The Three Comma Club - The Daily Gwei #59
Is your favorite DeFi protocol in this exclusive club?
Yesterday I wrote about the “total value locked” metric and how DeFi protocols are battling it out for the top spot on DeFi Pulse. Though, they aren’t only battling it out to be number 1 - they’re also competing to be part of the coveted “three comma club” aka the $1 billion locked club. Only 3 protocols are in this club at the moment - Aave, Maker and Curve but I expect many more to join over the coming months.
Now, does this club even matter? Do people care that a DeFi protocol is in a club that doesn’t measure anything useful (as I explained in yesterday’s piece)? Of course they do! People love flashy numbers and what’s more flashy than the big $1 billion?I think it’s worth exploring why people care so much about this.
In my view, these metrics are used to build narratives. For example, when the value locked in DeFi hit $1 billion total for the first time, it was a major milestone and news of the event was plastered all over everyone’s Twitter feed. This is because this number works as a building block for the overall DeFi narrative and further bolsters its legitimacy in the eyes of the casual observer (whether warranted or not). Most people have no idea that this number is pretty meaningless on its own but that doesn’t matter - what matters is that they believe that it means something which causes them to act on those beliefs.
So, what actions do these people take? Well, they probably start getting involved in DeFi because that $1 billion number legitimizes the space to them. They may get involved with yield farming, speculate on a token, trade using a DEX or any other number of things within DeFi - the point is that they no longer dismiss it as a toy because of this vanity metric. You’re probably thinking that this is silly and people don’t actually change their minds on something based on a vanity metric but I can say from personal experience that this happens regularly. To put it into context - how many times have your friends scoffed at crypto when it was in a bear market only to return once the market started heating up again and showing those flashy numbers? I bet you have at least one or two of these friends!
There are of course other vanity metrics that people love to look at from prices of different coins/tokens to the number of “partnerships” that a project or ecosystem has. In the end though, these metrics are just narrative building devices and also serve as a marketing vehicle for the ecosystem. Is it a bit dirty? Sure - certain projects will use these tactics to “fake” traction in order to pump their token. Are we going to stop seeing this behavior in crypto? Ha - never!
Have a great day everyone,
All information presented above is for educational purposes only and should not be taken as investment advice.