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2) This is *not* trying to answer the question of whether food tokens will go up or down short-term. It's trying focus on the long-term ramifications of it. NOT FINANCIAL ADVICE. I OWN SOME FOOD TOKENS.

3) What is the core financial transaction behind yield farming? Well, basically: new projects drop most or all of their tokens on DeFi users in return for valuation and TVL. Are those justified?

Cryptocurrency Derivatives Exchange

4) A lot for this will come down to what you think DeFi should be worth. For now, I'm going to make the following arbitrary assumption: that ftx.com/trade/DEFI-PERP is "fair". DEFI-PERP is currently basically made up of the largest DeFi projects pre-yield-farming.

ftx.com

FTX

1:30 PM · Sep 13, 2020Twitter Web App

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5) So, the projects in DEFI-PERP are worth about $200m-$2b right now. I think that optimistically, vegetables all together are worth about as much as the rest of DeFi -- so maybe like $6b or so.

6) That means that giving away all the yield farming coins can generate at most that amount of valuation, and that amount of transaction costs. So how much is it in fact generating?

7) Well a few of the valuations make no sense, and I don't really know who's buying them. If you remove those, things actually aren't that crazy. YFI is at $1b, some of COMP/BAL/SNX/LEND comes from this, and then a collection of tokens around a few hundred million.

8) OK, and how about the transaction costs? Well people are spending about $100m per month on gas. In addition people are locking up about $10b of capital; if you use 20%/year as the baseline Crypto cost, that's another $1b or so of expenses.

9) So put it all together and you get.... ....well, you know, $6b or so. I'm gonna be honest, I wasn't expecting that, at all.

10) Now I ignored some coins from the calculation, intentionally; and I ignored the opportunity cost of peoples' time. But, like, ok, so I'm still surprised. I thought food tokens were obviously a bubble. Now I'm not so sure.

11) This is also obviously ignoring the difference between different coins. Some have obvious utility!

@compoundfinance

@AaveAave

@BalancerLabs

, etc. are important products people use even ignoring farming;

@CreamdotFinance

@SushiSwap

, etc. are forks on useful products.

12)

is a weird case -- right now it's mostly just about farming, but it's also the king of farming, the meta-farming coin, and so it kinda makes sense that it should get a decent piece of that pie.

13) So, TL;DR: obviously food tokens are a ridiculous bubble, it was clear to me from the beginning. But also maybe it's not and maybe I was wrong about that?