A number of cryptocurrency proponents have been discussing the stablecoin DAI this week, as the DAI allegedly held on the Compound platform is much larger than what is recorded in circulation.
At press time, Compound statistics show there’s $523 million worth of DAI held in reserves, while the web portal daistats.com shows there’s only 160 million DAI in circulation.
There seems to be another mystery in the world of decentralized finance (defi) again as the crypto community is now discussing the stablecoin DAI and the algorithmic money market protocol Compound.
Essentially, the Compound platform allows users to earn interest or borrow assets against collateral by leveraging a myriad of crypto assets. The platform is a well known tool and the stablecoin DAI is the most popular asset on the market today.
According to stats on the compound. finance markets detail page, there is $523 million worth of DAI held in reserves. In fact, the market overview of the compound.finance total supply is $1.3 billion to-date. That specific data metric includes all the tokens that are leveraged on the Compound platform.
However, looking at the website daistats.com shows there is only 160 million DAI in circulation. This has caused many defi proponents and the crypto community, in general, to start theorizing on why there is more DAI allegedly held in reserves on Compound, than what’s ostensibly minted in the real world.
A number of people on Twitter started making fun of defi projects and specifically criticized Compound, DAI, and Maker proponents. In the official Maker Chat governance channel, one individual said: “This whole thing is just a little frustrating — Compound is not being a good actor right now.”
Other’s discussed whether or not there is a major issue with farmers, farming yields, and market makers. Just recently, the Compound project introduced a new governance proposal that affected “yield farming.”
On Twitter, some people discussed an ostensible issuance loophole that could grow the DAI held on Compound infinitely, while others didn’t believe it was possible. “This doesn’t seem [like a] possible/error. I don’t believe you can borrow DAI against a collateral of DAI…can you?” an individual asked.
One person responded: “Yeah you can, check out Instadapp. You can do it easily via the [Compound Finance] UI if you buy cToken of w/e too.” Another person confirmed the fact that it is entirely possible to borrow DAI against a collateral of DAI.
Whatever the case may be, in the defi world there is trouble in paradise once again. In the Maker governance chat, some people thought that simply changing the interest rate lower on another stablecoin like USDC would solve the issues Compound is dealing with at the moment.
However, some people thought that a decision like that would be tricky and cause yield farmers to move to other assets. “I mean what is a few hundred million DAI backed by a few hundred million worth of cDAI between friends,” another individual discussing the DAI/Compound situation remarked.
A concerned individual on Twitter wrote: “DAI will skyrocket above peg – that means the debt value will increase accordingly, [and] that’s dangerous for my collateralization. Many farmers will get rekt on Compound.”
What do you think about the discrepancy between DAI in circulation and what’s held on Compound? Let us know in the comments section below.
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