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Yearn Finance has overhauled its tokenomics and introduced a vote escrow mechanism. Stakers have the option to convert their YFI tokens into non-transferable veYFI tokens by locking them up for durations ranging from one week to four years. Users can stake vault tokens to earn YFI rewards, represented as dYFI, which can be redeemed for discounted YFI tokens.
For those who commit to locking their YFI holdings for more extended periods, up to four years, they will enjoy enhanced rewards. While users have the flexibility to exit their positions before the lock-up period concludes, they will face penalties of up to 75% of their rewards.
Yearn has been grappling with maintaining its market share, especially as on-chain activities increasingly migrate to Ethereum Layer 2 solutions with cheaper gas fees. The surge in gas fees on the Ethereum mainnet during the bull market was a pivotal factor behind the widespread adoption of yield aggregators such as Yearn.
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