Regulatory pressure has hit another decentralized finance (DeFi) project. Yield Protocol, a DeFi lending project, has announced that it will be closing down at the end of the year citing lack of demand and legal challenges.
Closing Date Set for December 29th
Yield Protocol, a decentralized finance protocol, recently announced that the December 2023 series will expire on December 29th, and from that date onwards, all borrowing and lending activities on the protocol will be terminated and closed.
The announcement from Yield Protocol stated:
We believe this decision is necessary because there is currently no sustainable demand for fixed-rate borrowing on Yield Protocol. Additionally, the current regulatory environment in the US, combined with increasing regulatory requirements in Europe and the UK, makes it difficult for us to continue supporting Yield Protocol.
The decentralized finance protocol reached its peak in April 2022, with total assets on the protocol exceeding $22 million. Since then, this figure has steadily declined to approximately $2 million.
What is Yield Protocol?
Yield Protocol is a decentralized finance protocol for collateralized fixed-rate, fixed-term borrowing and lending on the Ethereum network. The protocol uses a class of tokens called fyTokens (fixed yield tokens) to achieve its goals. fyTokens are Ethereum-based ERC-20 tokens that can be redeemed for the underlying asset on a one-to-one basis after a predetermined maturity date. For example, a participant with fyDai tokens can redeem them for Dai after the maturity date.
fyTokens do not earn interest payments but instead trade at a discounted value (similar to zero-coupon bonds) and provide returns when redeemed at full nominal value at maturity. The interest rate can be calculated based on the difference between the discounted value and the final value of the underlying asset at maturity.
