A new report claims the majority of yield farmers do not understand the smart contracts underlying their decentralized finance (DeFi) protocols.
According to a survey by CoinGecko, the vast majority of yield farming participants have no understanding of the underlying technology, despite making enormous profits. The report, which surveyed 1,347 users, found that 93% of respondents had reaped financial returns of at least 500%.
However, just forty percent of respondents claimed they were comfortable interpreting the smart contracts underpinning their DeFi protocols, including the associated risks.
The report reads,
What is shocking to us (or maybe not) is that a large chunk of the farmers do not know how to read smart contracts (40%) and do not even know what impermanent loss is (33%), which implies that they don’t know their real ROI and are extreme risk-takers for the sake of the high returns.
The firm also found that 52% of farmers had less than $1,000 in capital to farm, contributing to significant concerns over rising network gas fees. The report claims limited farming capital has reduced profit margins due to the high fees associated with moving between pools and protocols.
In addition, the survey found the majority of farmers held ether (82.7%), followed by bitcoin (74%) and chainlink (25.6%).
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