Yearn Finance creator announces new DeFi credit protocol

Andre Cronje—the programmer behind the successful decentralized finance (DeFi) protocol Yearn Finance—announced an experimental tokenized credit service.

According to Cronje’s Dec. 31 announcement, the new yCredit protocol “allows users to deposit ERC20 tokens and receive a 99.5% USD based credit line represented via the yCREDIT ERC20 token.” He also provided an example:

“If you deposit $100 worth of AAVE, you will receive 99.5 yCREDIT. If you burn 100 yCREDIT you will receive your AAVE.”

What makes this system much more interesting is that Cronje is highly regarded by the cryptocurrency community. As Modern Consensus reported in late September, his projects are trusted so much that when his wallets deployed a contract that he was secretly testing for a new protocol, Eminence.Finance, $15 million was deposited by users who wanted to front-run other investors before he asked for investments.

That led to an $8 million hack, which in turn led Cronje to warn angry punters, “let me be clear, do not use random contracts I deploy unless I reference it in a medium article.”

As for yCredit, Cronje explained that all deposits, trades, swaps, borrows or, repays incur a 0.5% fee. The funds collected through those fees are distributed among users that stake yCredit in its smart contract.

The yCREDIT token also functions as an algorithmic stablecoin, not unlike MakerDAO’s DAI. When yCREDIT’s value is above its $1 peg, users can profit by minting yCredit and selling it for the ERC20 that is above peg. When the token is under its peg, “users can profit from arbitrage by selling the relevant ERC20 for yCredit, and optionally, burning the yCredit to unlock their original minting position.”

The protocol’s tokens can also be used to purchase any of the tokens that are currently employed as collateral in the system.

The crypto assets that can be used as collateral on yCredit are Aave (AAVE), Binance Coin (BNB), Binance USD (BUSD), Curve DAO (CRV), Compound (COMP), DAI, Ether (ETH), Chainlink (LINK), MakerDAO (MKR), Ren (REN), renBTC, Synthetix (SNX), Synthetix USD (SUSD), TrueUSD (TUSD), Uniswap (UNI), USD Coin (USDC), Tether (USDT), Wrapped Nexus Mutual (wNXM), Wrapped Bitcoin (wBTC), Yearn Finance (YFI).