Cryptocurrency is by design programmable, which means that crypto has virtually unlimited possible applications. For now, though, crypto is mainly treated as a financial asset: Most people use crypto for investment, staking and payment, which emerged as the top 3 use cases in a recent study.

Lending or borrowing was the least popular use for crypto, lagging behind yield farming and governance.

8 Most to Least Popular Use Cases for Crypto

#1 Investment

93.9% or almost all crypto holders said they used crypto as a form of long-term investment, which is not surprising given that the market leader and pioneer Bitcoin is considered digital gold. Aside from Bitcoin, cryptocurrencies have long served the ambiguous function of raising capital, and have been accepted as part of the alternative investment asset class.

For more than 3 out of every 10 holders, crypto is always an investment (37.9%). This not only means that crypto is likely a permanent part of their financial portfolio, but also that they believe crypto is here to stay. At the same time, their investment focus indicates that this group tends to view crypto as a financial instrument or business.

For another 3 in 10 holders, crypto is very often an investment (30.9%), while 25.1% said they only sometimes or rarely used crypto as an investment.

The remaining minority of 6.1% never used crypto as an investment, possibly because they are crypto day traders with a shorter horizon, or because they think crypto is too risky and volatile to be considered an investment asset.

#2 Staking

88.8% of crypto holders said they staked crypto, indicating that staking has become a popular activity despite being a relatively new development. The high level of adoption is likely driven by the rewards offered as a comparatively safer, lower effort way to earn from crypto, as well as the emergence of beginner-friendly staking methods, such as on centralized crypto exchanges.

As many as 2 in 10 crypto holders always participate in staking (20.1%), possibly because their lifestyle requires a more passive approach, or they are strong believers in Proof of Stake. A larger number of crypto holders said they stake very often (27.6%), while 41.0% sometimes or rarely staked.

Only 11.2% never tried staking crypto before.

#3 Payment

Crypto payments ranked as the third most common use case, with a majority 84.5% having used crypto to make payments. While crypto is technically able to serve the same purposes as fiat currency, there are only limited opportunities to purchase goods or services with crypto at the moment.

This might explain why just 3 in 10 holders use crypto for payments always or very often (31.4%), whereas more than half use crypto to pay only sometimes or rarely (53.2%).

People originally started using crypto payments in order to buy or sell on illegal marketplaces such as Silk Road. As a result, crypto payments continue to be associated with criminals or dubious activities, which might be deterring the 15.5% of holders who have yet to pay with crypto.

#4 Speculation

At least 81.0% of holders have speculated on crypto, making it the fourth most common use case. This is in line with the highly volatile movements that the crypto market is known for, which are caused by catalysts as irrational as memes or coincidental tweets. Speculation is also facilitated by the low barriers to entry into the crypto industry, such that there is no shortage of new projects and trading opportunities.

1 in 4 holders always or very often engage in short-term crypto speculation (26.5%). These are likely crypto day traders with higher capital and risk tolerance, or investors who specifically set aside part of their capital for riskier opportunities.

Another 2 in 4 also speculate in moderation, either sometimes or rarely (56.2%). Given that the crypto demographic is generally younger with a longer investment horizon, overall risk appetite is correspondingly higher.

That said, 19.0% stay away from speculating with their crypto.

Overall, people still seem to prefer to invest in crypto more than speculate on it, with speculation being a less common use case by 12.9 percentage points.

#5 Participation in Token Sales

79.6% of holders have used their crypto to participate in token sales, ranking it close behind short-term trading. Token sales started out with Initial Coin Offerings (ICOs), which defined crypto markets from 2017 to 2018 by raising millions of capital in seconds. Alternative formats have emerged since then, including Initial Exchange Offering (IEO) and Initial DEX Offering (IDO).

Around 2 in 10 holders said they always or very often participate in token sales. They likely represent the more crypto-native people who keep up with the latest developments in the space and will actively seek out new projects, either to support or speculate on.

Another 56.2% only sometimes or rarely use their crypto to participate in token sales, while 20.4% have never bought newly-launched tokens.

#6 Yield Farming

Nearly 3 in 4 crypto holders have farmed for yield (74.7%), nevertheless making it one of the less common use cases and lagging behind staking by 14.1 percentage points. This suggests that yield farming might currently be less accessible to people, even though it was arguably the most popular crypto activity during DeFi Summer in 2020.

Out of those 3 people, 1 engaged in yield farming always or very often (25.8%), while the other 2 only farmed for yield sometimes or rarely (49.0%).

On the other hand, 1 in 4 have never used their crypto to farm for yield (25.3%).

#7 Governance

Crypto was used for governance almost as regularly as for yield farming, with 74.5% of holders having voted or otherwise participated in projects which they held the token of.

Just 2 in 10 holders were active, committed members of their DAOs and always or very often engaged in its governance. Another 5 in 10 did use their crypto for governance, but only sometimes or rarely. These might be less involved DAO members or might not always hold governance tokens.

Crypto holders who have never participated in governance made up the remaining 25.5%

#8 Lending or Borrowing

Lending or borrowing turned out to be the least common way that people use their crypto, with just over half or 57.6% having done it before. This ties in with the relatively smaller market capitalization of lending in the DeFi space.

Even among those who have lent or borrowed crypto, only a minority of 15.0% always or very often use their crypto for credit. Another 42.6% sometimes or rarely used their crypto to lend or borrow.

The gap between frequent versus infrequent usage points to the possibility that crypto holders have an aversion towards lending and borrowing activities. Although bank deposits are an indirect form of lending, most people do not think that putting money into a bank account means they are loaning it to someone else.

A significant 42.4% of holders have never used crypto to participate in lending or borrowing. For this group, lending and borrowing might be perceived as riskier or simply too difficult to understand.

Methodology

The study examined 427 responses from the NFT and Crypto Users Survey, jointly conducted by CoinGecko and Blockchain Research Lab from December 2022 to January 2023.

(By Lim Yu Qian)

Read more: https://www.coingecko.com/research/publications/what-people-use-crypto-for