Yearn.Finance vs Compound: What to expect in terms of Liquid Staking Returns?
YFI-BNB liquidity pool offers roughly 22.58% APY in returns, and on the other hand, the ETH-COMP liquidity pool on Okto App provides 6.03% APY in return as of press time.
27 FEB 2023, 4 min read
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What is Yearn.Finance?

Yearn.Finance is one of the most unique decentralized application (dApp) projects in the DeFi industry. yearn.finance is essentially a group of protocols that are running on the Ethereum blockchain network that allows users to optimize their earnings on crypto asset holdings through lending and trading services.

As a  dApp, it provides all its features, services, and products in a completely decentralized manner, purely based on code, removing the need for any financial intermediary like a bank or custodian. To achieve this structure, it has built up a system of automated incentive mechanisms that are doled out through the use of its native crypto token, YFI.

The yearn.finance dApp provides access to a bunch of products across various sections, that includes the annual percentage yields table (APY), which lists out the various interest rates across different lending protocols, and also Earn - which identifies the highest interest rates for users to take advantage of by lending their crypto holdings. It also offers other features like Vault, and Zap to help traders in the space.

YFI has also been in the news lately as it has teased a new liquid staking product on its platform.

Yearn.finance is a DeFi platform that attempts to capitalize on the practice of 'yield farming' that is practiced by many crypto market veterans. It is a process where users lock up their crypto asset holdings in a DeFi protocol in order to make some passive income from their idle crypto holdings.  

Yearn.Finance has a total-value-locked (TVL) in DeFi of $424.19 million on the Ethereum blockchain alone and combining all the rest, it goes up to about $445.38 million!

Read more: Ethereum Shanghai Upgrade

Yearn.Finance Total-Value-Locked (TVL) | Source: DefiLlama

What is Compound?

Compound is another DeFi application that runs on the Ethereum blockchain network with the objective to incentivize a distributed network of computers to operate a traditional money market. In effect, it is a decentralized solution to allow users to lend or borrow crypto over the blockchain and is run with the help of its native governance token, COMP.

Similar to yearn.finance, Compound's DeFi protocol allows users to earn some extra passive income out of idle holdings by depositing them into lending pools to be accessed by other borrowers. Similar to any other lending and borrowing business, lenders earn interest from the borrowers depending on the amount being lent and the predetermined interest rates. Being a dApp, this service is facilitated in a decentralized manner wherein once a deposit is made Compound issues a new crypto called cToken, which could be cETH or cBAT, depending on the coin being put into the pool. This enables the creation of liquidity within the system and ensures lenders can pull their money out whenever they want to if need be. This process is completely automated via smart contracts built into Compound.

Compound has a total-value-locked in DeFi of $1.94 billion on the Ethereum blockchain.

Compound Finance Total-Value-Locked (TVL) | Source: DefiLlama

So what is the difference between yearn.finance and Compound?

The primary difference between these two decentralized finance (DeFi) protocols is in the way they function. While both are decentralized platforms that are run by a decentralized autonomous organization (DAO), the way these two protocols carry out their lending and borrowing in DeFi mechanism is different.

Alongside that - we can see that both these protocols have a large difference in their TVL in DeFi, and while that is a factor to be considered while choosing which one to go for, it must also be noted that while Compound was launched back in 2017, yearn.finance was launched as recently as July 2020.

So, how can you earn from the world of DeFi?

If you have read this far - you are probably either one of two categories of people. One, you want to know how you can participate in the world of DeFi, or two, you have COMP or YFI tokens and you want to know how you can earn some passive income out of them. You're in the right place for both of those!

To participate in the world of decentralized finance, all you need to do is have a DeFi crypto wallet, like Okto - where you can purchase and store your crypto assets safely with the self-custodial feature.

And if you're a part of the second category, you're in the right place too! Okto currently offers access to liquidity pools for both Compound and yearn.finance!

As of writing this article, YFI-BNB liquidity pool offers roughly 22.58% APY in returns, and on the other hand, the ETH-COMP liquidity pool on Okto App provides 6.03% APY in return as of press time. So you have a lot of options to fully utilize and capitalize upon your idle crypto assets!

Values as on 27 February 2023.

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