Compound — a new bubble or an indication of strength?

image: USD total value locked in DeFi (courtesy of DeFi Pulse)

Reasons for the increased demand

  • community interest — Compound’s reward scheme lets users earn extra COMP for any borrowing and lending activities in the protocol. This is similar to a cashback system, in which users get paid when they borrow or lend. When users vote for Compound community proposals, it serves as an incentive for them to “farm” or earn COMP by borrowing or lending assets in Compound so that they can be more active in its governance process.
  • higher than average yields — Compound users’ lending and borrowing activities are also encouraged by relatively high yields offered when compared to some of the supported assets in the protocol. The annual percentage yield is currently standing at 14%. Each money market on Compound adopts a floating interest rate the value of which fluctuates based on the market supply and demand of the underlying asset. The interest rate of the asset, in short, rises when the asset is scarce and highly sought by traders
  • multiple exchange listings — on June 23, Coinbase Pro became the first major exchange to support the listing of COMP, later followed by OKEx and Binance.
(source: Twitter)

Are we looking at a bubble?

(source: Twitter)

DeFi: is it sustainable?

(source: Twitter)

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CryptoCurrency

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Cryptocurrency market data overview and research platform.

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