This article provides an overview of how three important projects in the decentralized finance (DeFi) space — Aave (LEND), Compound (COMP), and Synthetix — have been doing over the past 24-hour period, covers recent news that might have affected their tokens (or might do so in the future), and looks at interesting tweets about these projects/cryptoassets from prominent members of the crypto community.
According to data by DeFi Pulse, currently (as of 12:50 UTC on June 22), these are the 10 DeFi projects by Total Value Locked (TVL):
The three DeFi projects we will will look at here occupy four out of the top five positions in this table.
In an excellent blog post published on 13 February 2020, crypto researcher Jack Purdy explained why TVL is such an important metric in the world of DeFi:
“Since most applications require capital to be deposited, often in the form of loan collateral or liquidity in a trading pool, it has been used as the de facto metric to show the growth of decentralized finance.”
Purdy also pointed out that although “the growth in TVL is a positive sign for the burgeoning world of DeFi”, it is worth remembering that “this figure is highly reliant on the price of ETH”.
To understand this better, let’s compare TVL (USD) with TVL (ETH) across all DeFi projects for the past 90 days:
As you can see from the two TVL charts above (provided by DeFi Pulse), between March 26 and June 22, while the TVL in DeFi measured in USD has gone from $604.245 million to $1.488 billion, i.e. an increase of 146.25%, the TVL in DeFi measured in ether (ETH) has grown from 2.669 million ETH to 2.985 million ETH, which is only an increase of 11.83%.
Finally, Purdy noted that the increase in TVL in DeFi projects “demonstrates not the general growth of DeFi, but the increase in faith in these systems.”
Yesterday, Ethereum-powered decentralized exchange and lending/borrowing platform dYdX published (as a blog post) the first issue (June 2020) of its monthly newsletter “dYdX Trader Insights”.
The dYdX team provided this nice overview of the current state of the crypto space:
“Apart from Bitcoin’s increased use as a digital store of value, decentralized finance has been the primary innovation hub within the crypto ecosystem.
“Everything from borrowing and lending, exchanging assets, and trading derivatives is being built on top of a decentralized architecture. And unlike many of their crypto predecessors, DeFi protocols are growing rapidly.
“Decentralized exchanges, which includes dYdX, processed over 1700% more volume in May 2020 than they did in January 2019. Lending protocols currently store hundreds of millions in assets and have supported billions in on-chain originations as well as millions in interest yield. Lastly, derivatives are enabling crypto traders with much more novel and secure ways of getting leverage.”
They used the following table to show some of the huge gains (against both BTC and USD) enjoyed by various popular DeFi tokens in the past 7-day, 30-day, and 90-day periods:
“Aave” is a Finnish word that translates to “ghost” in English.
Aave is “an open source and non-custodial protocol enabling the creation of money markets.”
On May 21, Binance Research released a report on Aave Protocol. Here are some interesting facts from this report:
- “Depositors earn interest by providing liquidity to lending pools, while borrowers can obtain overcollateralized loans by using the liquidity from these pools.”
- “Similar to other DeFi platforms (e.g., Compound, Fulcrum), deposits are tokenized as aTokens, which accrue interest in real-time. Aave Protocol supports more than 15 different assets, with a large selection of stablecoins.”
- “LEND tokens are used for fee reductions and will also be used for governance rights at the protocol level for future smart-contract updates. LEND tokens are also burnt from the fees collected from the Aave Protocol.”
- “Since January 2020, Aave protocol also offers undercollateralized solutions: flash loans allow developers to borrow instantly and easily without any collateral.”
Currently (as of 14:10 UTC on June 22), ERC-20 token LEND is trading at $0.154 (+7.62%). LEND is up 81.17% (vs USD) in the past 7-day period and up 805.88% (vs USD) in the year-to-date (YTD) period.
Compound is “an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.”
Compound v1 launched on the Ethereum blockchain on 28 September 2018. Originally, its smart contract-enabled money market allowed for lending in five different cryptoassets — Ether (ETH), TrustToken (TrueUSD), 0x (ZRX), Brave Attention Token (BAT), and Augur (REP) — with an algorithmically-adjusted (based on demand) publically-stated interest rates for borrowing and lending these cryptoassets.
