Since the launch of DeFi governance tokens, one of the biggest critiques has been the value of the tokens. People were not caring about the interest they were earning on whatever coin they were lending they were more interested in the governance token and the value of it. This lead to yield farming, which runs counter in my opinion, to what DeFi was supposed to do. This could further be seen with the sky-high gas fees that forced out most if not all the small players who wished to participate in DeFi as the gas fee could easily eclipse the value of the coins you wished to lend into the pool.
I am a firm believer that true DeFi can only be achieved through the governance token being worth nothing. However, I am a realist in that people will always want to buy/sell these coins so they will always have some value no matter what. Due to human nature, I do not think that we can achieve the pure form of DeFi and will end up settling with the coins worth some value. That value though cannot be as high as these current token prices are now they have to be at a price that the average person can buy them at.
Looking at the top 3 lending platforms according to a coinmarketcap article in September (located here) Aave, Maker and Compound lead the way (Uniswap is left out due to it being a DEX and these three focusing on lending and burrowing). However, the value of those DeFi governance tokens is still extremely high with Aave token being the cheapest at $45 a coin. Maker and Compound have both been astronomically high with Maker hovering in the $560-570 range and Compound being around $120 yet currently at $107. Looking at how these three are doing price-wise we run into an issue with Coinbase not having Aave listed yet. It also has not been given away by Coinbase as Maker and COMP both have. These actions triggered huge price rushes up and so since this has not happened to Aave it's hard to judge where it would be if this did occur.
This then leaves us with looking at Maker and Compound to see whos governance token is closer to "pure" DeFi. It is not hard to make a call on which one is closer to the average person's price range. Maker at over $500 is over an Ether in value and COMP is just at $107 as of right now. What really separates them though is how the price has fluctuated. Maker has actually ended up higher than where it was 30 days ago and has fluctuated from $433 a coin to $599 a coin. Compound on the other hand has steadily fallen from a high of $185 near the beginning of the 30 day period to $107 which while still above what the pure DeFi value should be is trending in a direction that makes it more of a true DeFi governance token.
Here is Maker's Price Chart
Here is Compound's price chart
The odds of either of these DeFi applications falling in value to 0 or 1 is really not realistic to see. However, seeing one of the largest platforms in Compound having it token value falling without sacrificing its function or locked up value is an encouraging sign! There will always be certain coins that become/are a symbol of status in the DeFi industry. YFI is a prime example as it is worth a little over $18,000 while Bitcoin is hovering in the $10,700 range. Further keeping YFI value up is that it is capped at 30,000 coins and the multitude of spin-offs that have happened from its code (like Sushi Swap). Lastly, the idea that it is more expensive than Bitcoin has kept the price of it above that. This serves no other purpose than to have a coin worth more than the gold standard (Bitcoin).
DeFi is an ever-evolving space and who knows what it will look like even in 6 months. For DeFi to reach its true potential though the average person has to have a seat at the table and with token/coin prices above $10-20 a coin I just do not see that happening from these two platforms. The rate of new DeFi applications are launched could allow this to happen sooner rather than later.
Hope you enjoyed this post!
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