According to latest analysis from blockchain analytics agency Flipside Crypto, Brave’s Basic Attention Token (BAT) turned probably the most used ERC-20 token within the decentralized finance (DeFi) sector from June 19 to July 2. According to Dapp.com, “there was a transaction volume of $931 million generated from BAT token, more than the combined volume of Ether and Dai”.
BAT is the token used to incentivize and reward commercial viewing by Brave Browser customers. The thought behind blocking ads is to encourage advert makers to share income with the tip customers who watch adverts and share their private knowledge, which oftentimes they’re unaware is being tracked and monetized.
While Brave could also be one of many leaders within the blockchain promoting area and BAT is ceaselessly traded by crypto traders, the newest surge in value and buying and selling quantity was irregular.
What was behind the BAT pump?
According to Flipside Crypto, the latest enhance in BAT quantity and value was related to developments in one other DeFi mission known as Compound.
For the previous few weeks Compound has been the focus within the DeFi area and the latest launch of its COMP token precipitated a stir because it rallied 233% in its first week of buying and selling. As reported by Cointelegraph, COMP has additionally turn into the most important DeFi protocol when it comes to complete worth locked.
Compound’s reward mechanism permits customers to borrow tokens by depositing an equal quantity of one other token as collateral for stated mortgage. At the identical time, the lenders earn curiosity on the tokens locked in change for supplying liquidity to the Compound lending ecosystem.
The protocol additionally gives further COMP rewards to individuals primarily based on the quantity of curiosity they earned or paid for lending or borrowing.
According to knowledge from Flipside Crypto, this was the explanation for the surge in exercise as a result of tokens like BAT have a excessive rate of interest of 30% for lenders and debtors.
The risks of inorganic exercise
Although the spike in BAT utilization doesn’t appear to pose any speedy risk to the general DeFi ecosystem, there are a number of easily-overlooked penalties to such accentuated inorganic exercise.
The surge in exercise is created as a result of customers can merely borrow a token and resupply it to the lending protocol to earn COMP tokens for performing each roles.
The Ethereum community is already going through critical congestion and scalability points with its surging exercise on stablecoin and DeFi protocols. Inorganic exercise equivalent to that seen with BAT siphons essential assets from customers who’re interacting with the sensible contracts in a extra ‘legitimate’ manner.
Flipside Crypto famous that this kind of exercise may also trigger critical liquidity points for tokens with a relatively-small market cap and buying and selling quantity. In the case of BAT, round 82% of its provide was locked in Compound throughout this era.
This uncommon exercise got here to a cease when Compound modified the best way its bonus COMP tokens are distributed on July 2. Users at the moment are rewarded on the premise of the greenback worth of property borrowed, somewhat than the curiosity earned which has led customers to shift to stablecoins like DAI.
However, the newest pump in BAT’s quantity and spot value exhibits simply how fragile the DeFi ecosystem nonetheless is, and in addition how simply it may be deliberately or unintentionally manipulated.