With the rise of the DeFi world, protocols offering offerings for yield farming began to increase day by day. But when these DeFi tokens, used in the yield farming model, started to crash one by one, the trust in DeFi was shaken.
The rapid growth of the decentralized finance (Defi) industry in just a few months has generated great interest in the cryptocurrency world as well. The new tokens that have been released after tokens such as Aave (LEND), Maker (MKR), and Compound (COMP), which have performed very well, and deflated with a bubble effect, tarnish this glorious rise of DeFi.
They Benefit From Inexperienced Users
Investor and commentator CryptoWhale, in his Twitter account, suggested that 99% of yield farming tokens will hit the bottom. CryptoWhale had warned other investors many times about the newly released yield farming tokens. CryptoWhale argued that there is a reason why the creators of the newly released tokens remain anonymous and control 80% -95% of the tokens, arguing that these protocols are aimed at scamming inexperienced users who will act with market excitement.
Changpeng Zhao, CEO of Binance, one of the most important cryptocurrency exchanges in the world, and many other prominent people warned users with the implications of “don’t follow the herd.” However, the lure of these protocols offering tremendous returns kept users from holding back.
DeFi Rises Fast with Yield Farming
The decentralized finance world, which increases its value more than 4 times in just a few months, offers many advantageous applications such as yield farming. Yield farming, a model that allows investors to actively profit from their cryptocurrency savings, has contributed a lot to the growth of the DeFi world.
The total value locked to the DeFi sector reached $ 9.6 billion by breaking its own record at the beginning of September, with the great effect of the users flocking to tokens that they can make yield farming. Although this value has decreased to $ 6 billion with the effect of the general decline in the cryptocurrency world, the total value locked to DeFi platforms is currently around $ 8.5 billion.
Yield Farming Can Download Quickly As It Releases
The tokens that were released for use in the Yield farming model attracted great interest from users. These protocols, which offer their users extreme earning rates compared to traditional finance, also took the value of the DeFi industry to flight.
But this trend has spawned other initiatives. The DeFi market is now known for the record lows of new yield farming tokens. New DeFi tokens such as Sushiswap (SUSHI), yearn.finance (YFI), Pizza (PIZZA) gained hundreds of times as they were released to the market. However, this short-term interest resulted in huge losses due to various reasons such as the security gaps and the contracts not fully audited. Some tokens, which rapidly multiplied in their value in the first days of their release, then lost almost 100% value within hours. Such events have also shaken the trust in DeFi.