Coingecko surveyed 1,347 crypto users in August 2020 to ascertain the popularity of farming and farmers’ behavior. To everyone’s surprise, the survey suggests that yield farming products have matured and yield farming is no longer a frenzy. While many thought leaders in the crypto space are skeptical about yield farming sustenance, the Coingecko survey suggests that yield farming is here to stay.
However, the report revealed that the DeFi tokens farmed are not being held long by the farmers. In fact, these tokens are being dumped. Let us take a deeper dive into the report to understand the dynamics of the space.
Yield farming is a process where users move their assets across different DeFi protocols in a strategic manner to maximize their returns. It started with Compound and was followed by platforms like Yearn.Finance, SushiSwap, and more.
Yield Farming is a growing trend
According to the data by Coingecko, the total market cap of yield farming tokens is close to $3.15 billion at the time of writing. Here is what the survey reveals:
A Sophisticated niche
A very small subset of crypto users pursues yield farming but the trend is quickly catching up. The farmers are mostly crypto veterans, are familiar with financial ratios, and have knowledge of existing and new DeFi protocols.
Farmers are mostly holding Ethereum (82.7%) and Bitcoin (74.4%) in their portfolios. Surprisingly, the survey suggests that the tokens acquired via farming made up less than 10% of a farmer’s holdings. Either these tokens are locked in the pools or the farmers are dumping these tokens after accumulating rewards.
The report suggests that farmers who invested over $1,000 in yield farming are making the most profits. This is because of the high gas fees they have to pay for moving around their assets to different DeFi protocols. According to the survey, farmers are ready to pay $10 per transaction, which brings down their earnings.
Higher Risk appetite
While yield farming popularity continues to grow, the majority of farmers are unaware of the risks and rewards associated with farming. Almost 40% of the farmers do not know how to read smart contracts and don’t know their real ROI. Thus, they are taking extreme risks for the hope of earning high returns.
Farming is not easy and exposes users to higher risks. The survey concludes that for farming to prove profitable for retail customers, the high gas fee issues need an immediate resolution. Apart from that, the farmers need to educate themselves so that they do not blindly trust the unaudited platforms.