Yield Farming Fuels Buzz Around DeFi, but Fundamentals Are Lagging
Cointelegraph
Published Aug 09, 2020 03:00AM ET
Updated Aug 10, 2020 05:00AM ET
The hype surrounding decentralized finance is sometimes credited with triggering a wider market rally in July, as new protocols began releasing tokens that were immediately posting gains of many times their initial value. Despite undeniable price growth, however, it is not immediately clear if the sector as a whole has grown, as reliable metrics to measure the fundamental performance of DeFi protocols are incredibly hard to come by.
The projects lend themselves to fairly rigorous analysis methods, as they will often have well-defined revenues and expenses. But the rise of liquidity mining, or yield farming, is throwing the metrics off balance in some ways. Protocols reward their users with their own governance tokens, essentially as a payment for using the platform. A frenzied movement to maximize the yield for these tokens distorted the prevailing DeFi success metric, the Total Value Locked, or TVL.
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Written By: Cointelegraph
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