DeFi ballooned to over $3 billion, representing 1.24% of the overall cryptocurrency space
According to analyst firm Messari, DeFi companies are attracting capital into their platforms by distributing millions of tokens. In particular, Compound and Balancer are the two most prominent projects. Most of these programs work by distributing tokens to owners of voting rights on the platform with the opportunity to earn future claims for cash flow.
DeFi projects are distributing $25M a month in native tokens to incentivize users to bring capital to their networks
— Messari (@MessariCrypto) July 6, 2020
DeFi applications currently the hot topic in crypto circles
Currently, COMP owners can vote on enabling distribution that allows for more value capture for four years until 2024, but voters can change that aspect.
The report from Messari stated:
“Most of these programs work by distributing tokens that give holders a vote on governance rights on the platforms with the chance to earn a future claim on cash flows. Such liquidity mining programs abound in DeFi-circles. The latter is turning out a huge impetus in the cryptocurrency sector. Observers suggest retail traders and institutional investors are looking to move their capital to the crypto market — especially as yield farming becomes attractive.”
Compound and Balancer are giving out the most in token incentives, with the overall figure pegged at $ 25 million as of June 7. This is likely to increase as more firms offer similar programs, partly for promotional and partly for liquidity seeking purposes. The compound has soared to the top-25 altcoin by market cap weeks after launch while reaching a $ 3 billion valuation (by market cap) just days after launch.
Messari’s Jack Purdy stated:
“This network appreciation has led to huge capital inflows, which is everything in a world where liquidity is king.”
Decentralized Finance leads the way in cryptocurrencies
The DeFi sector has soared to more than $3 billion, accounting for 1.24% of the overall cryptocurrency space. The sub-sector has returned over 11% to investors in the past week, higher than any other traditional or crypto index.
The top nine tokens are based on Ethereum, with only REN operating on the leading network. Analysts are divided according to this metric, some arguing that it raised the price for ETH. In contrast, others argue that the widespread availability of the stablecoin demand suggests that 2017’s ETH boom may be unlikely.
However, for now, nearly all of DeFi’s activities are happening on the Ethereum network, which worked well, unlike CryptoKitties in early 2018.
- Ethereum Co-Founder Vitalik Buterin: Tron Has Ten Times More Flaws Than Ethereum!
- Dapp.Com Q2 2020 Dapp Market Report: Big Gains For Ethereum In Users And Transaction Volume, Led In Large Part By The DeFi Boom