The momentum behind decentralized finance (DeFi) continues, as two of the most popular DeFi currencies surge to their all time highest prices.
UNI and COMP, the native cryptocurrencies of Uniswap and Compound, have hit highs of $20.29 and $337 respectively according to CoinGecko. This comes as total value locked (TVL) in DeFi is also at its all time high of $27.38 billion. With the current debacle surrounding the Gamestop stock and possible manipulation from centralized firms, more and more market players will flock to decentralized financial platforms if they can offer the same services and capabilities as their centralized counterparts.
The Defi Explosion
Compound is the third most popular decentralized lending platform. Uniswap is the largest decentralized exchange by far. Both have billions of dollars locked into their platforms and users from all around the world. Built on the Ethereum smart contract platform, both Uniswap and Compound have solidified themselves as leading defi applications. Their growth is almost exponential.
Both tokens are platform governance tokens. These give owners the ability to proportionally control the governance of the platform based on their stake in the network. Uniswap airdropped its token to all users who used the platform before a specified date. The 1000 UNI airdrop that each user received to their Ether wallet is now worth close to $20,000 if they did not sell it. It was completely free and automatically received just for platform usage.
Offering Superior Value
There are many factors that draw users to DeFi applications. One of the most important is the increased value passed along to the user instead becoming profit for a third party. With UNI, users receive a portion of the transaction fees. They can also earn UNI by providing liquidity to the platform as a market maker. Compound gives users the ability to borrow or lend money in a peer-to-peer fashion. This lets each user act as their own personal pseudo-bank, giving out loans to qualified borrowers on interest.
Previously, only the elite and ultra wealthy utilized these financial instruments. With the creation of decentralized finance, regular people can profit from these services and the end users benefit. Although these tokens are at all time highs, if the platforms continue to grow then the token prices should follow.