Compound Finance is one of the leading protocol in DeFi space when it comes to lending, borrowing cryptoassets. Lets users deposit cryptocurrencies and earn interest, user can also borrow assets. The interest rates are optimised algorithmically.

This analysis tries to understand the concentration of supply and borrow markets for various cryptocurrencies. Some questions that this analysis tries to answers are

  1. How concentrated the wealth distribution specifically supply and borrow amount (in USD) is across the wallets that are involved in compound?
  2. How top 50 wallets show distribution of supplied and borrow assets look like?

Data Analysis

Flipside Crypto database was primarily utilised to perform the analysis.

  1. Two Major activities were focussed on in which a user is Supplier or Borrower. Some users participate in both the activities and hence are considered in both the analysis.
  2. The data was analysed for 2021 duration.
  3. Each of the two activities operates across the spectrum of cryptocurrencies assets. Specifically 9 such assets were used in this analysis.
    1. DAI
    2. ETH
    3. UNI
    4. WBTC
    5. USDT
    6. USDC
    7. BAT
    8. ZRX
    9. COMP

We define some aspects in limited capacity as follows:

  1. Supply : Sum of all assets supplied over the entire duration by a user in USD.
  2. Borrow: Sum of all assets borrowed over the entire duration by a user in USD.

Quantifying Volume Concentration

We use two well know inequality metrics Lorenz curve and Gini Index to study assets concentration across various markets.

Image Source: Wikipedia

Image Source: Wikipedia

The Gini coefficient is usually defined mathematically based on the Lorenz curve, which plots the proportion of the total income of the population (y-axis) that is cumulatively earned by the bottom x% of the population.

The Gini index is often represented graphically through the Lorenz curve, which shows income (or wealth) distribution by plotting the population percentile by income on the horizontal axis and cumulative income on the vertical axis.