Coinbase Adds a Completely Illiquid Token After Investing in Comp – Trustnodes

Coinbase Adds a Completely Illiquid Token After Investing in Comp


Compound under management frenzy for new ethereum based token, June 2020

Coinbase has announced a new token from ethereum based defi dapp Compound is to start trading on Monday at Coinbase Pro.

“Once sufficient supply of COMP is established on the platform, trading on our COMP-USD and COMP-BTC order books will start in phases, beginning with post-only mode and proceeding to full trading should our metrics for a healthy market be met,” they said.

This is just days after comp began public distribution this Monday, with dapp users having just 0.2% of the total supply to be circulating by that point.

That’s by lenders and borrowers on Compound getting 0.50 comps per eth block with it equally distributed, leading to a further spike in assets under management to now near $300 million.

That’s up 3x from $100 million on June 15th, and close to overtaking MakerDAO’s dapp which has long been leading and by far.

Top dapps rankings by assets, June 2020
Top dapps rankings by assets, June 2020

Compound is now to be run by token holders, with this dapp standing out for having no backdoor as it stands.

That makes it very risky, but people apparently don’t care as this is the only somewhat exciting thing going on right now in the crypto space.

That’s because it is fairly novel with numerous experiments within it, including its distribution method.

Compound trading pairs, June 2020
Compound trading pairs, June 2020

When we looked at this yesterday there was just one exchange, Bilaxy, but now there’s all sorts of exchanges we’ve never heard of and also Poloniex.

Its price also was about $80. Now it’s $1,000 (lmao) on one exchange and generally about $130.

This frenzy may well be due to its extremely limited supply, with just 10,000 tokens currently circulating out of 10 million.

That’s from the distribution. There are 2.2 million for the founding team, but that’s been vested for 4 years.

Meaning the only one that can sell now, save for these 10,000 tokens (increasing by ~3k a day), is the investors in the Compound Labs, the company behind the dapp.

That includes Coinbase itself, which is a shareholder, with it unclear just how much they paid for these tokens but far far less than the current price you’d think.

In addition the regulatory aspect here is grey at best as it isn’t clear whether someone like Coinbase can provide such liquidity with all this very much the very cutting edge where regulations are concerned.

SEC has previously said that if a token starts off as security it can become a utility if the token was sold for example to build a theatre (security), and now you’re selling tickets to go to the theatre (utility).

Here investors gave the funds to build the dapp, have it running, and have it used by people, and for that they also got a big chunk (24%) of the tickets to be sold, the token which can be used for code based governance and the actual running of the dapp.

You can tell the code for example, obviously following rules, processes, and getting the majority of voting token holder to agree, to add a new token as a collateralizable asset or to change the interest rate or the level of fees charge or literally everything really.

So if Coinbase is adding this token to their exchange, then their counsels are clearly of the view this is a utility token, creating thus a new business model.

That means if you’re able to build something yourself or get VCs to help and find some utility for a token, you can now go public globally in potentially thousands of exchanges without requiring any paper work and without waiting months and years for the bureaucracy.

So the ICO has changed from promises to build things to now selling tickets for built things which in a way makes SEC irrelevant once again, at least for now.