DeFi Summer

In June 2020, Compound started distributing its COMP governance token to people who borrowed and lent on the protocol. Suddenly using a protocol *paid you* in its token. Liquidity mining was born, and with it, DeFi Summer.

Money legos

The magic was composability: lending markets, DEXes, stablecoins and yield aggregators snapped together like Lego. You could supply an asset, borrow against it, farm a token with the proceeds, and stake that — all in a few transactions, across protocols that never coordinated.

deposit ETH ─→ [lending] ─ borrow USDC ─→ [DEX] ─ LP ─→ [farm] ─ earn token
                  │                                              │
                  └────────── one user, four protocols ─────────┘

How liquidity mining works

The trick was simple and combustible: a protocol prints its governance token and hands it to users for supplying liquidity or borrowing. Suddenly a 3% lending yield becomes 3% *plus* a token that might 10x — so capital floods in, TVL spikes, the token pumps on the attention, which funds more emissions. A flywheel, for as long as the music plays.

emit token ──→ higher yield ──→ capital floods in ──→ TVL ↑
     ↑                                                   │
     └──── token price ↑ ←── attention ←── "highest APY" ┘
            (great until emissions outrun real demand)

The hangover

The same composability that made money legos magical also stacked risk: a bug or oracle manipulation in one protocol could be flash-loaned into a chain reaction across the others. And much of the capital was mercenary — it farmed the token, dumped it, and left the instant a higher yield appeared elsewhere. DeFi Summer was equal parts genuine breakthrough and unsustainable mania.

It was chaotic, over-leveraged and full of forks-of-forks — but it's also when DeFi became real, TVL became a number everyone watched, and a lot of us got pulled onchain and never left. Everything in this archive, in a sense, starts here.