Decentralized finance (DeFi) has been on the rise over the last two years and is now takings its place as a leading driver of innovation and valuations in the blockchain industry.
DeFi protocols, which allow users to engage in financial activities like lending without a centralized middle-man, have gained around $530 million in digital assets in the past week, bringing the total to $1.58 billion. These include everything from Ethereum (ETH) and ERC-20 tokens like DAI (DAI) to more unique assets like wrapped Bitcoin (wBTC).
As these DeFi projects mature, unique incentive structures are being introduced to promote user participation in governance and the protocols themselves. The latest additions being Balancer (BAL) and Compound Token (COMP).
Compound Token provides holders with voting rights related to Compound’s lending protocol on matters like technical upgrades, supported assets, collateral factors and more. Compound has elected to use liquidity mining to distribute COMP tokens, rewarding users who supply or borrow funds (or both) with Compound. The decision has been wildly successful thus far, bringing the total supply on the protocol to $950 million from 27,242 users.
COMP has performed equally well. Since the token was released on June 16, COMP has gained around 180%, giving it a fully diluted market cap of $2.3 billion and making it the largest DeFi token by nearly 4x — with Balancer and Maker (MKR) trailing at roughly $600 and $503 million, respectively. The token also launched on Coinbase Pro today, which should further fuel to the current DeFi rally.
In total, DeFi tokens are now valued at roughly $6.5 billion, which represents only around 2.3% of the total crypto market.
Disclaimer: This article’s author has cryptocurrency holdings that can be tracked here. This article is for informational purposes only and should not be taken as investment advice. Always conduct your own due diligence before making investments.