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Spotlight 🔎
Curve
The effects of the COMP token distribution has rippled to stablecoin automated market maker, Curve.
Daily trading volume for USD pegged coins on Curve has surged from <$10m to more than $36m. The largest jump has been seen for USDC and USDT with Curve reporting a trading volume jump of 280% and 1000% respectively as the COMP distribution commenced. In just one week, the supply of USDT on Compound has jumped from $900k to $172m as of today marking a 19,000% increase.
The Formally Verified Take
To understand why the effects of high interest in farming COMP by users has funnelled through to Curve, we first need to understand how the COMP distribution model incentivises heavy contribution for markets that have high interest rates and changes as market conditions evolve over time. For the past few days, the highest rates were for USDC and USDT. Therefore, users were becoming opportunistic by leveraging their positions to maximise their return.
The process goes like this: users put in USDC on Compound and borrow USDT, swap this USDT on Curve for USDC, and add that as further collateral on Compound to borrow more. Instadapp’s COMP maximisation dashboard even allows users to perform this action effortlessly. This continued until users found a natural cap on leverage that could be taken and users were naturally capitalising on yield on both the supply and demand side. USDC and USDT now make up for more than 70% of the USD pegged coin trading volume on Curve in the last week.
By changing its invariant from Uniswap in order to prioritise lower slippage for stablecoin traders, Curve is proving out to be a key venue for simple stablecoin swaps.
The key question here is how long this leveraged activity will last. As compound market rates evolve, will we see a similar rush in leveraging alternative assets beyond USDT and USDC? For now, dApps like Curve are riding the wave. In the future, we might expect to see future cash flows from interest rate margins or flat fees on the borrow side - for providing value flows for COMP holders beyond value placed in governance alone (although these should be tied).
It is too early to say whether the COMP farming was a success or failure. What is more certain will be the desire for COMP stakeholders to design and implement new incentives to bootstrap further contributions to Compound’s market for the long-term success of the platform.
Quick Takes ⚡️
1inch
1inch has its highest daily trading volume since launch ($10.4m) with total cumulative volume on the aggregator surging past over $360m.
The continued climb in volume in recent days comes after 1inch was the top integration for Kyber for the month of May ($8.5m contributed). By providing users with GasToken functionality, users have been able to save ~$60k in gas costs through the burning of GasToken.
The Formally Verified Take
We can clearly see the significance of the recent trading volume levels seen this week by aggregating volume per month. As of today, June is already ranked the 2nd highest since inception and is projected to reach the number 1 spot by the end of the month (this is just a pro-rata estimate). What’s more is that activity is not simply from the same set of users. The ratio of new users to total users is 40% despite total users interacting with the platform increasing overall.
What makes the growth of 1inch interesting is twofold. Firstly, 1inch has been facilitating a large portion of the stablecoin swaps (likely in relation to the COMP distribution). Over 50% of total distribution to 1inch for the 15th and 16th June stemmed from Curve. Additionally, nearly 60% of the total trade volume were USDC and USDT on both days.
Secondly, it signifies a growing relevance of DEX aggregators more generally - it’s no longer about a simple trade. The core value proposition of aggregators is that they aggregate. Not just trade venues but also in functionality. In other words, DEX aggregators are able to provide users access to a multitude of DeFi dApps while compiling it into one interaction for the user. Most recently, with the integration of Curve with Ren, 1inch users are able to tap into Renasset-ERC20 pools to effectively swap native BTC for any ERC-20 coin (seeking the best price and low slippage in the process). In the future, it is likely 1inch will start rolling out further integrations to tie up remaining gaps between Uniswap V2, Compound, Sets, Aave, Balancer, and others.
Ren
Ren introduces an incentivised BTC liquidity pool.
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Formal Verification offers both key and concise data analysis and ecosystem research for decentralised networks and digital assets so you can be attuned to the absolute key developments both on and off the chain.
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