There is still a large supply of tokens for these 8 altcoins, controlled by their founders and venture capital firms.
Whales watched projects
Recent findings by DeFi researcher Thor Hartvigsen have revealed the extent to which whales can control some of the top crypto projects.
On February 28, the researcher announced the findings from tracking the best whales among eight ‘strong performance protocols’.
Whale token investors 🐋
Who secretly owns the majority of the tokens you hold? And at what price did they invest 🧐
I spent 3 weeks tracking down the top whales of 8 strong performing protocols👇 pic.twitter.com/UE3FTrZltM
— Thor Hartvigsen (@ThorHartvigsen) February 27, 2023
Also, the findings are eye-opening but not surprising given the nature of crypto project finance. Most of the projects are venture capital backed and these giants still hold large bags of tokens.
DeFi whales’ battle for these 8 altcoins
Lido, the liquid staking platform, was the first project to be analyzed as it saw remarkable growth last year. However, venture firms Paradigm Capital and Dragonfly Capital control 10% of the altcoin supply. This equates to around 100 million tokens worth an estimated $309 million at current LDO prices. ‘Paradigm’s 100m LDO authorization round ends in May 2023 and Dragonfly unlocks 10m additional LDO tokens on August 25, 2023,’ the researcher said.
The decentralized perpetual change GMX also has a lot of whale influence. About 7% of the circulating supply is held by just four whale accounts, including top whale Arthur Hayes, who owns $15 million worth of 200,500 GMX tokens.
Frax Finance has a number of VC investors, many of whom still control whale wallets filled with FXS tokens. According to Hartvigsen’s findings, 15% of the circulating FXS supply is held by just five whale accounts.
DeFi stablecoin yield platform Curve is another platform with a whale effect. The researcher discovered that a handful of founding wallets hold around 400 million CRV tokens. The current circulating supply of CRV is 752 million, but these founding tokens are locked to qualify for the next few years. Other platforms with heavy whale dominance include dYdX, Synthetix (SNX), and Polygon (MATIC). Five VC whale accounts hold about 8% of the entire MATIC supply.
decentralized argument
Crypto projects like to point out how decentralized they are, especially in DeFi. However, this is not the case when a handful of whales can influence the governance vote with their huge bags.
Additionally, they may liquidate some of their heavy stashes on a whim, which will affect token prices at the time. As usual, it will be the small retailer that will burn if this happens.
Also, the most glaring recent example was the influence of Andreessen Horowitz (a16z) on a Uniswap management vote. Earlier this month, the firm used the 15 million UNI token voting block to vote against a proposal. The proposal was for the use of the Wormhole bridge for Uniswap V3 distribution on BNB Chain. a16z has invested heavily in LayerZero, its preferred competitor bridge platform for distribution.
For some platforms it looks like the ‘decentralized’ part of DeFi should be reworked.
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