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DeFi Decrypted: What Is DFI Money and YFII?

Did you know that there are four different yEarn Finance (YFI) forks present on the DeFi market? That’s right.

As it can get confusing to know the difference between each, we are creating multiple guides on AAX Academy to help you out.

Today, we will be exploring YFII (also called DFI Money), a popular yEarn fork that has sparked quite some controversy in the crypto space.

Quick Recap on yEarn Finance (YFI)

To understand YFII, it’s essential to know what yEarn Finance (YFI) is and how it works.

Created by Andre Cronje earlier this year, yEarn is a decentralized finance (DeFi) platform that allows crypto enthusiasts to leverage automated yield farming strategies across numerous lending pools (e.g., Aave, Compound Finance).

Yield farming is a trending practice in the crypto space, in which users supply liquidity to DeFi pools while earning rewards on idle coins.

While farmers can choose between multiple pre-vetted pools to stake liquidity, the service automatically moves user funds between various protocols to find the one with the highest interest rates and maximize profit.

Eventually, Cronje handed over yEarn’s governance to the community. YFI, the platform’s native token, was created by the project’s founder solely for governance purposes (e.g., voting on network upgrades and adding new liquidity pools).

However, soon after issuing the cryptocurrency, YFI’s price skyrocketed due to the high interest among traders and investors, jumping to as much as $41,400 in September from July’s $765.

Currently, the cryptocurrency’s supply is capped at 30,000 YFI, with the tokens being distributed among liquidity providers.

What Is YFII (DFI Money) and How Is it Different From yEarn Finance?

YFII or DFI Money is a fork of yEarn Finance. Like most forks in the crypto industry, YFII is very similar to the original chain but with key differences concerning some features.

To better understand this, let’s first explore what has led to the YFII fork.

In late July, a member proposed the YIP 8 proposal to the yEarn community with the goal of increasing the YFI supply with an additional 30,000 tokens to a total of 60,000 YFI.

As per the proposal, the new tokens would be distributed via the halving model Bitcoin uses, reducing the YFI issuance rate every week to decrease inflation.

While the community has already decided to issue new YFI tokens in the future (YIP 0), YIP 8 was rejected. The proposal’s critics stated that Bitcoin’s deflationary model was not suitable for yEarn and the community instead needs to create its own mechanism to combat inflation and issue new tokens.

Soon after rejection, the proposal’s supporters decided to launch a fork and create YFII (DFI Money).

In addition to minting new tokens, developers have implemented Bitcoin’s halving mechanism to YFII with some other minor differences in features compared to yEarn.

Now, the project has attracted numerous users along with multiple centralized finance players, crypto whales, and digital asset exchanges adopting YFII.

Controversy Around YFII

While the crypto community was fine with forked coins during the industry’s early years, forks almost identical to the original chain could raise some red flags now.

And that was definitely the case with YFII since the project shares a 98% code similarity with yEarn Finance, sparking controversy in the DeFi community.

Also, the project was announced by the pseudonymous developer (or group) called “White Noise,” who regularly posts YFII updates on Medium.

An interesting fact about YFII is that the fork is seen as the “eastern” while YFI the “western” version of yEarn Finance. The reason for this is that YFII attracted great attention among Chinese users.

As a result, the project features a vibrant community on the popular China-based WeChat instant messaging app, allowing local players to get conveniently involved in a non-English DeFi project.

However, what made most crypto users suspicious about the project is that initially, the developers left potential backdoors in the protocol’s code. For example, the “governance” and “minter” addresses allowed one to generate an infinite number of tokens.

As a result, the popular Ethereum-based web wallet MetaMask issued a warning to its users about potential phishing activity concerning YFII while the Balancer DeFi protocol blacklisted YFII.

Later on, the community resolved YFII’s issues by burning the owner key, preventing anyone from minting (infinite) tokens without getting a proposal approved by the members.

How Did YFII Perform in Terms of Price?

After the hard fork, it only took YFII a month to enter into a major bull run.

From the initial price of $683 in July, the cryptocurrency surged to $6,883 by September 1, representing a 908% ROI for early investors.

However, between September 2 and 9, YFII took a hit, halving the digital asset’s value.

After a minor bull run from September 9’s $3,351 to $6,108 on September 14, the cryptocurrency’s price has been steadily falling, trading at $2,114 at the time of writing this article.

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