Yearn Vault Tokens (YVT) are a type of cryptocurrency token used to incentivize users for contributing their assets to Yearn Vaults. Yearn is a decentralized finance (DeFi) platform that seeks to maximize the yield from digital assets by automatically shifting them between protocols. YVTs are distributed as rewards for staking in specific Yearn Vaults, and they can be used to earn additional rewards or buy various services on the Yearn platform.
The YVT tokens were introduced in 2020 and have since become popular among DeFi investors looking for ways to increase their returns on investments. When an investor stakes their digital asset in one of these vaults, they receive a portion of the fees generated by trading activities within it – such as liquidity mining, borrowing & lending, and yield farming – into their wallet address as YVT tokens. The amount of tokens received depends on how much was staked and its duration; longer durations result in higher yields over time.
In addition to earning passive income from staking activities, users can also use YVT tokens as collateral when borrowing funds from other users through peer-to-peer platforms like Compound or Aave. This allows investors with limited access to traditional credit markets an alternative way of obtaining capital without having to liquidate any holdings or take out expensive loans from banks. Furthermore, holders may also use these tokens for governance purposes if the protocol ever decides upon changes that require voting approval from its community members – something that’s becoming increasingly common amongst decentralized projects now days!
Finally, some exchanges allow trading pairs involving YVTs so traders can speculate on price movements if they believe there’s potential upside ahead due either organic growth or increased demand due external factors such risk sentiment shifts amongst crypto investors or new ventures launching which could benefit this particular technology stack overall.