The big news from the world of decentralized finance this week has been the launch and distribution of Compound’s COMP token. Within a day it became the largest DeFi token by market capitalization, surpassing the previous leader, MakerDAO.
On its first day of trading, Compound Finance’s COMP token became the most valuable DeFi asset, making it a market cap ‘unicorn’ as it reached a billion dollars.
First DeFi Unicorn
Industry observer, Camila Russo, noted the remarkable achievement in her DeFi newsletter, The Defiant. The former Bloomberg correspondent added that the market frenzy surrounding the COMP token distribution has ‘spread magic to the rest of DeFi.’ Compound initiated the token distribution on Monday with 4.3 million of the total 10 million tokens going out to users of the platform. Sebastian Aldasoro, who contributed to The Defiant, added that this week’s frenzy signals that traders view COMP as a way to gain exposure to one of DeFi’s most successful protocols,Speculation driving demand: Token holders may eventually decide for COMP to receive a share of Compound’s earnings, and/or Coinbase may list COMP, causing it to shoot up further.Token prices doubled during the first day of trading, topping $100 briefly before a pullback. This pushed its market capitalization beyond $1 billion, making COMP the largest DeFi token by a fully-diluted market cap. Defi Market Cap is currently reporting that Compound has actually surpassed market leader MakerDAO in terms of market capitalization. According to Uniswap, prices had retreated to below $80 by Tuesday and had leveled out just below $75 at the time of writing.


Compound Governance Drive
Compound is an autonomous Ethereum-based platform that lets users earn dynamically-adjusted interest through lending, or borrow assets against crypto collateral. Since its inception in late 2018, Compound has been striving for full decentralization, and it has finally been achieved. As part of its drive for democratic governance, the platform has been testing the tokens for the past couple of months in preparation for the distribution on Monday. COMP tokens will be used as a voting mechanism on governance issues and proposal submissions. Holders with at least 1% of the total token supply can submit protocol upgrades, and all holders will be able to vote on these changes. In an announcement on the launch, General Counsel at Compound Jake Chervinsky stated,Yesterday’s launch was the final step in the decentralization process that we announced in February. Our core work on the Compound protocol is done.


The emission schedule reminds me of a Proof of Work chain but the key difference here is that COMP farmers don’t have huge on-going costs like electricity and mining hardware upkeep/maintenance – but they do have capital opportunity costCompound certainly has introduced a novel way of distributing its tokens that could well pay off for investors if DeFi does become the financial landscape of the future.
DeFi Markets Back Over $1B
The COMP token distribution has no doubt contributed to the total value locked across the entire DeFi ecosystem, which has just topped $1 billion again. Defi Pulse has reported the milestone and new four-month high of $1.05 billion in TVL across all markets. Since its mid-March crash, DeFi has recovered over 100% to current levels and is just $200k off its all-time high. The total amount of Ethereum locked into the DeFi markets remains at 2.6 million ETH. The momentum from this week’s Compound token distribution, and recent solid fundamentals for the DeFi ecosystem, has boosted it higher than regular crypto markets which remain relatively flat in comparison.Disclaimer
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Martin Young
Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain...
Martin has been covering the latest developments on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain...
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