We are back to take a look at how Decentralized Finance fared in the past seven days, as it passed through one of it most profitable weeks to date and keeps growing as an important section of the entire cryptocurrency market, so let’s begin:
In a positive turn of events, this week we saw a big growth in the DeFi sector as the overall market remained stagnant. The main reason is clear for everybody: Compound’s COMP token was released to the public and with it came a large amount of transactions and purchases.
Not only did Compound carry the entire DeFi sector beyond the $1.5 billion mark, but it was enough for the lending platform to surpass Maker and become the dominating project in the DeFi landscape, with 30% dominance and nearly $600 million in TVL, and the public release of their governance token makes it fully decentralized after a period of stabilization that lasted for nearly 2 years, with the launch of v2 back in May 2019.
We have previously covered Compound in our DeFi Report #8: it isa lending and borrowing platform that, instead of dealing with directly P2P transactions, it handles a “pool” of different assets towards which every user can contribute. When an amount is deposited, the user is granted cTokens in proportion to the number and the value of the tokens they provided, and these cTokens can be transferred, traded, and are used to calculate each user’s collateral, which later represents how much they can borrow from the pool. The platform sustains itself by charging 10% of all the interests paid.
The big change came with the launch of the COMP token, which is entirely used for governance. Advancing towards the community-managed stage means every COMP holder has a chance to propose, debate and vote for the changes in the platform. Now, decisions like increasing reserves or changing collateral factors for certain tokens, adding support for other currencies and modifying the distribution speed of COMP tokens.
An important aspect to follow in the next few weeks will be the behavior of companies built on top of Compound, like Dharma and Staked, since the sudden increase in COMP’s value represents a big choice for them: either redistribute the COMP among their users (adjusting for the new value), use the new income to ensure new benefits or a mix of both.