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Assessing the far-reaching effects of Compound III’s deployment on Polygon

  • Polygon integration may positively impact Compound Finance’s TVL, despite some limitations
  • COMP holders have reduced a significant portion of their asset holdings

DeFi lending protocol Compound Finance is in the news after it announced finally deploying its third version to Polygon. Contextually, Compound III is a streamlined version of the main Compound protocol. Here, the former allows the efficient supply of assets and borrowing of stablecoins against various collaterals.

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The disclosure, as stated above, would allow Wrapped Bitcoin [BTC]  nd Ethereum [ETH], as well as MATIC, to be used as collateral. This development means that Compound will not only operate on the Ethereum Mainnet. So, it joins Aave as the other protocol on the Polygon network.

For a fact, Polygon has recorded significant growth on several fronts already. Therefore, it is no surprise that the Compound community seems to be elated by the update. However, will the collaboration bring about a recovery in Compound’s underwhelming Total Value Locked (TVL)?

According to DeFi Llama, Compound Finance had a TVL of $1.89 billion at press time. This positioned the project in ninth across the DeFi ecosystem. Here, the TVL measures the volume of crypto-assets bound by smart contracts in a particular protocol.

Source: DeFi TVL

For its part, Compound’s TVL has fallen by 4.25% in the last 30 days alone. This has left it at one of its lowest points since 2022. This drop also implies that investor interest in the protocol is now nowhere near its height. 

However, the recently-announced partnership could help Compound exit the status quo. Although it is not guaranteed, the public interest in Polygon might play a part and possibly trigger more unique deposits into protocols under Compound Finance.

Meanwhile, COMP active addresses are far below that of Polygon. The metric acts as a good indicator of daily transactions over a particular blockchain.

At press time, the 24-hour MATIC active addresses were 163000 while the same for COMP were 259. Thus, Compound interaction with Polygon has a chance to improve the protocol’s unique transactions.

COMP active addresses and MATIC active addresses

Source: Santiment

How much are 1,10,100 COMPs worth today?

Not in for the long ride?

Finally, COMP investors look to have disposed off some of the tokens held. This, because of the exchange inflow highs of 4 and 7 March. The exchange inflow hitting peak levels suggests an intention to sell an asset. However, at press time, the aforementioned resolve had not strengthened.

Concerning the supply outside of exchanges, COMP flashed a figure of 8.66 million. Although it has been higher over the last few days, the figures are still lower than the same for February. This implies that some long-term holders have already cut short some parts of their holdings.

COMP exchange inflow and supply outside of exchanges

Source: Santiment

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