# The Starter Problem: Invisibility of Yield for Small Balances I’m Dan, I’m currently an Operations & Engineering Intern at [@nook\_platform](https://x.com/@nook_platform). I’m in charge of special growth projects, ranging from everything from onboarding to customer friction to adoption to payouts. After joining Nook and looking at the experience from the customer lens, I noticed something interesting. In the data I’ve recently analyzed, I discovered a pattern prominent amongst low depositors, leading them to earn less and return less. It made sense from a behavioral standpoint - but was concerned that DeFi payouts, designed for everyone, were not working for everyone as intended. I dug deeper into the data to look at this problem of users that have less than $500 in their Nook account specifically. Here is the cohort, how I searched it and what I found. Before diving into the numbers I found, I want to revisit why Nook was built in the first place. Nook was built to give users simple, direct access to higher-yield earning opportunities by abstracting away the complexity of DeFi, while still maintaining transparency and control over where their funds are allocated. ## The Technical Issue The numbers I found to start were that \~74% of active users hold $500 or less in the app. Together, the low depositor group accounts for about \~$67K out of nearly $10M in AUM present on the app. So the majority of our active users represent less than 1% of capital on the platform. ## These Aren’t New Users
Another key takeaway from this cohort is that most are not new users. The average user in this cohort has been on Nook for about 174 days. Around 73% have been on the platform for between three and twelve months. Only about 7% are truly new.
As mentioned earlier with the pattern I noticed with low depositors earning less and returning, the user balances barely change with time within this cohort. In other words, these are not users steadily building their savings over time. As a result, most deposited once and stopped. ## The First Two Weeks Matter
The next important takeaway was the median time from first deposit to first withdrawal is about \~14.6 days for this cohort. That means the key decision window happens almost immediately. Users deposit, watch for results, and decide whether the product feels worth using.
Among users who are in the cohort, about 46.11% fully exit. Churn in this cohort is about \~46.33%, versus roughly \~34.37% platform-wide. At the same time, about \~38.72% of users never withdrew at all. That does not mean they are engaged. In many cases, it means they are dormant, not active. Despite these factors that have contributed towards low depositors earning less and returning less, there’s another key takeaway I have decided to look into for this cohort. A takeaway that showcases a good chunk of our low depositors.
Out of the low depositors, I discovered that \~41% of them earn less than 4% APY. The percentage earning less than 4% APY is already concerning as Nook’s purpose is to provide users direct access to higher-yield earning opportunities. ## Two Different Experiences After analyzing the low depositor group, I came to the conclusion that there’s clearly two different experiences amongst our users.The two different experiences I notice for a Nook user include: * For large balance users, Nook works the way people expect a yield product to work. Funds would be allocated across [@Morpho](https://x.com/@Morpho) sources, rewards accrue, claims are processed, yield compounds, and growth becomes visible over time as they use the app. * For smaller balance users, the system still works. But the output is often too small, too delayed, or too fragmented to feel real. Because of that, I’ve decided to dive deeper into the user behavior of the users earning less than 4% APY and having under a $500 account balance specifically.
## Why Yield Feels Invisible When it comes to low APY, it wouldn’t be a fee problem as Nook fundamentally covers gas, bridge, swap, and [@Morpho](https://x.com/@Morpho) vault transition costs. The issue is that yield can be real on paper while still being invisible in practice. From my analysis, these users would fall victim into these three categories. The categories being the factors that would result in low APY for these users: * First, some rewards are always in transit. [@merkl\_xyz](https://x.com/@merkl_xyz) rewards go through a verification period before they become claimable, which creates a built-in lag. * Second, Nook’s daily claim process skips individual token rewards below $0.30. For larger balances this is trivial. For smaller balances, rewards often accrue in cents across multiple tokens and may take days or weeks to cross the threshold. * Third, even after rewards are claimed, there is still a delay before they are swapped to USDC and deposited back into a user’s position. In context, all of these fixed-dollar frictions hit small balances much harder than large ones. A stuck $0.30 reward is basically irrelevant for a user with $10,000. For a user with $15, it represents 2% of their position. Another key takeaway is that this same pattern also shows up with rebalancing, as it is designed to improve returns by moving funds to better opportunities. For larger balances, that works well. Additionally for smaller balances, rebalancing often leads to frequent cross-chain [@Morpho](https://x.com/@Morpho) vault switches. When that happens, unclaimed rewards on the original chain can be left behind as dust. A few dollars of orphaned rewards is noise for a large account, but meaningful for a user with $40 or $50 deposited. Most of these amounts fall below the $0.30 claim threshold, meaning they are unlikely to ever be claimed.
This issue alone already happens to 71.8% of people within this cohort. This makes the issue more prominent and highlights the need to adjust how rebalancing is handled.
Already enough, the average dust per [@Morpho](https://x.com/@Morpho) vault switcher is about $0.32 which already takes up a good portion into a low balance user’s earnings. ## What We’re Changing This is the core takeaway as the same system creates very different outcomes depending on balance.The good news is that this is fixable. The yield engine does not need to be rebuilt. The product needs to be tuned for scale.That means improving: * How rewards are surfaced and delivered for small users. * Creating a smarter rebalancing system where it would only rebalance more often once the user achieves or deposits a higher balance within their Nook account. * Being more careful about early rebalancing for new or low-balance users. * Reducing pipeline lag and making reward timing more legible. In conclusion, this is not a product pivot. It is an engineering and product design adjustment that would solve the issue with the \~41% of low balance users that earn less than 4% APY. Low APY shouldn’t be the main reason for a user to fully exit the app. Everyone should be able to meaningfully participate in earning, not just users with larger balances. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.nookapp.xyz/updates/the-starter-problem-invisibility-of-yield-for-small-balances.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.