Lanthanide-doped LiYF4 (Ln:YLF) is commonly used for a broad variety of optical applications, such as lasing, photon upconversion and optical refrigeration. When synthesized as nanocrystals (NCs), this material is also of interest for biological applications and fundamental physical studies. Until now, it was unclear how Ln:YLF NCs grow from their ionic precursors into tetragonal NCs with a well-defined, bipyramidal shape and uniform dopant distribution. Here, we study the nucleation and growth of ytterbium-doped LiYF4 (Yb:YLF), as a template for general Ln:YLF NC syntheses. We show that the formation of bipyramidal Yb:YLF NCs is a multistep process starting with the formation of amorphous Yb:YLF spheres. Over time, these spheres grow via Ostwald ripening and crystallize, resulting in bipyramidal Yb:YLF NCs. We further show that prolonged heating of the NCs results in the degradation of the NCs, observed by the presence of large LiF cubes and small, irregular Yb:YLF NCs. Due to the similarity in chemical nature of all lanthanide ions our work sheds light on the formation stages of Ln:YLF NCs in general.@en