When Digital Turns Physical

How YFI becomes the leading world bank

The Restaurant Era of Digital Finance

Ethereum ends the oligopolized banking industry, just as the internet ended the oligopolized journalism industry. Banks on Ethereum have one product to sell: yield [1], so we occasionally refer to Ethereum banks as yield-optimizers. Anyone will be able to launch their own bank, a.k.a. their own yield-optimizer, on Ethereum with the same friction as launching their own website on the internet. However, banking on Ethereum will be more competitive than journalism on the internet, whose competition has been hindered by prominent social media companies’ moats of user-generated data. Rather, Ethereum banking’s competitiveness will be more in line with the Food & Beverage (F&B) industry, where any product can be sold by any company, primarily due to Ethereum’s open-source nature versus the walled garden nature of the current version of the internet [2].

Cross-industry Product Differentiation Guide

Economies of Scale on Ethereum

Where the industries differ is their ability for monopoly or oligopoly formation, due to different flavors of economies of scale. Economies of scale in the F&B industry emerge from the bulk purchasing and production of goods. Economies of scale in the internet’s journalism industry should emerge from the bulk purchasing and production of goods as well, but instead have emerged from social media relationship graphs, stifling competition.

Earning Yield on Ethereum

The mainstream consumer’s idea of the highest-yielding financial products differs significantly depending on the customer. The bank that will attract the greatest amount of capital will be the one that accounts for the customers’ large discrepancies in taste. Consequently, the largest Ethereum banking winners will be those offering customized products that can be easily implemented into a maximally diverse array of larger portfolio schemes. This dynamic appears identical to the largest winners of the internet’s journalism industry, where the biggest winners are those that serve the largest possible customer base.

Aggregation as the Largest Winner

From the internet’s journalism industry, we’ve learned that the best method to reach widespread appeal is aggregation. Yield aggregators will attract the largest amount of capital to their strategies, which will compound as their strategies’ benefit from the economies of scale discussed earlier, allowing them to offer a higher quality service (i.e. higher risk-adjusted yields at lower costs) than competitors.

Finding the Winner

The winning aggregator will have the strongest global brand of any Ethereum bank, which itself is an abstraction of customer service, namely consistency in product and marketing offering. Customers like consistently good things. Therefore, customer service really is everything, and perhaps has always been everything. The constitution of customer service in the proliferation of banking services is attached in the Appendix.


Teams come in all shapes and sizes, from individuals to countries. Teams entering new markets win initially based on innovation, offer customers something they wanted but couldn’t find before, and then continue to win via economies of scale and the continued execution by a now larger, still innovative team. This is how all competitive markets work [6]. Achieving scale puts you in a better position than upstart competitors, but competitors will arise if the leader fails to continue to innovate. Thus, when we determine the best aggregators on Ethereum, we look at team incredibly closely, namely:

Yearn.Finance (YFI) As the Current Leader

Based on our establishment of aggregators as the most valuable Ethereum banks, and our establishment of innovation and community as the most important variables in finding successful aggregators, Yearn.Finance (YFI) is the clear leader to be Ethereum’s most valuable bank. YFI has the top core team in the space, innovates continuously in its product offerings, innovated completely in its equity offering, and has the largest and most dedicated community of any Ethereum bank, largely due to its combination of the other variables mentioned. Finally, the YFI community has, with its recent governance proposals, exhibited that it is willing to act ‘un-monopolistically’ through adequately incentivizing strategists and developers to continue to join the aggregator. Acting ‘un-monopolistically’ is crucial for not blowing a lead in competitive industries, as monopolistic actions will fail in a competitive market.


Like the restaurant business, competition in Ethereum banking will be brutal, a far cry from the walled-garden internet winners who can’t appear to lose in the Web 2.0 era. The biggest banking winners will likely be aggregators, similar to how the aggregators of journalists today are worth far more than any specific publication [10]. The primary difference will be that, due to Ethereum’s innate open-source nature, anyone with enough resources can create an aggregator (like a Facebook or Twitter), thus preventing aggregators from extracting monopolistic rents, although the resources required to deploy secure smart contracts at the scale of aggregators will still be significant. However, we also believe that yield optimization is a higher-value service than journalism, due to that yield optimization is the synthesis of investors’ processing of information created by journalists, and so that Ethereum banking aggregators will achieve higher free cash flows than the internet’s current journalist aggregators. The aggregator that we believe will be the market leader for years to come is YFI. YFI has the most innovative product offerings, the most innovative founding team, the strongest community, and the best brand [11]. For these reasons, as long as the YFI community continues to innovate make intelligent governance decisions, we believe that the Ethereum banking restaurant race is its to win.


[1] More specifically, risk-adjusted yield. Risk on Ethereum is both technical via code and economical via under-collateralized loan defaults — Ethereum’s technical risk is new to the banking system, while loan default risk is pertinent to the current banking system [1a]. The fully open-source nature of Ethereum allows for you or trusted parties to fully quantify both technical and economic risks, unlike the traditional banking system, where rehypothecation and other misrepresentations of economic risk are kept hidden from consumers. The other product that modern banks sell, liquidity vis a vis payments, is already native to Ethereum, and so banks on Ethereum need not devote any resources to it.


The parallels between banking’s yield and journalism’s knowledge are more similar to each other than F&B, as banking and journalism are both abstract knowledge games. Food, on the other hand, is a hard good, consumed physically. However, the internet has still fundamentally F&B, primarily because F&B consumption is fueled by knowledge — what are the best diets, the best brands, the best restaurants, etc.. This also led to F&B becoming dominated by aggregators, from Amazon to Doordash to Opentable.

Partner at Bizantine Capital