Back then, here is how Compound Labs CEO Robert Leshner explained Compound’s business model to Coindesk:
“We keep a small residual of all interest that moves through the system. The more assets inside the system the more we earn.”
Compound Labs (the developer of the Compound protocol) is backed by a16z, BainCapital Ventures, Coinbase Ventures, Paradigm, Polychain Capital, and Dragonfly Capital.
Last Monday (June 15), ERC-20 token COMP, which is Compound’s governance token, went into circulation for the first time after Compound started distributing it to all users of the Compound protocol:
All Compound protocol users are now receiving $COMP – marking the beginning of community governance.
— Compound Labs (@compoundfinance) June 15, 2020
Within less than 24 hours, trading in COMP started on decentralized exchange Uniswap.
This is how Defi Rate describes COMP’s public distribution model:
“The public distribution will feature 4.2M COMP (out of 10M) in total, distributing 0.5 COMP every block.
“Tokens will be allocated proportionally to the interest accrued in each market, with an average of 5,760 blocks produced per day.
“This means we can expect to see ~2,880 COMP entering circulation every day with the public distribution expected to last around ~4 years based on normal block times.”
Here is how COMP’s total supply of 10 million tokens is being distributed:
- 24% (2,396,307 COMP) to shareholders of Compound Labs
- 22.25% (2,226,037 COMP) to the Compound team (subject to a 4-year vesting period)
- 3.72% (372,707 COMP) to future Compound team members
- 42.3% (4,229,949 COMP) reserved for distribution to users of the Compound protocol
- 7.75% (775,000 COMP) reserved for governance participation incentives
On June 16, crypto custodian BitGo launched support for COMP.
On June 18, Coinbase announced that it would be listing COMP on Coinbase Pro, with trading to begin “on or after 9AM Pacific Time (PT) the following day, if liquidity conditions are met.”
Currently (as of 15:05 UTC on June 22), Compound is trading at $255.39 (down 25.9% against USD in the past 24-hour period), but still its $656.8 million market cap (based on circulating supply) makes it the 24th most valuable cryptoasset and the most valuable DeFi token.
“Synthetix is a decentralised synthetic asset issuance protocol built on Ethereum. These synthetic assets are collateralized by the Synthetix Network Token (SNX) which when locked in the contract enables the issuance of synthetic assets (Synths).
“This pooled collateral model enables users to perform conversions between Synths directly with the smart contract, avoiding the need for counterparties.
“This mechanism solves the liquidity and slippage issues experienced by DEX’s. Synthetix currently supports synthetic fiat currencies, cryptocurrencies (long and short) and commodities.
“SNX holders are incentivised to stake their tokens as they are paid a pro-rata portion of the fees generated through activity on Synthetix.Exchange, based on their contribution to the network.
“It is the right to participate in the network and capture fees generated from Synth exchanges, from which the value of the SNX token is derived. Trading on Synthetix.Exchange does not require the trader to hold SNX.”
Synthetix has three DApps for trading, staking, and analysis: Exchange (“exchange Synths without a counterparty”); Mintr (“lock SNX to mint Synths and collect fees”); and Dashboard (“an overview of the Synthetix network”).
On June 15, crypto custodian BitGo announced support for SNX.
On June 19, Synthetix announced via a blog post that Synthetix, Curve, and Ren have “collaborated to launch a new incentivized pool to provide liquidity for tokenized BTC on Ethereum,” and said that the goal is “to create the most liquid Ethereum-based BTC pool available to offer traders access to the lowest slippage for trades between sBTC, renBTC, and WBTC.”
This incentive, which will run for ten weeks, went live at 04:00 UTC on June 19.
Currently (as of 15:25 UTC on June 22), Synthetix is trading at $1.45, which means it is up 2.8%, 27.3%, and 80% — all against USD — in the past 24-hour, 7-day, and 30-day periods respectively. With a market cap of $153.41 million, SNX is the 56th most valuable cryptoasset.