Crypto Conversation: Stable Coin Effort Ends Up in a 'Pickle'

On-chain transaction data suggest Pickle Finance gave yield farmers a spook.
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What’s Hot in Crypto this Week?

Pickle Finance. Pickle aims to "stabilize" stable coins by rewarding certain behavior among users. This might seem odd, because stable coins are cryptocurrency backed by reserve assets. But, in fact, stable coins often trade a few percentage points above or below their pegs -- a problem that has worsened with the rise of "yield farming." Remember, yield farming is the attempt to get crypto assets to produce the most returns possible, often by moving assets around and trying to spot the highest annual percentage yields.

Since Pickle's launch on Sept. 11, more than $161 million have been locked in its "pickle jars" -- which automatically shuffle tokens among farms to maximize yield for users.

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

Pickle aims to solve the problem of stable coins moving from their peg value by rewarding users who provide liquidity to liquidity pools that have stable coins that are below their peg. The rewards are in the form of a new token: $PICKLE. Pickle also gives rewards to an ETH-PICKLE pool for stable coins that go above their pegged value.

Why is Pickle in the spotlight now?

Pickle has become the new "yield farming" bubble. On Sept. 30, the Pickle team revealed that something had gone wrong and it couldn’t retrieve people’s funds. We could see on the chain that activity clearly reduced starting on that date.

We also noticed that as soon as the team fixed the issue on Oct. 7, 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 $347 million on Sept. 16 to $161 million today, but many people are still saying Pickle has a real use-case.

 

Pickle Finance (4)

What’s Flipside’s Take? 

Pickle Finance’s primary liquidity pool is the Pickle/ETH pool, or Pickle Power Farm. It offers the highest interest rate, which was once up to 4,500% annual percentage yield. It currently stands at 190%, which suggests that most stable coins are 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.

But these high interest rates are often too good to be true. As Quiao Wang puts it: If you’ve spent two days farming yields in decentralized finance, "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. 

It’s also too early to tell if Pickle Finance is working. 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 stable coins drop below peg. 

The Flipside Crypto Asset Score Tracker provides institutional and sophisticated retail investors the ability to track over 500 cryptocurrencies' fundamentals. FCAS Tracker is currently free to a select group of new users as it continues to develop the product. Visit Flipside here to gain access to Flipside Analytics.