Using Compound as a window into the Ethereum DeFi space

Ethereum DeFi space
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Compound’s supply and borrowing dynamics can show the development of the Ethereum DeFi space

Borrowing is an essential function of a healthy economy. While the concepts of good and bad debt remain up for debate, it is clear that without a liquid loan market an economy runs the risk of stagnation or worse.

A decentralized economy is no different in that regard. As such, Compound, a decentralized algorithmic protocol for supplying and borrowing assets, acts as a good indicator of the development of the Ethereum DeFi space.

Tracking diversification

2020 opened with a tough first quarter for the entire crypto market, and the Ethereum ecosystem was not spared. With DappRadar’s OpenData product we are able to track how that affected Compound’s supply (assets deposited for interest) and borrowing dynamics, both at an aggregate and per-asset basis.

Data available through DappRadar OpenData

In a lot of ways, the trend mirrors the development in the price of ETH, but it is encouraging to see that this side of the market is able to stabilize after a steep drop off and that asset diversity does not suffer from it.

With supply standing at nearly 4x borrowing demand, supply is not a major source of concern. However, stable growth in the supply side needs to be met by a healthy borrowing need. So, it is encouraging to see that borrowing volume has also stabilized, as well as, maintained its diversity.

Data available through DappRadar OpenData

The hidden value of BTC

Especially noteworthy, is the gold sliver representing wBTC. BTC stands at over 65% of overall crypto market capitalization. So, it has been the desire of various DeFi ecosystems to be able to bring this vital asset into its sphere. wBTC represents early success for Ethereum DeFi. This can be seen in wBTC’s expanding footprint in MakerDAO, as well as other dapps.

Data available through DappRadar OpenData

However, in Compound wBTC represents more than just transaction volume. Since users can borrow wBTC on Compound, they can effectively use it to short the asset. Shorting as well as other more complex financial strategies have been associated more with the centralized exchange players.

However, with decentralized borrowing of BTC becoming available on Ethereum, and its decentralized exchanges continuing to mature, the Ethereum DeFi space may finally be on its way to offering a competitive alternative to centralized offerings.

Growth remains limited

While it is easy to get excited and proclaim that the age of decentralized finance is upon us, a closer look at the data suggests caution and patience are necessary.

Consider user activity on the dapp. While the number of active suppliers oscillates with a rather high amplitude, the number of borrowers exhibits more resilience to market turbulence.

Ethereum DeFi space
Data available through DappRadar OpenData

It is important to note that OpenData is able to identify unique addresses, but that is not the same as a unique user, as one may employ several addresses. Still, MAUW is an important metric when considering dapp activity.

However, when it is matched against avg supply and borrow transaction sizes, a more complete picture emerges.

Ethereum DeFi
Data available through DappRadar OpenData

In this view, borrowing patterns appear more volatile than supply ones. With few borrowers expanding and contracting their activity, it looks as though Compound has seen very limited growth in terms of expanding its user base.

That is reasonable, as there are a limited number of use cases for which users would logically borrow assets. The expansion of the asset base and the potential for shorting within the ecosystem may help with that, but for now, growth appears limited.

Looking for signs in the data

In the early days of the crypto market, growth was nearly synonymous with hype. While everything was hypothetical, the talk was cheap. However, if the industry wants to make a positive impact it needs to deliver positive results. The beauty of true on-chain projects is that their progress can be tracked in real-time.

Compound is a vital component of the Ethereum DeFi space, and it will be important to continue to monitor its progress through our custom Compound OpenData dashboard, as it continues to grow and develop.


DappRadar’s OpenData product will soon allow more people to analyze, visualize, and export complex DeFi and DEX blockchain data. For now, we are working with specific decentralized applications, specifically within the DeFi space. Who want to provide data dashboards and on-chain analysis to enrich users’ experience. 

If you are a dapp looking to provide accurate and actionable data to your users please reach out to our Head of Business Development – Sergio Susko. He would be delighted to help and discuss unique dashboards for your dapp. 

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