This week, the price of Bitcoin (BTC) is causing a sensation as the digital asset finally surpassed the USD 12K mark, but before this move, the price performance of some altcoins have been far outpacing BTC for weeks.
Two of the tokens with the most notable performances are Band Protocol (BAND) and Chainlink (LINK), as both increased by 348% and 88% in the last ten days. Each functions as an oracle block chain network that supplies data to decentralized finance (DeFi) applications.
Since the beginning of August, the price of BAND increased from USD 3.9 to USD 17.78 and in the same period, LINK increased from USD 7.6 to USD 14.45 at its peak on August 10.
What’s behind the pump to the DeFi tokens?
The main factor behind the strong rebound is the explosive growth of the DeFi sector.
DeFi applications allow users to perform various financial activities such as transactions, loans and also earn interest on cryptomoney loans.
For DeFi platforms to work smoothly, they need to obtain market data from various websites and blockchain networks and this is where oracles come in. Oracles are needed within smart contracts to get the data to run DeFi platforms. Therefore, when the DeFi sector expands, blockchain networks that provide oracles benefit from it.
Yield farming increases the noise around DeFi, but the fundamentals are lagging behind
A TradeBlock research article explains:
„Oracles allow off-chain data to be integrated with the intelligent contract parameters that exist in public block chains. In the figure below, we compare the price gains between ChainLink (LINK) and Band Protocol (BAND) over the last three months.
Defi Pulse data shows that since June 1, the total value insured in DeFi applications increased from USD 1,048 billion to USD 4.76 billion. As more capital has entered the DeFi market, demand for oracles has also increased.
The main difference between Band Protocol and Chainlink is that the former is based on Cosmos and the latter operates on the Ethereum network. Cosmos is a chain of participation testing (PoS) blocks, while Bitcoin System is in the process of moving to PoS through ETH 2.0.
BAND has experienced substantially higher gains than Chainlink over the past few weeks due to a large valuation gap. Currently, LINK is valued at over USD 4 billion, while BAND is valued at USD 308 million despite its 348% gain.
Demand for BTC and ETH derivatives continues, the market is expected to grow further
The Messari researchers explained that BAND followed a similar path to Chainlink, which encouraged its growth. They said:
„BAND has recently taken a page directly from the LINK manual with a lot of partnership and integration announcements, including a listing in Coinbase Pro. Over 32 times in the year, their relative rating game and linkage to LINK has worked so far“.