Algorand Surges as Foundation Incentivizes DeFi Activity on Algofi
The announcement of liquidity rewards for a product built on Algorand put ALGO tokens among the few gainers on Thursday.
Tokens of Algorand (ALGO) have added as much as 10% in the past 24 hours, becoming one of the few gainers on Thursday morning even as the broader crypto market extended its decline.
ALGO hit a resistance level at $1.60 in early European trading hours on Thursday, jumping from the $1.40 level on Wednesday night, data from CoinGecko showed.
The move came hours after the Algorand Foundation, which oversees development on layer 1 blockchain Algorand, announced a $3 million incentive program for Algofi, a decentralized finance (DeFi) platform that relies on smart contracts to offer low-cost lending and borrowing services to users.
“Through a partnership with the @AlgoFoundation Aeneas DeFi Fund, Algofi will be launching a rewards program of $3MM (2MM $ALGO),” Algofi noted in a tweet this morning, adding the incentives will run for active users through the first quarter of 2022.
Algofi launched earlier this month with backing from Union Square Ventures, Arrington XRP Capital and others, saying a liquidity incentive program would be introduced in the coming weeks. It is one of the first DeFi products in the Algorand ecosystem.
From January, users of Algofi will algorithmically earn ALGO rewards when they borrow and lend ALGO and the dollar-pegged stablecoins algostable (STBL) and USD coin (USDC). Tokens will also be rewarded to users of goBTC and goETH, representations of bitcoin (BTC) and ether (ETH) on the Algorand network, respectively, if they stake the assets on Algofi.
Developers of DeFi products often use token rewards to encourage usage of new systems. Incentivizing users with native tokens through value-accrual or yield-generating mechanisms like Algofi’s leads to early adopters interacting with new DeFi products, fueling activity and generating more usage of the new product’s native tokens.
The program follows the Algorand Foundation’s September announcement of a $300 million fund. The fund is earmarked for the creation and adoption of DeFi products built on the Algorand platform.
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