Up until yesterday, Compound was the second-largest decentralized lender after Maker, but with more than 150% spike in its price, COMP has become the top DeFi project by market cap of more than $2 billion. In the cryptocurrencies realm, it would have put Compound at 11th spot.
— Ceteris Paribus (@ceterispar1bus) June 19, 2020
This jump in COMP price also resulted in the total market cap of DeFi space to reach nearly $5 billion, up from $3 billion just a few days back.
The success of COMP has led investors to now chase other projects like Kava and Lend. Yesterday, a significant spike was registered in the idle Lend tokens, which may not be related to this bubble chasing behavior.
— Ceteris Paribus (@ceterispar1bus) June 18, 2020
Some believe this frenzy in the DeFi space will also reflect in Ethereum. According to some, as much as $1 trillion market cap.
this is all I see pic.twitter.com/Mpsx2Hho4E
— moon (@MoonOverlord) June 18, 2020
“True ethos of decentralized systems.”
This explosion in COMP price came after Coinbase announced that the exchange would be listing the first-ever DeFi token on its platform. On June 22nd, COMP-USD and COMP-BTC order books will enter transfer-only mode on Coinbase Pro.
The listing had a noticeable “Coinbase Effect.”
Interestingly, Coinbase is one of the investors in the project, along with Andreesen Horowitz, Polychain Capital, Paradigm Capital, and Bain Capital Ventures. These shareholders of Compound Labs Inc. that created the protocol have received about 2.4 million tokens.
Compound Labs have been relinquishing control over its project and put COMP tokens into a “reservoir contract” that will be distributed over the next four years to users.
Besides the 2.4 million tokens allocated to shareholders, 4.2 million tokens will be distributed to its users. Its founder and team members are allotted 2.2 million tokens that are subject to a four-year vesting period.
The company, Compound Labs, won’t retain any of its tokens. Because it is no longer involved in building or managing the protocol, founder Robert Leshner isn’t worried about the project being deemed a security.
But the market isn’t so sure about that.
— Ledger Status (@ledgerstatus) June 18, 2020
COMP tokens are “governance” tokens that give its holders a right to vote on the decision that affects the protocol.
Given that, Compound’s market cap jumped seven times to its total value locked; some argue it “may signal the rally went too far.”
According to Spartan Black from The Spartan Group, a crypto hedge fund invested in DeFi, “this is a good outcome for the industry as it allows crypto-asset holders to enhance the returns on their assets while participating in the success and governance of these decentralized lending platforms which is the true ethos of decentralized systems.”
This could also “kick off a new funding wave similar to the 2017 ICO bubble,” he said.