The Ethereum-based DeFi sector has been consuming the bandwidth of the crypto sphere in recent times, being at the forefront of most conversations due to its exploding popularity.
One new trend dubbed “yield farming” has also garnered significant attention from investors, as it has allowed users to see massive yields on their capital – sometimes being as large as 200% APR or higher.
Although there are aspects of the decentralized finance ecosystem that seem promising, one executive at major crypto investment fund is pointing to one flaw of the emerging sector that could hamper its long-term growth and sustainability.
Decentralized Finance Popularity Continues Growing as “Yield Farming” Trend Takes Off
2019 was a great year for Ethereum-based DeFi, with many protocols, platforms, and sector-related tokens seeing tremendous growth throughout the year.
This trend continued throughout 2020, with the total value locked within collateralized loans breaking over $1 billion earlier this year before plunging in mid-March.
The market-wide meltdown seen on March 12th caused many collateralized loans to be liquidated, which caused the dollar-value of tokens locked within plunging from its previous highs of $1.25 billion to lows of $520 billion in just a few days.
From this point, this metric recovered alongside the crypto market, but started going parabolic last week when it saw a sudden jump up to fresh all-time highs of $1.6 billion.
Most of this growth came about due to the recent launch of Compound, which has given rise to the “yield farming” trend in which users leverage Ethereum-based tokens to collect incentives that can, in some instances, be as large as 200% annually.
Many investors believe that all this bodes well for Ethereum, as it has directed a significant amount of attention and new users to the cryptocurrency. Its price, however, has not yet reflected this.
DCG Investor: Lots of “Massively Unusable” Products in Ethereum-Based DeFi Ecosystem
Larry Sukernik, an Investment Associate at the Digital Currency Group (DCG), recently explained that a good portion of the Ethereum-based DeFi ecosystem is “massively unusable” despite it being created by “very high IQ” individuals.
“A very high IQ can be a headwind to building massively successful products. You get people with a big brains that need to be put to work. And when they’re put to work, the result is often a complex, brilliant, but massively unusable product. Lots of that in DeFi now,” he explained.
This could hamper the growth of the bourgeoning DeFi sector, potentially limiting its growth due to the knowledge required to successfully navigate through many of the products.
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