Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
Out of hundreds of DeFi platforms, many overlap in function and purpose. This makes it difficult to navigate the DeFi ecosystem to get the highest interest rate for your crypto deposits. Yearn and Pickle Finance cutting a deal is the first sign of DeFi consolidation, ultimately benefiting the end-user.
Yearn-Pickle Merger Comes Out of Exploit Support
Over on his Medium blog post, the South African blockchain developer and creator of Yearn Finance, Andre Cronje, announced close cooperation with Pickle Finance. Both DeFi protocol developers will join forces to avoid working on the same issues. Instead, they will use their blockchain expertise to expand the strengths of each protocol.
If there is a will for cooperation, it makes perfect sense to do this. Smaller development teams, even more so on an individual level, have much to gain from joining up. Instead of being satisfied with the diffused state of DeFi with lots of samey protocols and rewards, combining forces to make a more enticing and stable platform is the way to forge DeFi’s future.
The merger of Yearn and Pickle protocols will occur after Yearn upgrades to V2. Then, new tokens will launch – CORNICHON and DILL. The latter token will be earned by locking Pickle tokens, which gives the owners of locked tokens a veto voting power. The CORNICHON will have a different purpose, distributed to those who lost nearly $20 million worth in DAI, in the recent Evil Jar exploit attack on Pickle Finance.
According to 0xPenguin, moderator of Pickle Discord channel, this attack spurred the Yearn-Pickle merger:
“The idea of the merger, and the long-term benefits to everyone – investors, community members and developers – emerged during the process of working with the Yearn team in the investigation of the exploit.”
What is Pickle Finance?
The goal of Pickle Finance is to streamline the DeFi user experience, by having everything one needs to automate yield strategies on a single platform. Previously, one could just visit Aave or Compound to let the smart contracts do the yield farming work. However, these represent static investment strategies, inevitably outdated.
With Pickle, you place your funds/tokens in Pickle Jars, which serve as deposit pools from token exchange protocols like Uniswap. Then, you have at your disposal a wide range of automated investment strategies to execute for maximum gains without the risk of losing your principal.
Unlike Yearn Finance, with its limited supply of 30,000 YFI tokens, Pickle Finance has an inflationary supply model, following a strict emission schedule of PICKLE tokens. This gives Pickle an effective tool to shape the incentives for its users. Although launched on September 11, Pickle Finance brings much-needed innovation to make DeFi activities accessible and time-saving.
As such, it was a good candidate for Yearn Finance.
Coming Synergies Between Yearn and Pickle
After Yearn launches its next big upgrade, V2, it will share its total locked value (TLV) with Pickle – amounting to about $464 million combined. The best feature of Pickle – Pickle Jars – will merge with Yearn, becoming Yearn vaults, integrated into the new V2 design.
In turn, through newly-introduced Reward Gauges, Pickle users will be able to earn rewards from Yearn depositors. As far as Pickle’s inflationary supply goes, the token emission schedule will remain on track. Pickle Developers will be further incentivized by earning a 10% performance fee.
Yearn Finance Token Ahead of Bitcoin
As you can see from Yearn’s market cap and coin price, YFI tokens surpass even Bitcoin at $23k, which is not followed by Yearn’s market cap.
This means that YFI price is an artifact of Yearn’s deflationary strategy, by having an unusually low finite pool of only 30,000 tokens. Comparatively, booming Bitcoin has a finite pool of 21 million tokens. In other words, it would be prudent to not judge Yearn Finance by the price of its token, as it was an intentional psychological strategy, derived from a small supply limit.
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions.