The highest increase of 408% in the past three months, is the growth of DeFi tokens sustainable?

特邀专栏作者

2020-07-09 20:58 (UTC+8)

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The surge in DeFi native tokens and the increase in leveraged positions have promoted the development of DeFi, but it should be noted that this also means that this booming field is also accompanied by increasing risks.

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Editor's Note: This article comes fromUnitimes（ID：Uni-times）Editor's Note: This article comes from

, by Johnny, published with permission.

The total value (TVL) of assets locked in current DeFi applications has exceeded $2 billion, of which $1 billion was poured in within three weeks in June this year! What’s more, according to a report from Messari, DeFi platforms are now handing out a total of $25 million worth of assets to users for free each month. It's all about the phenomenon known as "Yield Farming". Basically, liquidity mining involves borrowing and lending as much as possible using crypto assets like BAT and USDT.

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The growth trend of the total value of assets locked in DeFi. Source: DeFipulse

Therefore, in the past three months alone, these DeFi protocol tokens have ushered in a sharp increase. It may not be like the heyday of 2017, but this is a booming new industry.

Data provided by Messari shows that 10 DeFi tokens have grown between 41% and 804% since April 8 (see chart below). Bitcoin and the entire cryptocurrency market have only grown 27% over the same time period.

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10 DeFi protocol tokens have outperformed the broader crypto market over the past three months. Source: Messari

In the three months since April 8, the value of the LEND token has risen from $0.022 to $0.199. And this growth is just a continuation of the recent LEND growth, which has reached a record 1127% since January this year.

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The price of LEND has increased by 804% since April this year and by 1,227% since January. Source: CoinMarketCap

In Messari’s data, the DeFi token that performed second only to LEND was Bancor (BNT). Bancor is an Ethereum-based exchange protocol that allows users to implement non-custodial token transactions through the use of liquidity pools. Since April 8, the BNT price has surged from $0.191080 to $1.65, an incredible 761% increase.

Bancor provides interest income to liquidity pool contributors. While Bancor has its own website and decentralized exchange (DEX), the protocol is also used by many other exchanges, such as DEX 1inch.exchange.

Ren (REN) was the next protocol token to perform strongly, gaining 286% over the past three months. Ren is an open, permissionless protocol for cross-chain cryptocurrency transfers. Given the stated goal of the Ren protocol to bring blockchain interoperability to the DeFi space, perhaps REN's growth is a clear sign that investors are capturing not just DeFi tokens themselves, but those that are built on a more technical level. Tokens that work on it.

Additionally, tokens from Synthetix (SNX), Kyber Network (KNC) and Loopring (LRC) also saw record gains of 220% to 280%.

Synthetix is an Ethereum-based synthetic asset issuance protocol and a trading platform for synthetic assets. The so-called synthetic assets are simulations of certain real assets (such as USD, BTC, ETH, XAU, etc.). Synthetix users issue synthetic assets (such as issuing sUSD, sBTC, sETH, sXAU, etc.) by mortgaging the local protocol token SNX, so that Users can trade and arbitrage the asset without actually holding the asset (such as BTC).

Kyber Network is a decentralized on-chain liquidity exchange protocol based on Ethereum. According to Etherscan, it is currently the third largest decentralized exchange by trading volume. Loopring, also a decentralized exchange (DEX), recently gained attention for its successful implementation of ZK-rollups, a new Ethereum scaling technique.

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Image source:https://kyber.org/vote

Staking KNC tokens on KyberDAO allows KNC holders to vote directly, or proxy their votes to reputable community members, to make governance decisions on protocol layer changes, such as the network allocated for staking rewards fee ratio etc. Currently, 65% of network fees will be allocated to users who have pledged KNC tokens as staking rewards.

The price of the KNC token has increased by nearly 800% so far this year, reaching an all-time high of $1.84 on July 3. But unlike DeFi lending platform Compound’s governance token COMP and Blalancer’s BAL token, the value of the KNC token has yet to soar sharply following the Katalyst upgrade and the launch of KyberDAO’s staking rewards.

The Katalyst upgrade has been touted for months compared to these competitors, which may illustrate that KNC will gradually increase in value rather than suddenly like the tokens of liquidity protocols such as Compound.

The upgrade of Katalyst has brought a series of changes to the Kyber network protocol, not only reducing transaction fees for users, but also setting custom swap fees for liquidity providers. Kyber is also preparing a Kyber Improvement Proposal (KIP) framework for KNC stakers to submit, review, and discuss governance proposals, similar to Compound's Executive Vote system.

The first protocol governance proposal will be voted on after Epoch1 (July 14th) of the Katalyst upgrade. The network fee rewards distributed during Epoch 0 following the Katalyst upgrade will be used to "burn" KNC tokens, thereby reducing the overall supply of KNC and driving the price of remaining KNC tokens. After Epoch 1 and beyond, starting from July 14th, the allocated network fees will be distributed directly to KNC stakers.

In addition, other DeFi tokens that have outperformed the market in recent months include 0x (ZRX) and Augur (REP), which are up 169% and 102%, respectively. Additionally, MakerDAO (MKR) and Ethereum’s native token ETH experienced smaller growth rates of 43% and 45%, respectively.

In mid-June, the governance token COMP, issued by the Ethereum-based lending platform Compound, sparked the enthusiasm for liquidity mining in the encryption field. COMP pushed the decentralized lending protocol’s token valuation to the top of DeFi less than a week after its launch, and the value of crypto assets locked in the protocol also dominates. Yield farming itself isn’t a new concept, but the mania around COMP has turned it into a meme called “yield farming.”

When Compound launched its native governance token COMP in mid-June this year, it was trading at around $30. But due to the influx of market hype, the altcoin quickly skyrocketed by 1,000%, reaching an all-time high price of $350. The ERC20 token has since seen a sharp pullback since then. As of this writing, the cryptocurrency is trading at around $180, according to data from CoinMarketCap. That's about a 50% drop from COMP's all-time high, and that drop came in two weeks. See below:

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COMP token price action since launch. Source: CoinMarketCap

A large part of the drop in the COMP token occurred after COMP was listed on the Coinbase exchange. Since Coinbase was one of the first "mainstream" cryptocurrency exchanges to list COMP, the exchange is the go-to venue for many COMP holders to sell their tokens, analysts said. Investors in the cryptocurrency could suffer further losses, with analysts suggesting the DeFi token may be inherently overvalued. But as of now, COMP remains a high-cap cryptocurrency even after falling 50% from its highs.

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