Compound Changes COMP Distribution Rules Following ‘Yield Farming’ Frenzy

Compound started distributing COMP tokens on June 15 following the announcement of the distribution mechanism on CoinDesk. The hope had been the system would favor the most fervent users with an actual need for Compound’s services, but no one expected the gap between the cost of yield farming COMP and the price of COMP on the market to diverge so dramatically.

“By distributing on the basis of total borrow, the incentive to self-deal in niche asset pools largely dries up, and we’re likely to see much of this capital (particularly the BAT market) flow out of the protocol,” Brendan Forster of Dharma, which uses the Compound protocol to offer stablecoin “savings” accounts, told CoinDesk in an email. Dai aside, if the change works out as planned, longtime Compound users should start earning more COMP each day, which has the potential to put upward pressure on COMP’s price as proportionately less gets sold on exchanges, as Forster explained.

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