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Decentralized Finance (DeFi) applications, currently the hot topic in crypto circles, are doling out millions of dollars to attract user capital and usage.
This is similar to “bounty” campaigns by several ICOs in 2017-18, which were led by massive price declines at the time.$25 million distributed
On-chain analytics firm Messari tweeted Monday that DeFi firms are attracting capital to their platforms by distributing millions in their native token.
Compound and Balancer, with market caps of $1.9 billion and $370 million, come out on top; giving out millions in COMP and BAL respectively:DeFi projects are distributing $25M a month in native tokens to incentivize users to bring capital to their networks + $COMP: $18.5M + $BAL: $5.8M+ $SNX: $768K + $AMPL: $44K + $REN: $16K Full analysis: https://t.co/k9vnGxZfjO pic.twitter.com/RBwrczfopl — Messari (@MessariCrypto) July 6, 2020
Most of these programs work by distributing tokens that give holders a vote on governance rights on the platforms with the chance to earn a future claim on cash flows, notes Messari.
Holders can, in theory and via polls, vote on enabling distribution that allows for more value capture. Currently, COMP holders can enjoy these distributions for four years until 2024, but voters could change that aspect.
Such “liquidity mining” programs are abound in DeFi-circles. The latter is turning out a huge impetus in the cryptocurrency sector. Observers suggest retail traders and institutional investors are looking to move their capital to the crypto market—especially as “yield farming” becomes attractive.
Compound and Balancer are giving out the most in token incentives, with the overall figure pegged at $25 million as of June 7. This is likely to increase as more firms offer similar programs, partly for promotional and partly for liquidity seeking purposes....