What is Yam Protocol (YAM)?

Yam Protocol (YAM) crypto

Yam Protocol is software running on Ethereum that seeks to encourage a global network of users to operate a cryptocurrency that mirrors the price of the US dollar. It does this using a new encryption feature called YAM.

In this way, YAM is an example of what is often called “stablecoin” or cryptocurrency designed 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 rebase. If the price of each YAM token exceeds $1, the YAM bid will increase, reducing the price. If the price is below $1, the offer shrinks, pushing the price up.

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

However, despite the promise of Yam's premise, it has become something of a cautionary tale as it has struggled to maintain its dollar equivalence.

Who Created the Yam Protocol?

Yam Protocol (YAM) crypto

O Protocol Yam has five founders: Brock and Trent Elmore, Clinton Bembry, Dan Elitzer (an investor at IDEO CoLab) and Will Price (a data scientist at research firm Flipside Crypto).

According to its documentation, the Yam Protocol was created from a patchwork of code from existing DeFi projects, including Ampleforth, Compound, Synthetix and yEarn.

Noteworthy is that the Yam team did not receive any YAM tokens at project launch. Instead, all YAM tokens were distributed to users who locked cryptocurrencies to earn YAM.

A day after the release of its first version, however, a critical bug was found in the code, ensuring that funds destined to be distributed by the protocol would be blocked forever.

The project was later relaunched with new software and a new token called YAMv2 before migrating back to YAM in a third software release.

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 assets in the protocol, all YAM token owners can vote on decisions related to the software's operation.

For example, when the Yam protocol was temporarily offline, it was the owners of YAMv2 who voted on the way forward to relaunch the protocol.

Others believe that YAM has value because it was launched on the market without any initial sale that would allocate part of its supply to large investors.

Instead, YAM had value because it was an interesting new way to release a stablecoin, users wanted to own it by setting its price on the open market.

YAM price

YAM (YAM)
2.23%
17.43
0.388599
⇣ 16.94
May 20
⇡ 17.65

 

How Does YAM Work?

The defining feature of the Yam Protocol is its ability to maintain price stability with the US dollar by altering the supply of YAM cryptocurrency available on the market.

YAM's intended target is 1 yUSD, the stable currency yEarn Finance designed to maximize yield when deposited in its protocol.

Every 12 hours, the YAM token supply is adjusted to reflect the demand for the currency. If the YAM demand is high, the YAM price would be above $1, which means that the supply would need to increase to bring the price down.

The protocol will add tokens if the YAM price exceeds $1,05 or burn tokens if the price drops below $0,95. Noteworthy is that YAM provisioning resets happen proportionately for all token holders.

This means that if a user owns 1% of the entire YAM before the supply reset, he will still retain 1% of the entire YAM if the supply increases or decreases in the next 12-hour window.

yUSD / YAM

Currently, users can earn YAM by providing liquidity to the yUSD / YAM Uniswap pool.

Those who do will receive a portion of the rewards distributed each week. The protocol was scheduled to release 92.500 YAM in the first week, a reward that decreased by 10% with each subsequent week.

In addition, when the YAM undergoes a positive rebase, the protocol mines Tokens Additional 10% YAM that he uses to sell into the yUSD / YAM pool to buy yUSD tokens.

Purchased yUSD tokens are then deposited in a treasury governed by the YAM holders. It is important to note that treasury uses yUSD as it is a high yielding stablecoin, allowing for consistent value with exponential growth.

Yam v2 and v3

The YAM token itself has undergone some changes over time. Because of the bug discovered after its release, YAM owners had to switch to a new token called YAM v2.

However, this new token it has no rebasing function, which means it doesn't try to maintain a stable price.

The YAM v2 token is used to vote on the decisions that govern the protocol. As a result, YAM holders were able to agree on several parameters of the system.

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

Why Use YAM?

YAM can be interesting if you believe in taking an experimental approach to operating a stablecoin that could become widely used.

You can also take YAM if you want to vote on proposals that could impact the future of the software.

Lastly, YAM is useful if you want to diversify your stablecoin portfolio. There is a wide variety of stablecoins on the market, many with different mechanisms to maintain their prices.

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