DeFi Hype Seems Bloated As Only 1% Of Crypto Users Are Actually Into It

The DeFi hype seems quite bloated as the news reports show that only 1% of the crypto users are attracted to it and participate in it so let’s read more about that report in our latest cryptocurrency news.

The DeFi hype seems to not be hype after all as only 1% of the users participate in the sector because they seek a minimum of 15% annual return to justify the expected risks. A recent study by a privacy-oriented computation platform ARPA found that despite the hype, DeFi remains a niche corner of the crypto market and that only experienced users are attracted to it. ARPA’s 2020 report shows that over 700 crypto users in both China and English-speaking countries found that the sector remains niche and out of 5 million crypto users across the world, ARPA sees only 1% of the users participating.

The entirety of what we call DeFi is worth less than both XRP and Bitcoin Cash alone.

Despite its rerating over the past couple months, DeFi is still extremely small in perspective.

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— Ryan Watkins (@RyanWatkins_) July 28, 2020

The findings are in line with the recent Messari reports that DeFi remains a small fraction of the broader crypto economy. 70% of the users have more than a year of experience with crypto while 23% are new to crypto. The findings suggest that a lot of the hype surrounding DeFi has to translate into broader usage as the High profile exploits that have exposed vulnerabilities of multiple protocols which played a role in deterring more users. Huge transaction fees have become the main issue with DeFi.

Most of the respondents in the 2020 Global DeFi user Survey report which had a primary interest in earning yield through yield farming:

 “The single most important reason for user participation is to get rewards from liquidity mining, or significant interest income. On average, the total annualized return would need to exceed 15 percent to be sufficiently attractive for users to use DeFi products, according to 75 percent of global respondents and 74 percent of Chinese users.”

After yield farming, attractive interest rates and no KYC were the main factors that drew people into Defi. Unattractive interest rates and bad user experience were the main reasons that people didn’t use decentralized finance protocols. Beyond this, many respondents cited poor transaction speeds as the biggest issue of DeFi and the ones that can lead to more losses. Ethereum’s upcoming 2.0 upgrade is expected to solve the issue with the reduced network congestion but as it now stands, the decentralized finance remains a niche market attracting bigger crypto bets to make high transaction fees to pay off.