Coinbase announces listing COMP, triggering a surge in price. Did it go crazy within just three days?

Coinbase announced at 9 pm on the 18th that it will list COMP (the governance token of the DeFi lending project Compound) on June 22. According to CoinMarketCap data, the price surged over 40% immediately after the announcement.

What is COMP?

Compound is one of the mainstream decentralized lending platforms in the current market. In a press release by Compound CEO Robert Leshner on February 27th this year, it was announced that in order to create a robust open protocol and eliminate single points of failure, the development team decided to issue a governance token - COMP. This creates a community organized by token holders, granting the community the authority to propose, vote, and implement changes to the protocol, replacing the current centralized governance by the development team.

Any holder of 1% of the total circulating COMP supply has the right to propose governance proposals. Specific protocol modifications that can be proposed include adding support for new assets, changing asset collateral ratios, changing the market interest rate model, or any other parameters or variables in the protocol that can be modified by current administrators.

How to acquire COMP?

According to previous reports, COMP is issued in the form of "mining", where users can receive COMP by participating in Compound borrowing or lending, known as "borrowing is mining". Distribution began around 2:00 AM Taiwan time on June 16th and was distributed to users participating in the protocol.

Why the sudden surge?

On the day COMP began distribution, many Chinese exchanges had already listed related trading pairs, and decentralized exchange Uniswap also provided trading services.

As of the time of writing, according to CoinMarketCap data, the trading volume of more than 40% of centralized exchanges like MXC has reached $124, a four-fold increase from the $50-70 range on the 16th. Uniswap also recorded $118.

Currently, the known function of COMP is only to participate in Compound governance. However, it is evident that traders are not acquiring it for governance purposes. Perhaps they see it as a cryptocurrency representing the operational status of Compound, making it a speculative target, or they anticipate that Compound may introduce more applications and profit models for this token to attract more general investors and drive up the price. Of course, investors may have already identified some novel profit models.

With the emergence of COMP, Compound, which ranks second in locked assets, continues to increase its "value." It has surpassed half of Maker's $4.9 billion locked assets to reach $2.8 billion. Although it remains in second place, the total of 10 million COMP tokens, when calculated at the current token price, has far exceeded the market value of Maker's MKR token, indicating it may be overvalued.

On the third day, a total of 9302 COMP tokens were distributed as part of the reward allocation, with a total of 4,229,949 COMP tokens distributed until completion.