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What is Compound (COMP)

Compound (COMP) is a version of software running on Ethereum and connected to a distributed network of computers within a traditional money market. It is one of the latest decentralised finance (DeFi) protocols and uses multiple crypto assets to enable a process of borrowing and lending without using a financial intermediary such as a bank.

Compound users can deposit cryptocurrency into lending pools that borrowers can access. Those lenders will then earn interest on the currency that they deposited.

As soon as they make a deposit, Compound will create a cToken to represent the deposit in the eyes of the lender. Each of these tokens can be traded or transferred without issue, but it can only be redeemed for the particular cryptocurrency within the initial protocol. All this takes place in the background automatically and is regulated by the Compound code, so lenders are able to access the deposit at any time.

Who created Compound (COMP)?

Compound (COMP) was originally set up by Geoffrey Hayes and Robert Leshner in 2018. In their initial capital funding round, they raised more than US$8 million from venture capital firms such as Bain Capital Ventures. The entrepreneurs then raised an additional sum of US$25 million the following year from the same sources and other major investors.

What does Compound (COMP) do?

Compound (COMP) initiates a sequence of smart “contracts” that run on Ethereum and enable collaboration between lenders and borrowers.

Lenders can lend the cryptocurrency through Compound (COMP) by sending tokens to an Ethereum address within the network and, in doing so, will earn interest. Borrowers need to post collateral through Compound (COMP) in cryptocurrency form. They can then borrow other cryptocurrencies supported by Compound (COMP).

Who manages the Compound (COMP) token?

While the original founders held the project tightly, with absolute control over its operation, this changed a couple of years ago when Compound (COMP) decided to move towards community governance instead. This is why they created the COMP token and gave the holders of each token the power to vote in all matters related to how Compound (COMP) should be developed.

The shareholders (COMPOUND Labs) still own around a quarter of all the Compound (COMP) tokens and distribution, with a further allocation held by the founders. The rest are distributed within the protocol, giving the community power and rewards. The aim is to help the protocol evolve as time goes by and become more popular.

How can I use the Compound (COMP) token?

Compound (COMP) will give lenders COMP tokens based on how many cTokens they have in their wallets. This transaction will be subject to the interest rate prevalent at that moment based on the available supply. Therefore, the more liquid the market, the lower the interest rate will be.

Compound (COMP) will give lenders COMP tokens based on how many cTokens they have in their wallets. This transaction will be subject to the interest rate prevalent at that moment based on the available supply. Therefore, the more liquid the market, the lower the interest rate will be.

COMP coin tokens allow holders to take part in a certain amount of governance related to the software. They can vote on proposals or assign any voting rights to somebody else to vote instead. So it’s possible that a third party who does not actually hold any COMP tokens could weigh in on any particular issues as and when they arise. Token holders can vote on interest rates and other critical issues impacting values, profitability and revenues.

Compound (COMP) can operate with Basic Attention Token (BAT), Ether (ETH), 0x (ZRX), Augur (REP) and DAI. Investment pools are created to serve loans and generate profit to give the investors and participants their return.