After more than two years of brewing, DeFi broke out in the summer of 2020. Within just three months from mid-June till present, the progress is dazzling. This is by far the most innovative stage in the cryptocurrency history. Liquidity mining and yield farming are extremely popular and the Ethereum gas fee skyrocketed on their backs. Meanwhile, some projects are forced to close due to the overly costly transaction fees they need to subsidize for users. What did classic DeFi projects do in the past six months?
Liquidity mining has been a recognized driver for DeFi. The model was originated by Synthetix on Curve to distribute SNX token incentives to users who provide liquidity for the sUSD pool. Synthetix is a synthetic asset generation and trading protocol, therefore, with no liquidity its synthetic assets are meaningless.
What is liquidity mining? It is depositing or lending tokens under a set of rules to a DeFi product with a mining mechanism to ensure liquidity for the products fund pool with the final aim to get rewards for it. The recently popular Compound does it. Compound is a DeFi protocol for collateralized lending on Ethereum. Users provide their tokens to get annualized income or pay interest to borrow tokens. While borrowing and lending, they earn the governance token COMP distributed by a smart contract.
Their token COMP serves for governance and reflects the business value. All borrowers and lenders on Compound earn COMP. The total number of tokens allocated for mining is 4,229,949. Lenders get one half and borrowers get the other half of it. When COMP price rises, the users motivation to deposit and borrow money is stronger.
YAM is the initiator of mining + forking. When AMPL came out, there were some imitators but none of them gained mass attention in the crypto community. The only exception is YAM. Why is YAM so attractive? It is a fork of AMPL with YFIs issuance mechanism that added a couple of new features such as a reserve and exploded.
YFI is the governance token on https://yearn.finance. It has no pre-mining, ICO, allocation for the team, or reserve for investment institutions. It adopts the online governance model and community decide ...
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