There’s no doubt that yield farming is one of the hottest use cases for DeFi as it enables users to earn a passive income by putting their idle cryptoassets to work in high-yielding farming opportunities.
As such, a myriad of automated yield-farming protocols have emerged, two of which have been battling neck and neck for months on end to be viewed as the number 1, de facto yield farming protocol.
These protocols I speak of are; Harvest Finance (FARM) and Yearn Finance (YFI).
Even though Harvest Finance was originally inspired by Yearn Finance and launched 1 month later as an underdog competitor, it has since innovated on the automated yield farming model beyond all expectations.
Harvest is now genuinely competing with its predecessor on multiple levels and while they started out nearly the same, Harvest has since dialed in and perfected its yield farming protocol.
Harvest offers lucrative $FARM incentives through a variety of pools and the ability to maximize profits with its Profit Sharing Pool. Harvest also offers the most yield farming strategies with the highest yields and lowest fees in the industry.
Meanwhile, Yearn is dominating the DeFi ecosystem by expanding its product offering to different segments like insurance, lending, and more.
All in all, it's safe to say the competition between these two protocols is heating up and it's time to put them in the ring together and see how they stack up against each other.
So, let’s get ready to rumble.
Round 1: Total Value Locked (TVL)
Winner: Harvest
Naturally, one of the most fundamental metrics when measuring the current success of a yield farming protocol, or any DeFi protocol for that matter, is the total value locked (TVL) in the protocol.
After all, the core purpose of an automated yield farming protocol is to earn users a yield on their deposited funds. Therefore, the service with the most capital under management can be considered to be the most dominant.
That said, let’s crunch the numbers and see who wins this round.
Harvest Finance TVL: ~ $600M
Harvest.Finance website homepage
As of February 1, 2021, Harvest has nearly $600M in TVL and if you look at its historical data from Harvest Dashboard ( see top right corner), you can see that Harvest is steadily growing at a healthy rate since its inception in August 2020.
Yearn Finance TVL: ~ $500M
Yearn.Finance website homepage
As of February 1, 2021, Yearn has just over $500M in TVL and if you look at its historical data from DeFiPulse, you can see that Yearn’s TVL peaked in September 2020 at nearly $1B and has since retraced significantly but is showing steady growth once again.
For this round, I think it's pretty clear that Harvest Finance is the winner as it leads in TVL and is showing a more consistent growth trend. Note that TVL for harvest on defipulse seems to lag behind.
Round 2: Available Strategies
Winner: Harvest
Another key fundamental metric when it comes to measuring the success of a yield farming protocol is its number of available strategies and percentage yield on said strategies.
While Yearn has the first-mover advantage and has established itself as a market leader in the realm of DeFi yield farming, Harvest has gained its recognition through its wide range of high-yielding farm strategies.
Harvest.Finance Strategies and APY % Yields
As you can see, Harvest has a lot of different strategies, 43 active ones to be exact. And all of Harvest’s strategies come with a different APY % and varying levels of risk. Harvest’s APY percentages range between the single digits, double digits, and even triple digits +.
There is literally something for everyone, and the reason Harvest can offer so many strategies is because they integrate with such a wide range of platforms:
Harvest Finance Integrated DeFi Platforms
As for Yearn Finance, they have quite a few strategies as well; 28 active ones to be exact with APYs ranging from 2% all the way up to 60%.
Yearn.Finance Strategies and APY % Yields
Comparing Yearn’s strategies to Harvest’s, it's clear that Harvest offers many more with varying APY % yields, some of which are extremely high.
That said, Yearn can be thought of as a more “conservative” yield farming platform, while Harvest offers both conservative yield farming and something for true DeFi degens as well.
Overall, with the number of strategies and levels of diversification and risk, Harvest Finance wins this round as well.
Round 3: Network Growth
Winner: Yearn
While both protocols are competing closely in terms of TVL and offer a nice range of strategies and APYs, Harvest Finance has managed to steal a 2-0 lead thus far. However, in this next round, Yearn has a few tricks up its sleeve.
In this round, we evaluate the important on-chain metric – network growth – the number of active users and wallets interacting with the protocol.
Network growth is such an important valuation metric for DeFi protocols as it divulges their real-world interest and ultimately their success. Said another way, a healthy growing network generally benefits other metrics used in valuing DeFi protocols.
Network Growth - “new active wallets” for Yearn Finance (Pink) and Harvest Finance (Green) – Time period is October 2020 - February 2021
The chart above shows the number of new active wallets interacting with Yearn (pink) and Harvest (green) on a daily basis. As seen, Yearn usually gets 10x more new wallets interacting with it daily than Harvest.
Therefore, Yearn proves to be more popular than Harvest as a DeFi protocol because it attracts a greater number of new users (wallets) on a daily basis.
However, if you look only at the 2021 timeframe, notice how Harvest’s network growth is in an uptrend while Yearn’s is declining:
Network Growth for Yearn and Harvest (time period 2021 only)
Though Yearn wins out this one, it’s clear that Harvest is chipping away at its competitor.
Round 4: Market Cap / TVL Ratio
Winner: Unclear
Yet another common on-chain valuation metric for DeFi protocols like Yearn $YFI and Harvest $FARM is the ratio of market capitalization over the total value locked (TVL) of said asset.
This ratio can be helpful in determining whether a token is undervalued (has more room to grow) or if an asset may be overvalued (less room to grow).
For instance, a token with a high Market Cap/TVL Ratio (close to 1 OR over 1) may be overvalued in comparison to a similar protocol with a lower Market Cap/TVL Ratio. Or, in some cases, it might just mean that the market has lower growth expectations for the token (and vice versa).
Now, to be clear here:
An asset’s market cap is the price of its token times the token’s circulating supply:
market cap = price * circulating supply
An asset’s TVL is the capital deposited into its platform, the total value locked (TVL)
To get the Ratio, you simply divide the Mcap by TVL:
Ratio = Market Cap/TVL
Without further ado:
Harvest’s Market Cap/TVL Ratio = 0.17
(Source)
Yearn’s Market Cap/TVL Ratio = 1.8
(Source)
Based on these ratios, Yearn is considered to be severely overvalued (or has low growth expectations) as its ratio is well over 1, in fact, it's almost 2.
Harvest, on the other hand, is considered to be severely undervalued (or has lots of room to grow.)
Now, before we call a winner here, let me first point out that this metric is subjective. On one hand, you might say Yearn is the winner because its market cap is much higher. On the other hand, you might say Harvest should win because it has a smaller market cap with more room for growth.
At the end of the day, you could make arguments for both cases. That said, we’ll call this round a draw.
Round 5: Market Cap / TVL Ratio
$FARM (green) & $YFI (brown) on a 2021 timeframe
As Defi season blooms, both tokens perform pretty well. Let's examinate their 2021 performance in terms of % growth.
- $FARM started 2021 @ $76.66 and today it hovers @ $240 = 213% increase
- $YFI started 2021 @ $22,356 and today it hovers @ $30,878= 38% increase
Winner: $FARM
Title Goes to…
While Yearn Finance still remains dominant, the growth of Harvest Finance in recent weeks/months and its competitiveness in the market is a strong indicator of an increasing product-market fit.
The end results of today’s fight? $FARM wins 3:2.
Yearn won out on the all-important network growth metric and blew Harvest out of the water in terms of its market capitalization. While Harvest won big on the sheer number of high-yielding farming strategies available, won by just a hair on the protocol’s TVL but also made big on its token price performance in 2021.
