The Ethereum (ETH) DeFi sector continues to grow seemingly unhindered. In recent weeks, the growth of this sector has been one of the causes attributed to the positive performance of Ethereum that managed to outperform Bitcoin in profits. Now Compound Finance founder Robert Leshner announced on his Twitter account that the Compound protocol has exceeded $ 1 billion in total supply. Leshner also celebrated the recent release of the protocol's COMP token and hopes it can continue to grow:
Now there are a billion dollars supplied to the Compound protocol. I am looking forward to $ COMP holders expanding and improving Compound, for the next big milestone to pass.
Compound is a series of market interest rates that run on the Ethereum blockchain. The protocol allows its users to take any supported asset as collateral and obtain a loan. The protocol offers flexibility to its users to establish the asset in which they want to take the loan. For example, if a user has ETH they can supply it to Compound and receive the stable DAI currency.
Also, users who supply an asset to Compound start earning interest immediately. In part, this is one of the reasons for Compound's recent growth. In addition to being a decentralized loan protocol, it offers more flexibility when giving an asset to a user and when he can withdraw his earnings.
Compound's growth broke with the reign of the DeFi Maker platform. For a long time, this platform dominated Ethereum's DeFi sector, but it seems like Compound's profits and versatility have brought much more investors. At press time, Compound has lost a significant portion of total supply and stands at $ 989 million. On the other hand, Compound has managed to fix $ 631 million of the 1.6 billion that are in the DeFi sector of Ethereum with a dominance percentage of 38.86%.
BAT volatility could affect Compound
Despite the above data, there are still doubts in the community about the sustainability of the growth of Compound and the DeFi sector. According to Compound data, the Basic Attention Token (BAT) makes up 74% of the protocol's loan market. In contrast, the DAI and Tether (USDT) stablecoins hold about the remaining 18% of the total $ 362 million that has been lent from Compound.
In the short term the stability of the protocol could be affected. As BAT is a token and not a stable currency, the asset is highly susceptible to price rises and falls in the market. According to Compound BAT has a supply of $ 309 million set in the protocol, this represents 77% of all BAT supply. Therefore, the token could see its volatility increase as more of the asset is fixed in the protocol and removed from the market.
A price rise or a sudden drop will affect investors who have taken out a loan with certain conditions. Their positions could be suddenly liquidated, as was the case on March 'Black Thursday'. At that time, the drop in the price of ETH affected the performance of the entire DeFi sector.
