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Crypto yield is booming, but DeFi is losing out: Report

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Crypto yield is growing, but just 1.5% of users earn yield through DeFi protocols, a new report by MoreMarkets finds.

Summary

Over 20–36 million users earn yield through CEXs, compared to just 500,000–700,000 in DeFi
The majority of users want at least 6% yield to consider staking
Security and liquidity concerns still suppress retail adoption for DeFi yield

Crypto-yield adoption is still slow, especially in DeFi. According to a survey by MoreMarkets, published on Friday, Oct. 17, security concerns may be the main reason why. The survey shows that risk considerations still drive user experience with staking.

Currently, an estimated 20–36 million users actively earn yield on centralized exchanges, including Binance, Coinbase, Crypto.com, and more. At the same time, only 500,000–700,000 actively earn yield on DeFi protocols such as Lido and Aave.

According to MoreMarkets, the most likely reason is the ease of staking on CEXs. Moreover, users fear the smart-contract risk that comes with DeFi yield.

Users still see yield as risky

The report shows that APY must exceed 6% to attract interest. Yields below that—while competitive with bank rates, are seen by most as too low to justify the risk. Notably, 43% worry about platforms going bankrupt, and 42% fear hacks or breaches. Moreover, 15% of users reported hearing stories about platforms like Celsius and BlockFi going bankrupt.

A chart showing responses to the question of minimum returns users expect on staking | Source: MoreMarkets

The survey also shows a significant education gap among users. For one, 28% of users don’t understand how crypto yield works. In addition, only 21% care about auto-compounding or high-yield mechanics. According to MoreMarkets, this shows that simplicity wins when it comes to staking rewards.