Yield Farming is a Distraction to DeFi, says AMPL Co-founder

Patton says yield farming is not the reason most people including himself joined DeFi.

By · Aug 13, 2020 . 7min read

Yield farming in Defi

Michael Patton, who goes by the handle @brandoniles on Twitter, talks tough on yield farming, calling it a distraction to DeFi clearly taking a swipe at the recent YAM’s explosive growth.

In a recent tweet, Patton says yield farming is not the reason most people, including himself, joined DeFi. Hence yield farming passes as a distraction. However, he has a different opinion on another hot subject. Moreover, that is Liquidity Mining. Patton thinks it is very different from yield farming but not so different from the openness of finance we get from Bitcoin.

Patton goes further to explain his take in the tweet. Admitting that distributing governance tokens like YAM just did to users is superb. However, the ill of this kind of action happens when that distribution corrupts how the system is used.

He says

You’re still distributing, but to different people than otherwise. Profit-motivated actors, at risk of extracting value down the line at the expense of the platform, or rotating.

Michael Patton

Apparently because of the recent massive interest in DeFi necessitating as much $5 billion TVL across several open-source protocols, many have dismissed DeFi as a bubble. Liquidity providers who go about lending to decentralized protocols which function as pools earn mouth-watering interests especially if compared to their legacy finance counterparts. As though that is enough, they still participate in protocol governance.

So for those who dismiss liquidity mining, Patton says

Liquidity mining, or “proof of liquidity”, I think of as generally applying to purely monetary assets. More liquidity for a financial asset makes that asset more valuable. Higher liquidity does not necessarily make a governance token more valuable.

Michael Patton

Obviously, he takes a swipe at those who go wild about acquiring a DeFi protocol’s governance with future token appreciation as their motivation.

Patton says his yield farming as a distraction to DeFi statements is not referencing any project.

Although Michael Patton says his position on the topic is not a direct or indirect reference on any project, many would argue otherwise. His statements are coming barely 24 hours after YAM’s release. Liquidity Providers – LP has since deposited over $400 million since our last publication at $76 million.

In fact, Binance Research thinks DeFi is so hot right now, primarily because of YAM’s meteoric rise. Little wonder someone like Patton thinks yield farming is such a distraction to DeFi.

While yield farmers are harvesting their gains across several DeFi platforms like the arbitrageur who made around $40,000 profit just by swapping across protocols, Ethereum gas cost is seeing its all-time high. In fact, Ethereum miners have been smiling to the bank with the DeFi boom as they keep raking in profits.

Data from Coinmetrics showing Transaction fees surpassing block counts as DeFi explodes. Perhaps part of reason Patton criticizes yield farming as a distraction to DeFi
Source: Coin Metrics

Interestingly, miners transaction fees on Ethereum surpassed block rewards yesterday being August 12th for the first time ever on the network. Is it any surprise that this happened the same day YAM allowed LPs to start depositing into its contract address?

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