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High APY won’t last long, Defi + upgraded DAO is the true future
The farming mania
Have you enjoyed the yield farming in the last couple of days? The price of COMP has jumped from $30 to $340 in just a week. And by supplying token assets on Compound, the lenders(of some tokens) could earn 20%+ APY (not counting the incentives COMP yet).
On Saturday, June 20, Compound has overtaken MakerDAO to become the largest decentralized finance protocol by total value locked according to data from DeFi Pulse. There is over $580M in cryptocurrency locked on Compound compared to $470M on MakerDAO.
Behind the halo
It happened so quickly that people on Twitter kept comparing it with the ICO scam. Not to judge for that yet, let’s understand the mechanism of how Compound works first.
In a nutshell, it’s called “Liquidity Mining.” The more people borrow or lend, the more rewards(COMP token) they can “farm,” which increases the liquidity of the financing and the size of the balance sheet.
It’s not different from that you save money to the bank and earn the interest rate (it’s very low). However, on Compound, borrowers are willing to pay a lot more, because they think they can make more money with…
