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Just went down a quick rabbit hole on
@compoundfinance's $COMP token distribution and I think it will be fascinating to watch what happens. My thoughts...(1/9)
@compoundfinance's $COMP token distribution and I think it will be fascinating to watch what happens. My thoughts...(1/9)
First of, huge congrats on running this experiment. Giving away control of one of the most active protocols in #defi that has raised a total of $33.2M really follows the ethos of the crypto space.
(2/9)
(2/9)
Compound will release 10m $COMP tokens over the next 4 years to three parties: Users of the protocol, investors, and team members. Currently the price of the token is ~$67, implying a market cap of $670m. A valuation that is overinflated and the most valuable #defi app.
(3/9)
(3/9)
4.2m $COMP tokens ($281m) with go to users, 2.4m ($160m) will go to investors, and 3.4m (230m) will go to team members over 4 year vesting schedule. Inevitably this will go down as the supply of vested tokens increase.
(4/9)
(4/9)
With such a high percentage of tokens being allocated to investors and team members is governance of the protocol really decentralized? I think not... and is detrimental to having a truly open platform. But those who built/invested in this need & should to be rewarded.
(5/9)
(5/9)
Users incentive to provide liquidity to the platform is very compelling. We will continue to see growth in @compoundfinance... until the other shoe drops. Users can BORROW @Tether_to and have a positive APY due to the $COMP token rewards. Lending yields are also redic high.
(6/9)
(6/9)
Users are simply lending and borrowing, collecting yield on both sides until their leverage is maxed out. This IS NOT sustainable, WHEN the token price decreases the effective yield decreases, causing less users to "liquidity mine", causing further $COMP price decline.
(7/9)
(7/9)
When this will happen? No one knows. Owners of tokens that are tradeable should liquidate while prices are high and users are speculating/maxing out their yield. Governance will never be decentralized so I'm not sure on the value of the token because of this.
(8/9)
(8/9)
Ultimately I think this will be good for the #defi space and bring more attention to it. Compounds AUM/Users will grow. I will be watching closely and congrats to @compoundfinance, @rleshner, @justHGH and team, and @a16z, @polychaincap, @paradigm, @BainCapVC for supporting.
(9/9)
(9/9)
