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What is Yam Protocol? (YAM)

The Beginner’s Guide


The Yam Protocol is a software running on Ethereum that seeks to incentivize a global network of users to operate a cryptocurrency mirroring the price of the U.S. dollar. It does so by using a new crypto asset called YAM. 

In this way, YAM is an example of what’s often called a “stablecoin,” or a cryptocurrency meant to mimic the price of another asset. Popular examples of stablecoins include USDT and DAI.

The software achieves this feat by adjusting the supply of YAM tokens daily in a process called rebasing. Should the price of each YAM token go above $1, then the supply of YAM will rise, driving the price down. If the price is below $1, the supply shrinks, pushing the price up.

In its short life, Yam has helped popularize a concept called decentralized finance (DeFi), in which multiple crypto assets are used together to provide a product or service. 

However, despite the promise of Yam’s premise, it has become somewhat of a cautionary tale, as it has struggled to maintain its dollar equivalency.

What is yam protocol


Ai đã tạo ra Yam Protocol?

Yam Protocol có năm người sáng lập: Brock và Trent Elmore, Clinton Bembry, Dan Elitzer (một nhà đầu tư với IDEO CoLab) và Will Price (một nhà khoa học dữ liệu tại công ty nghiên cứu Flipside Crypto). 

Theo tài liệu của nó, Yam Protocol được tạo ra từ một đoạn mã chắp vá từ các dự án DeFi hiện có, bao gồm Ampleforth, Compound, SynthetixyEarn.

Đáng chú ý là nhóm Yam đã không nhận được bất kỳ YAM token nào khi khởi động dự án. Thay vào đó, tất cả các YAM token đã được phân phối cho những người dùng khóa tiền điện tử để kiếm YAM. 

Tuy nhiên, một ngày sau khi ra mắt phiên bản đầu tiên, một lỗi nghiêm trọng đã được tìm thấy trong mã đảm bảo các khoản tiền được phân phối theo giao thức sẽ bị khóa vĩnh viễn.

Dự án sau đó đã được khởi chạy lại với một phần mềm mới và một token mới có tên YAMv2 trước khi chuyển trở lại YAM trong phiên bản thứ ba của phần mềm.

How Does YAM Work?


The Yam Protocol’s defining feature is its ability to maintain price stability with the U.S. dollar by changing the supply of YAM cryptocurrency available on the market. 

The intended target per YAM is 1 yUSD, yEarn Finance’s stablecoin intended to maximize yield when deposited into its protocol.

Every 12 hours, the supply of YAM tokens is adjusted to reflect the demand for the coin. If YAM demand is high, the price of YAM would be over $1, meaning the supply would need to increase to drive the price down. 

The protocol will either add tokens if the price of YAM exceeds $1.05, or burns tokens if the price drops below $0.95. Of note, is that YAM supply readjustments happen proportionately for all token holders. 

This means if a user holds 1% of all YAM before the supply readjustment, they would still hold 1% of all YAM if the supply increased or decreased in the next 12-hour window. 

yUSD/YAM

Currently, users are able to earn YAM by providing liquidity to the yUSD/YAM Uniswap pool

Those that do so will earn a portion of the rewards given out each week. The protocol was scheduled to release 92,500 YAM in the first week, a reward that decreased by 10% every subsequent week. 

Further, when YAM undergoes a positive rebase, the protocol mints an additional 10% YAM tokens that it uses to sell into the yUSD/YAM pool to buy yUSD tokens.

The purchased yUSD tokens are then deposited into a treasury governed by YAM holders. It is important to note that the treasury uses yUSD because it is a high yield stablecoin, allowing consistent value with exponential growth. 

Yam v2 and v3

The YAM token itself has undergone some changes over time. Because of the bug uncovered after its launch, YAM holders had to move to a new token called YAM v2. However, this new token has no rebasing function, meaning it doesn’t attempt to maintain a stable price. 

The YAM v2 token is used for voting on decisions that govern the protocol. As a result, YAM holders have been able to come to an agreement on various parameters around the system. 

This includes relaunching the original token as a YAM v3 token. The first rebase is expected to take place three days later. 
 


Why Does YAM Have Value?

YAM derives value from its use in the operation of the Yam protocol. 

In addition to serving as a reward for users who lock up assets in the protocol, all owners of YAM tokens can vote on decisions relating to the operation of the software. 

For example, when the Yam protocol went temporarily offline, it was YAMv2 owners who voted on the path forward for relaunching the protocol. 

Others believe that YAM has value because it was launched to the market without any initial sale that allocated a portion of its supply to big investors. 

Rather, YAM had value because it was an interesting new way of launching a stablecoin, users wished to own it, establishing its price on the open market. 


Why use YAM?

YAM may be of interest if you believe in participating in an experimental approach to operating a stablecoin that could become widely used. 

You may also want to hold YAM if you wish to vote on proposals that could impact the future of the software.

Lastly, YAM is useful if you wish to diversify your portfolio of stablecoins. A wide variety of stablecoins exist on the market, many with different mechanisms to maintain their prices. 

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