The introduction of the COMP token appears to have led to a massive increase in DeFi's share
The amount of value blocked in the DeFi protocols more than doubled in the last quarter of 2020, reaching a record $ 2 billion. There are some things that may be driving this boom – but the COMP token appears to be a significant factor.
Massive asset growth in the DeFi sector began on the same day that the COMP governance tokens were distributed.
Jack Purdy, a cryptocurrency researcher commented:
“There are currently around $ 25 million in tokens being distributed every month through agricultural production opportunities at DeFi. It has proven to be an incredibly effective mechanism for generating liquidity ”.
The objective of the COMP is to use cryptocurrency assets that are at a standstill and put them into operation. COMP was introduced to encourage users to take advantage of the platform and clearly led to a huge increase in the use of DeFi.
What does DeFi do?
DeFi, short for Decentralized Finance, uses blockchain, smart contracts and cryptocurrency. This new system must operate autonomously without government intervention and eliminates the need for intermediaries in the traditional financial system – effectively reducing costs among end users, removing the intermediary.
With new waves of demand, there will likely be more investment in DeFi platforms, so investors should keep an eye on the risks involved.
Some risks remain
When lending money, a late payment of interest at a maximum price can cost the investor a lot if he does not have the asset he has lent available.
Some commentators are also warning about possible security risks. The deposited assets are held and controlled by portfolios. Wallets need keys that are a potential security risk.
Experts have warned that when individuals with malicious intent gain access to their wallet keys, they will be able to bypass security countermeasures on the blockchain. This is not a new risk and is part of any decentralized system.
Whatever the risks, it is clear that there is a growing market for DeFi products.