You know what I’m talking about, right? The wild west of finance where anyone can become a millionaire overnight (or lose everything just as quickly). But is it all smoke and mirrors or are there real opportunities to be had here?

First, the bubble part. DeFi has been on fire lately with insane growth rates that make even the most seasoned investors blush. According to CoinGecko, total value locked (TVL) in DeFi protocols has skyrocketed from $1 billion at the beginning of 2020 to over $85 billion as I write this article. That’s a whopping 8400% increase!

But here’s the thing is it sustainable? Are these numbers based on real value or just hype and speculation? Well, let’s take a closer look at some of the most popular DeFi protocols to see what they offer.

First up, we have Uniswap the world’s largest decentralized exchange (DEX) by trading volume. It allows anyone to swap tokens without any intermediaries or fees (except for gas on Ethereum). Sounds great, right? But here’s the catch the majority of its revenue comes from providing liquidity through staking LP tokens. In other words, you need to lock up your assets in order to earn a yield. And that yield is not guaranteed since it depends on market conditions and competition for liquidity.

Next, we have Compound Finance a lending platform where users can borrow or supply crypto collateral to earn interest. The interest rates are determined by the demand for loans and the supply of collateral. Sounds simple enough, right? But here’s the catch the interest rates are not fixed since they fluctuate based on market conditions. And that means your yield could be significantly lower (or higher) than expected.

Finally, we have Yearn Finance a platform for optimizing and automating DeFi strategies. It allows users to earn yields by staking their assets in various protocols or using them as collateral for loans. Sounds great, right? But here’s the catch the fees charged by Yearn can be significant (up to 20%) since they are based on a percentage of your earnings. And that means you need to earn a lot more than expected just to break even.

So what does all this mean for DeFi’s bubble and beyond? Well, it’s clear that the current growth rates cannot be sustained indefinitely. The market is becoming increasingly crowded with new protocols popping up every day, which means competition for liquidity will only increase. And that could lead to lower yields (or even losses) for investors who are not careful.

But here’s the good news there are real opportunities to be had in DeFi if you know where to look. For example, protocols like Aave and Fulcrum offer fixed interest rates on loans which can provide a more stable yield than Compound Finance or Yearn Finance. And platforms like Rari Capital allow users to earn yields by providing liquidity for complex strategies that are not available elsewhere.