The success of yEarn’s YFI token is rapidly spurring a crop of copycats, with varying degrees of legitimacy. Some of them have turned to be outright scams, others have already gone inactive, while one is being celebrated as the first successful Chinese DeFi token.
Since many DeFi protocols are forkable and the barrier to entry for competitors is low, it wouldn’t be surprising if, as the market enters a new stage, more copycats show up to get a piece of the $4.3B of total value locked (TVL) DeFi pie.
YFII, from China with love
yfii.finance launched the YFII token on July 26 as a fork of YFI, yEarn’s token. The fork includes the upgrade proposal YIP 8, which didn’t pass YFI’s governance. The update doubles the total supply up to 60K and adds a halving mechanism similar to Bitcoin.
The inside story of YFII: China’s celebrated DeFi knockoff
The Chinese DeFi token instantly faced headwinds as part of the community went vocal about the project being a scam and Balancer decided to blacklist it. With $20M in its liquidity pools, the move raised questions about how decentralized DeFi is and whether all of the DeFi platform’s components should be fully trustless or not.
The pool was relisted and yearn.finance deployed a strategy to farm YFII using Curve’s y pool.
YYFI, the first DeFi exit scam
YYFI was launched July 29 as yet another YFI token copycat but was quickly identified as a scam. Once the fork got enough liquidity, the owner minted 1M YYFI and started draining the Balancer Pool.
The risk of YFI creator Andre Cronje minting an unlimited number of tokens since he was the sole owner of the contract was raised within hours after its launch. But Cronje handed control to community members to protect from that risk.
C.R.E.A.M & WIFEY
Wifey.finance, which announced its WIFEY token on Monday as a “YFI clone that gives you the most,” joined forces with the C.R.E.A.M protocol for the distribution of the token —“wifey” is a play on the way some pronounce YFI. C.R.E.A.M is the first project that forked Compound’s lending protocol specifically to leverage the yield farming trend.
Here’s how WIFEY distribution works: Users stake funds to the Curve yCRV pool and receive yCRV tokens in exchange. Then they supply their yCRV to C.R.E.A.M and receive crYCRV tokens in exchange. Finally, users stake their crYCRV tokens at Pool 1 in wifey.finance and, well, get WIFEY rewards for providing liquidity.
As DeFi keeps attracting capital and yields remain attractive, more protocols are bound to get forked. The impact is already being felt across governance systems, incentive mechanisms designs, and even in the political decisions that have to be made when choosing whether a given project can leverage other Ethereum protocols to gain traction. DeFi is getting riskier, and investors must be cautious when interacting with forked protocols that promise to deliver high yields. Even the best talents in the space can get “rekd.”
Luckily, these kinds of experiments will push DeFi harder and help it evolve towards a more stable and reliable system that can gain mass adoption.
By Sebastian Aldasoro
[This story was written and edited by our friends at The Defiant, and also appeared in its daily email. The content platform focuses on decentralized finance and the open economy and is sharing stories we think will interest our readers. You can subscribe to it here.]