Defi (DEFI)
$0.493258 (1.33 %) View coin
News
19 June 2020

The Agricultural Revolution of DeFi is underway

Decentralized lending protocol Compound took the crypto world by storm this week when it began distributing its native COMP token to users of the protocol. Upon listing, COMP was trading at $16 and has since surged up to $230 leading to an absolute mad rush to borrow and lend assets in order to earn the native governance token.

To say this liquidity mining campaign has been a success would be a gross understatement. Total funds locked in Compound have increased from around $100 million to nearly $400 million in less than a week.

It should come as no surprise when you look at the yields generated from various schemes designed solely to maximize COMP. This video explains one of the more popular methods using a tool built by InstaDapp.

(The price has since 4x since this was recorded)

This concept is known as liquidity mining and entails distributing native tokens to those providing valuable services to the network. Synthetix instituted a similar mechanism last year which revived a lesser-known DeFi project to one of the largest by total value locked. In the case of Compound, they reserved 42% of their total token supply to be distributed over the course of 4 years to those lending and borrowing on the platform. And now the formerly tokenless protocol is worth more than the rest of DeFi combined…

While Compound wasn’t the first to do this, they have made the biggest splash in doing so. There are obvious impacts to the protocol itself, but this week, which has been nothing short of a frenzy, will be a turning point for the entire DeFi space. After the ICO bubble, there was a period where it was the “right” thing to do eliminating a token from your protocol. That’s not the case anymore.

It may not look or feel like a token sale but make no mistake, the venture capitalists buying equity in Compound did so with the full intention of receiving an allocation of tokens. That money was used to fund the development and in return, they received their fair share of tokens. - a16z - $79 million - Polychain Capital- $75 million - Paradigm - $26 million - Dragonfly Capital - $7.3 million This isn’t a knock on the roundabout token sale either. In fact, quite the opposite. If anything, it’s a testament to the success of funding a top-notch team that built a valuable product and was able to progress down the path of gradual decentralization.

The fact of the matter is that Compound has now set the stage for the future of decentralized finance. No longer are teams going to avoid the path of tokenization while watching their competition blow by them. Investors are going to demand their equity investments become token allocations. And last but not least, the growing pool of capital in DeFi with its yield-hungry farmers are going to scour the playing field for projects that properly incentivize their precious liquidity.

With this insane last week, Compound has not only skyrocketed its way into the leading spot in DeFi. They have ushered in a new Agricultural Revolution.

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