Crypto Yield Soars While DeFi Faces Challenges: Findings from a New Report

blocks representing crypto yield and DeFi

Summary:
The realm of crypto yield is experiencing significant growth, yet decentralized finance (DeFi) seems to be lagging behind, according to a recent report by MoreMarkets. While millions engage in yield-earning activities via centralized exchanges, only a small fraction utilize DeFi protocols. Key concerns, particularly around security, significantly impact user adoption in this space.

Key Takeaways

Only 1.5% of crypto users earn yield through DeFi protocols.
Approximately 20–36 million users earn yield on centralized exchanges like Binance and Coinbase.
Main concerns affecting participation in DeFi include fears of platform bankruptcies and hacks.
A significant portion of users lacks understanding regarding how crypto yield works.

Crypto Yield Growth Amid DeFi Decline

Recent findings from a survey conducted by MoreMarkets reveal that while the crypto yield landscape is booming, decentralized finance (DeFi) isn't fully capitalizing on it. Published on October 17, the report indicates that security concerns are among the primary barriers to wider DeFi adoption.

Currently, it is estimated that between 20 million and 36 million users are actively earning yields on centralized exchanges (CEXs) such as Binance, Coinbase, and Crypto.com. In stark contrast, only about 500,000 to 700,000 users earn yield through DeFi protocols like Lido and Aave. The report attributes this disparity to the straightforward staking process on CEXs, along with users' apprehension regarding the smart contract risks associated with DeFi.

Yield Perception: Risks and Returns

The report highlights that returns must exceed an Annual Percentage Yield (APY) of 6% to pique users' interest. Yields below this threshold, while competitive compared to traditional bank rates, are viewed by many as insufficient to offset perceived risks. The survey reveals that 43% of users express concerns over potential bankruptcies of platforms, while 42% are worried about the possibility of hacks or security breaches. Additionally, 15% of respondents mentioned they had heard negative stories about platform collapses like those of Celsius and BlockFi.

A chart showing responses to the question of minimum returns users expect on staking

Furthermore, the survey points out a substantial educational gap regarding crypto yields. Notably, 28% of users do not understand how crypto yield works. Moreover, only 21% show interest in advanced features such as auto-compounding or high-yield mechanics. According to MoreMarkets, this suggests that clarity and simplicity are particularly appealing when it comes to staking rewards.

A chart showing the reasons why users are hesitant about staking and yield

This restructured article maintains the essential details while making the content more accessible for those new to the cryptocurrency space. It emphasizes key findings and issues, presenting them clearly to engage and inform readers effectively.