Compound (COMP) increases in the week after the introduction of the protocol by almost 70%, “guaranteed” 4% return
Compound’s native cryptocurrency COMP is up 18% in the past 24 hours, just days after launching a service that offers a fixed APY return of 4%.
COMP is famous as the character that sparked the yield farming craze when it launched about a year ago. The price is currently $ 378, up 67% over the past week.
COMP / USD | Source: Coinecko
Yield farming is a use case of decentralized financial protocols (DeFi) that offer extreme returns, often through token lending and governance token earning, like COMP.
Shortly after its introduction, the Yield Farmer adopted all the governance tokens of the Compound Protocol. Now the return on the compound is simply the interest rate on the loans.
COMP rose in price after Compound launched its newest product, Compound Treasury, on June 29. The service is aimed at “financial institutions and non-industry companies”.
With the Compound Treasury, companies from outside the industry can count on a “guaranteed” return of 4% on the USDC stablecoin, without the pitfalls that often occur in the industry. They are not FDIC insured and USDC can default, but are better than the interest rates offered by FDIC insured banks.
Just a few months ago, 4% seemed small compared to 12% returns on stablecoins offered by other DeFi protocols, but the situation has changed and returns on non-fixed staking protocols have fallen a little below 4%.
With the right market timing and luck, it is still possible to get thousands of percent return on some DeFi protocols. But it is a gamble and fraught with risks, many of which even turn out to be fraud or mismanagement.
So Compound’s service is pretty solid, especially for businesses that need a guaranteed income. In fact, Coinbase, the USDC mining company with Circle, decided to launch its own 4% stablecoin savings service just a day later.
Coinbase’s share price didn’t jump as much as COMP’s, rising 13.8% from $ 224 on June 25 to $ 255 on June 29, before falling to $ 240 on Friday.
Therefore, companies outside of the industry will get much higher returns if they just invest directly in Coinbase and Compound.
At home at home