Borrowing means mining is here, and COMP has exploded by 450% when it goes online. Can it detonate the market? How to play here is for you to see

插兜小哪吒

特邀专栏作者

2020-06-16 09:54 (UTC+8)

This article is about 2983 words, reading the full article takes about 5 minutes

Borrowing is mining, and it will explode when it goes online. Is it worth playing?

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Borrowing is mining, and it will explode when it goes online. Is it worth playing?

Editor's Note: This article comes fromChatting with Xiaozha (ID: xiaonazha88), reprinted by Odaily with authorization.

Editor's Note: This article comes from

Chatting with Xiaozha (ID: xiaonazha88)

, reprinted by Odaily with authorization.

Borrowing means mining is here. When you hear ** means mining, does it have a familiar feeling, a little familiar taste, and a kind of CX internal taste.

Here are a few examples of ** mining:

1. Transaction is mining, Fcoin

3. Reward means mining, Fire Bull

From the perspective of making money, the early users of these projects have made money, and the later users have all kinds of painful experiences.

Today, ** is mining, and it is coming again. This time it’s not a counterfeit project, but a prestigious project: Compound, a famous champion in the DeFi field.

As for how long Compound’s lending, that is, mining, can last, it is worth observing. The main calculation here is whether there is a profit margin in lending, that is, mining, and how big the profit margin is. For specific calculation logic and parameters, see the text.

1. What is Compound?

Compound is a DeFi protocol based on Ethereum. Its main business is similar to the "mortgage lending" of banks. Users can mortgage their assets in the agreement to obtain annualized income, while the lender of the assets needs to pay the corresponding interest .

Compound is the star of the DeFi project, and DeFi is the hottest field in the cryptocurrency industry right now.

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Source: defi.review

In the DeFi field, Compound ranks fifth in the amount of locked positions, with a locked amount reaching 90 million US dollars. It can be seen that the arrival of Compound will affect the development of many DeFi projects.

Therefore, the "borrowing is mining" launched by Compound has a huge impact and may change the pattern of the entire DeFi market.

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2. Compound starts lending and mining, unwilling to be lonely or want to cut leeks

In the mortgage lending category of DeFi, the current situation is that there are currency-issued projects and non-currency projects, as follows:

Maker：$95,797

Aave：$119,115

Compound：$43,232

The projects that issue coins are: Maker (MKR), Aave (Lend).

Projects that have not issued coins include: Compound, dYdX, bZx, Nuo network.

Among them, according to Feixiaohao data, the market capitalization of MKR and Lend project tokens are: 480 million US dollars and 100 million US dollars respectively.

According to tokenterminal.xyz data, the annual profits of Maker, Aave, and Compound are:

Compound may not be willing to be lonely, or it may be for reasons such as expanding its source of income. Compound is going to start its decentralization process by introducing a governance system and a governance token COMP, that is, to issue a coin: COMP.

A total of 10 million COMP tokens will be issued. There is no pre-sale or reservation for COMP. The distribution ratio is as shown in the figure below.

Among them, the loan mining is a total of 4.23 million COMP, calculated at the distribution speed of 0.5 COMP per block of Ethereum, about 2880 COMP is produced every day, and it takes 4 years to complete the mining.

COMP started at around 2:20 a.m. on June 16th, Beijing time. As long as users use the Compound protocol to carry out loan transactions, the more the amount borrowed, the more COMP will be mined. Perhaps this process can be called lending. mining.

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Compound claims that its COMP is mined for free, but in fact there is a cost.

URL:www.predictions.exchange/compound/None

For the fund provider, the potential capital gain is actually exchanged for COMP; for the borrower, the interest to be paid is actually exchanged for COMP.

Of course, this process will reach a balance, that is, when the COMP price is formed, the interest paid may be close to or slightly less than the obtained COMP value, otherwise the borrower will lose money. Therefore, when "COMP income ≥ expenditure interest", the borrower can choose to arbitrage.

So what is the specific cost of COMP? It can be calculated through the predictions website.

URL:

For example: to borrow 100 USDT, the production cost of each COMP is 2.34 USD.

In fact, as more people participate, various parameters will change on a large scale, and finally reach a dynamic balance, that is, the production cost of COMP is close to the "mining" cost.

For example, in the article published by Lianwen yesterday, the calculated COMP cost was 2.5 US dollars, and it became 2.34 US dollars in the evening test.

With the mining cost, let’s calculate the value of COMP.

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4. Calculate the value of COMP

Compound does not have a pre-sale, but its equity investors can get tokens, which means that COMP tokens have an implied value.

Compound has had two rounds of financing, the seed round of $8.2 million and the A round of $25 million, raising a total of $33.2 million.

According to the distribution of COMP tokens, 23.96% of COMP is given to investors, that is, 2,396,000 COMP tokens.

Then the maximum price implied by the COMP token = $33.2 million / 2396000 = $13.856.

(It should be noted that 23.96% is distributed to investors, and the interests of investors are not only COMP tokens, but also other interests)https://compound.finance/governance/comp

Then the implied market value of COMP tokens = 13.856*10 million = $138.56 million.

If calculated in this way, the mining cost of COMP is $2.34, and the implied price of COMP is $13.856, which seems to have a lot of room.

However, you need to do some calculations:

According to COMP Dashboard data, the total amount of interest paid across all Compound markets on June 15 was $3,582.02. search website:

And COMP produces 2880 COMP coins every day, if starting from the fact that the interest is equal to the output COMP value:

Price of COMP = 3582/2880 = $1.24

Here comes the problem, if the price of COMP is greater than $1.24, it means that Compound’s daily interest due to user loans is $3,582, and the value of COMP tokens released by Compound to users is greater than $3,582, which means that if you lend your left hand to your right hand, you can earned money.

Here is another problem: if COMP=1.24 US dollars, then the market value of COMP is only 12.4 million US dollars, which is nearly 10 times less than that of Aave and Maker.

For Compound, it is good to hold down the price of COMP, which will attract many people to arbitrage, and the more people come to borrow and borrow, the higher the output cost of COMP will be.

In other words, through the issuance of COMP tokens, Compound can attract a large number of depositors and borrowers to play on Compound by raising the price of COMP tokens. Compound will effectively enhance its encrypted lending platform.

Seeing this, is it a bit familiar, the once crazy Fcoin had such an effect. Will the Fcoin scenario still happen? worthy of attention.

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5. Whether it causes madness, how to operate it?

How to make a profit in Compound's trading or mining? Referring to Fcoin, there are two types:

1. Participating in lending means mining. When the calculated COMP cost of mining is lower than the market price of COMP, you can participate.

2. Buy COMP tokens in the secondary market. If you think the price of COMP in the secondary market is low, then stockpile the tokens and wait for it to rise.