COMP rose 17 times in ten days, can DeFi really achieve such huge profits?
From a profitability perspective, the current state of centralized financial inclusion may be what the future of DeFi will look like.
As we all know, no matter for the platform or for users, wealth management profits are often not as impressive as investment profits. This may also be the reason why Alipay also invests with collected user funds in addition to its payment business; and the average annualized income of bank wealth management also pales in comparison to stock investments such as Moutai and Apple.
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Compound will not always be profitable
Regarding the matter of Compound, V God said that "the interest rate is much higher than that of traditional finance (DeFi), which is either a temporary arbitrage opportunity or an unexplained risk." In addition to V God, many practitioners in the industry are also Warning "The value of COMP is overestimated!"
Therefore, as mentioned at the beginning, Compound is a DeFi project, and the current hot scene of liquidity mining and the premium of governance token COMP will not be its final state. Compound is a game-breaker in the development of DeFi, and it is also a trial and error.
On the one hand, the high price of COMP is the icing on the cake for Compound lending and mining, which can further attract wooly parties to move bricks, and can also push up the secondary market performance of COMP itself and loan assets such as USDT, BAT, Dai, etc. The following is the relevant assets Latest News:
- In terms of USDT, Tehter will convert a large amount of USDT on the chain on June 29, converting part of the TRC20-USDT to the ERC20 protocol, which may be related to the demand for USDT loans on Compound.
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BAT currency price performance in the past seven days, image source: CoinMarketCap
- In terms of COMP, since the launch of COMP, the price increase has also been very gratifying, from the initial listing price of 0.08ETH (about 18.5 US dollars) to the current price of 340 US dollars, an increase of more than 17 times.
These all show that Compound liquidity mining is currently very successful.
On the other hand, some objective laws also tell us that everything has a carrying limit. With the growth of lending activities and capital volume, Compound is also accumulating some risks.
Such as the liquidation risk of loaned assets. In fact, DEBANK data shows that Compound has more frequent liquidation of loan assets than other lending platforms, and the 24-hour liquidation volume ranges from thousands to hundreds of thousands of dollars. It can be predicted that if the transaction volume on Compound continues to grow, Ethereum may also be congested again.
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Trial and error is a necessary process for DeFi
In the development of DeFi, Compound shows the image of a breaker (spoiler). For a long time, DeFi has left people with the impression that the application is flourishing, and the profitability has little influence on leeks. However, the emergence of Compound allows us to see DeFi's altcoin-style growth and a game similar to pyramid schemes.
Compound is positive for DeFi. On the one hand, Compound has attracted (existing) users, fueling the popularity of DeFi. On the other hand, Compound is also a trial and error opportunity for DeFi.
Many people compare DeFi to Lego, which is the splicing of various protocols. Often, if there is a problem in one link, other links or even the entire system will be implicated.
In addition, there is a time lag in the connection and feedback between DApps. Because the development of DeFi is still in the early stage and lacks some mechanisms to deal with special situations, once problems arise due to compatibility between DApps, protocol upgrades, hacking attacks, etc., it is difficult for the system to respond immediately, that is, the coordination between DApps It is also inefficient and not flexible enough.
DeFi itself has unknown risks that require developers and users to explore and solve together, and Compound provides opportunities for DeFi to try and make mistakes.
Although there are unknown risks in the DeFi ecosystem including Compound, DeFi is undoubtedly a major progress in the development of the encryption world. In addition to the fact that DeFi applications have been showing a state of blooming, since this year, DeFi has also shown signs of "explosion" in some data performance.
In terms of market capitalization, before the concept of liquidity mining and COMP appeared, some data showed that the market capitalization of DeFi had doubled within two months, from about USD 1 billion to more than USD 2 billion. According to DeFiMarketCap data, the overall market capitalization of DeFi is now Already over $6.5 billion.
Data source: Feixiaohao
Data source: Feixiaohao
DeFi is undoubtedly the recent focus of the industry. It carries the vision of the second take-off of Ethereum. Some practitioners even believe that the starting point of the next round of bull market comes from DeFi. With the popularity of Compound, we can discover some risks in the DeFi system faster and take countermeasures, and the development of DeFi is a process of continuous trial and error, which will also be a necessary process.
