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Compound (COMP)
Compound —— An algorithmic, autonomous interest rate protocol
Website Explorer Documentation
- Compound is an algorithmic, autonomous interest-rate protocol on the Ethereum blockchain. Compound has grown to become one of the cornerstones of the DeFi industry.
- Built for developers, Compound creates efficient money markets where assets can be supplied and borrowed by individuals without any restriction (e.g., KYC).
- Compound relies on the concept of over-collateralization: individuals can supply tokens to earn yield while borrowers can provide assets that are used as collateral to borrow other assets.
- The borrowing and lending rates are defined algorithmically based on real-time market dynamics. Upon the mining of a new Ethereum block, i.e., every 15 seconds, the interest is generated.
- The COMP token is an Ethereum-based token, used for the governance of the protocol. Supporting a vote delegation process, COMP token-holders (and their delegates) can discuss, propose, and vote on any future changes to the Compound protocol.
Key Metrics
Market Ranking | #42 |
|---|---|
Market Cap | $619.788.324 USD |
Circulating Supply | 4.397.042 COMP |
Total Supply | 10.000.000 COMP |
What is Compound?
Compound is an algorithmic, autonomous interest-rate protocol on the Ethereum blockchain. Compound has grown to become one of the cornerstones of the DeFi industry. Built for developers, Compound creates efficient money markets where assets can be supplied and borrowed by individuals without any restriction (e.g., KYC). Interest rates are compounded at a block-level on the Ethereum blockchain, and no central party is required.
Compound relies on the concept of over-collateralization: individuals can supply tokens to earn yield while borrowers can provide assets that are used as collateral to borrow other assets. For instance, someone can deposit USDC, earn the USDC lending rate, while using the USDC to borrow ETH, and pay the ETH borrowing interest rate.
The borrowing and lending rates are defined algorithmically based on real-time market dynamics. Upon the mining of a new Ethereum block, i.e., every 15 seconds, the interest is generated. When the asset supply increases as more users deposit this asset, it leads to a decrease in borrowing/lending rates. In contrast, if the demand for borrowing an asset increases, it leads to a rise in the asset interest rates. Assets (e.g., REP) supplied in the protocol are swapped to cTokens (e.g., cREP), whose value appreciates over time to reflect the block-by-block compounding effect.
The COMP token is an Ethereum-based token, used for the governance of the protocol. Supporting a vote delegation process, COMP token-holders (and their delegates) can discuss, propose, and vote on any future changes to the Compound protocol. For instance, they can include new assets, or change asset-specific requirements on Compound (e.g., required collateralization margins)
Team
Compound was founded in 2017 by Robert Leshner and Geoffrey Hayes, both of whom previously worked in high-profile roles at Postmates — an online food delivery service. The two continue to hold executive positions at Compound Labs, Inc — the software development firm behind the Compound protocol, with Leshner currently serving as CEO, while Hayes is the CTO.
Though both founders have experience founding successful companies, Robert Leshner, in particular, has been particularly active in helping to grow the blockchain space, and has publicly invested in popular crypto platforms including Argent Wallet, Opyn, and Blockfolio.
The Compound team now comprises over a dozen individuals — almost half of which work as engineers.
How does Compund Work?
Positions (supplied assets) in Compound are tracked in tokens called cTokens, Compound's native tokens. cTokens are ERC-20 tokens that represent claims to a portion of an asset pool in Compound.
For example, if you deposit ETH into Compound, it's converted to cETH. If you deposit the stablecoin DAI, it's converted to cDAI. If you deposit multiple coins, they'll each earn interest based on their individual interest rates. In other words, cDAI will earn the cDAI interest rate, and cETH will earn the cETH interest rate.
cTokens can be redeemed for the portion of the pool they represent, which makes the supplied assets available in the connected wallet. As the money market earns interest (borrowing increases), cTokens earn interest and become convertible to more of the underlying asset. This basically means that earning interest on Compound is simply holding an ERC-20 token.
The process starts with users connecting their Web 3.0-enabled wallet, such as Metamask. Then they can select any asset to unlock that they want to interact with. If an asset is unlocked, users can both borrow or lend it.
Lending is quite straightforward. Unlock the asset that you wish to supply liquidity for, and sign a transaction through your wallet to start supplying capital. The assets are instantly added to the pool, and start earning interest in real-time. This is when the assets are converted to cTokens.
Borrowing is a bit more complicated. First, users deposit funds (collateral) to cover their loan. In return, they earn "Borrowing Power," which is required to borrow on Compound. Every asset that is available for supply will add a different amount of Borrowing Power. Users can then borrow according to how much Borrowing Power they have.
It's worth noting that every asset has a unique borrow and supply Annual Percentage Rate (APR). Since the borrow and supply rates are adjusted based on supply and demand, each asset will have a unique interest rate for both lending and borrowing, and each asset will earn different interest rates.
By now, the supported assets for lending and borrowing on Compound include:
DAI
USDC
ETH
WBTC
USDT
UNI
ZRX
COMP
BAT
SAI
REP
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