RedStone Research, 14th February 2024
Key Takeaways
- Yield & Earn products within DeFi have gained immense popularity, providing users with opportunities to earn yields on their cryptocurrencies through various mechanisms like lending, staking, and liquidity provision. The DeFi ecosystem now offers a variety of products, each catering to users’ distinct investment preferences and risk tolerances.
- More than two-thirds of the Total Value Locked (TVL) in DeFi is linked to projects specifically created to generate, maximize, and optimize yield.
- Investors often opt for Earn products because of their user-friendly nature. These projects typically employ strategies that users could undertake on their own, such as lending, staking, restaking, providing liquidity, among others. However, this requires a certain level of knowledge, time and effort to implement individually.
- The trajectory in the crypto space suggests the eventual emergence of mega-apps, where users can engage in various financial activities, from earning passive income to participating in governance.
- CeFi Earn products, including exchanges and custodial providers, offer conservative earn products such as staking, lending, and liquidity provisioning. However, decentralized alternatives in DeFi often outpace CeFi in terms of innovation, flexibility, rewards, and user appeal.
- Oracles play a fundamental role for DeFi Earn products by delivering accurate market prices of the utilized assets, for example in Sommelier or Enzyme vaults.
- Participating in DeFi earn products presents unique advantages but comes with inherent risks. Users should be cautious about integrated protocol risks, market volatility, smart contract vulnerabilities, liquidation risks, and leverage exposure.
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