In June 2020, Compound launched its COMP token with a novel distribution mechanism: users who lent and borrowed on the protocol earned COMP tokens as rewards. It was called “yield farming” and it was immediately addictive. Within weeks, every DeFi protocol was launching a governance token with liquidity mining rewards, and hundreds of millions of dollars were flowing into protocols that had been nearly empty the month before.
Yearn Finance, built by Andre Cronje as a solo developer, launched in July 2020 with no pre-mine, no VC allocation, and a “fair launch” ethos that captured the imagination of the crypto community. The YFI token went from $0 to $43,000 in weeks — each YFI token briefly worth more than a Bitcoin. Andre became the folk hero of DeFi Summer, building and shipping products at a pace that seemed superhuman.
SushiSwap forked Uniswap’s code in August 2020 and launched a “vampire attack” — offering higher rewards to migrate liquidity from Uniswap to its own platform. The anonymous founder, Chef Nomi, then sold $14 million of SUSHI tokens from the developer fund, was publicly shamed, and returned the money. It was the most dramatic storyline of the summer and a preview of the governance drama that would define DeFi.
DeFi Summer 2020 was to Ethereum what the ICO boom was to Ethereum in 2017: a proof of concept that attracted massive capital and attention, crashed spectacularly, and left behind real infrastructure. Uniswap, Aave, Compound, Yearn, Curve, and SushiSwap all survived and became multi-billion-dollar protocols. The phrase “money legos” entered the crypto vocabulary. And the idea that tokens could be used to bootstrap network effects — giving users ownership in exchange for using the product — became the default playbook for every crypto launch that followed.
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