy back $YFI in the open market and utilize it as incentives for Yearn contributors or any other initiatives which can benefit Yearn ecosystem: security audits, bug bounties, grants, gas reimbursement, development overhead, etc.

11) As in any start-up at early stage of development, profits are re-invested to drive growth. But BABY is also a way of transferring $YFI from weak hands to strong hands. Contributors usually believe in the project they work for, therefore, they should hold $YFI with conviction.

12) In my recent tweet I wasn't convinced how growing TVL would affect $YFI price because market is mostly driven by speculation and sentiment. But today I realised that it all adds up and 1 $YFI = 4 $BTC is not really an unreasonable expectation.

https://twitter.com/korpi87/status/1381273490058268676