On-Chain Transactions Suggest Pickle Farmers Got Spooked

On September 30th the Pickle team announced that something had gone wrong and they couldn’t retrieve people’s funds. What we see happen on chain is a clear reduction in activity starting on that date.

We also notice that as soon as the team fixed the issue on October 7th, many farmers sent their $PICKLE to “other addresses”, suggesting that they were done farming… at least for now. 

Total value locked in the project went down, from $347MM on September 16th to $161MM today, but many people are still saying Pickle has a real use-case. 

What is Pickle Finance? 

Pickle is the new yield farming bubble. Since its launch on September 11th, more than $161 million have been locked in pickle farms.

It works like the other DeFi food themed protocols that reward users who provide liquidity with high interest and additional token rewards. 

Its purpose however, is new. The stated goal of Pickle is to stabilize stablecoins. Indeed stablecoins often trade a few percent above or below their pegs – a problem which has worsened with the rise of yield farming. 

How does Pickle Finance Work?

The idea is pretty straightforward: reward users who provide liquidity to liquidity pools that have stablecoins that are below peg. The rewards are in the form of a new token: $PICKLE. Pickle also gives rewards to an ETH-PICKLE pool, to take care of the case where all stablecoins are above peg.

Anyone can mine PICKLE tokens by staking Uniswap LP tokens for several stablecoin pools: DAI/ETH, USDC/ETH, USDT/ETH, sUSD/ETH, and of course PICKLE/ETH.

Similar to Sushi, Pickle has a Master Chef Contract to distribute minted tokens to farmers, and a Developer fund which gets 2% of anything minted. 

ETH-PICKLE is the Largest Pickle Farm by Far 

Pickle Finance’s primary liquidity pool is the Pickle/ETH pool, or Pickle Power farm. It offers the highest interest rates, which was once up to 4,500% APY. It currently stands at 190% APY. The fact that this it the largest farm reflects the fact that all stablecoins are currently above peg and don’t need additional liquidity. 

Users can choose to place their money directly into one pickle farm, or they can place it in a PickleJar – which automatically shuffle tokens between the farms to maximize yield for users. 

But these high interest rates are often too good to be true. As Quiao Wang puts it, “If you’ve spent 2 days farming yields in DeFi and still don’t know where the yield comes from, you are the yield.” And the project itself warns that this is just an experiment that has not yet been audited. 

Is Pickle Helping?

It’s still too early to tell. The concept makes sense: reward behavior that promotes a stable peg. But a look at the price pegs of DAI, Tether and USDC suggests that Pickle Finance has so far had no visible impact. The real mechanics of Pickle will come more into play next time there’s a major upset – particularly if the stablecoins drop below peg. 

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