Compound changes the distribution of COMP tokens
Compound changes the distribution of COMP tokens

Compound changes the distribution of COMP tokens

By Alfredo de Candia - 1 Jul 2020

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The vote on a proposal to change the distribution of COMP tokens in the Compound Protocol has been concluded and will come into effect from tomorrow.  

Compound and its token have been disrupting the decentralized finance (DeFi) sector for two weeks now, as the distribution of the token via airdrop for all lenders and borrowers has led to the allocation of thousands of COMP tokens within a few days. 

The major change that will be introduced tomorrow will be to remove the interest rate burden of borrowing.

This is going to improve the distribution of tokens which are about 3000 per day for a total of just over 4 million COMP. 

The proposal has been approved within 2 days and has received full approval from the community with 771,804 in favour and 1 against; 115 addresses have voted, so also the community has realized that by making the appropriate changes this system will last longer. 

The decision taken will also mean that the interests will normalize and that the various pools of the different tokens will change their values since more importance will be given to how many dollars there will be in a pool. 

However, what worries Maker’s team is that this will lead to greater demand for the most used stablecoins on the protocol, i.e. DAI and USDC.

This increased demand could raise the price of the related stablecoins and therefore make the system less profitable, partly because it would immediately saturate it.

Users would be incentivized to generate many DAI, thus locking ETH to do so, which is necessary to obtain COMP.

And, in the case of a sharp drop in the price of ETH, there could be further risk and the liquidation of the collateral could start.

Now all that remains is to wait for the update and see how the situation will evolve, i.e. whether it will bring an increase or decrease of the related assets, including the COMP token itself. 

Alfredo de Candia

Android developer for over 8 years with a dozen of developed apps, Alfredo at age 21 has climbed Mount Fuji following the saying: "He who climbs Mount Fuji once in his life is a wise man, who climbs him twice is a Crazy". Among his app we find a Japanese database, a spam and virus database, the most complete database on Anime and Manga series birthdays and a shitcoin database. Sunday Miner, Alfredo has a passion for crypto and is a fan of EOS.

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