$22.10

Compound is a decentralized finance protocol that enables users to earn interest on their crypto assets by supplying them to various lending pools. When you deposit tokens, you receive cTokens, which represent your share and can be redeemed for the original asset at any time. The exchange rate between cTokens and the underlying asset increases over time, reflecting accrued interest. Borrowers can use their crypto as collateral to take out loans, with loan-to-value ratios ranging from 50% to 75%, depending on the asset. If collateral drops below a certain threshold, positions may be liquidated. The protocol went live on the Ethereum mainnet in September 2019.

Compound was established in 2017 by Robert Leshner and Geoffrey Hayes, both of whom had prior experience at Postmates, an online food delivery service. They continue to lead Compound Labs, Inc., the company behind the protocol, with Leshner as CEO and Hayes as CTO. Leshner has also been involved in the broader blockchain ecosystem, making public investments in projects like Argent Wallet, Opyn, and Blockfolio. The team has grown to over a dozen members, with nearly half working in engineering roles.

Compound aims to put idle cryptocurrency to work by offering a trustless lending platform where users can earn interest or borrow against their assets. What sets it apart is its community governance model. Holders of the COMP token can propose and vote on changes to the protocol, such as adding new assets, adjusting collateral ratios, or modifying COMP distribution. This decentralized decision-making process operates without direct involvement from the founding team. COMP tokens can be acquired through exchanges or by actively using the platform, like depositing or borrowing.

The total supply of COMP is capped at 10 million tokens. As of now, approximately 3.3 million are in circulation. Of the total supply, over 4.2 million are earmarked for distribution to protocol users over four years. Nearly 2.4 million are allocated to shareholders of Compound Labs, Inc., while 2.2 million go to founders and the current team, subject to a four-year vesting period. Additionally, 775,000 are reserved for community governance incentives, and 332,000 for future team members. The emission rate can be adjusted through community governance proposals.

Compound relies on smart contracts to automate processes like minting cTokens upon deposits and handling redemptions. The protocol enforces collateralization factors for all supported assets, ensuring that loans are always overcollateralized. If a borrower's collateral falls below the maintenance threshold, it is liquidated at a 5% discount, which repays part of the loan and restores the collateral level. This mechanism protects lenders, encourages borrowers to maintain adequate collateral, and offers profit opportunities for liquidators.

COMP is listed on numerous cryptocurrency exchanges, including major platforms like Coinbase Pro, Binance, and Huobi Global. It can be traded against a variety of cryptocurrencies and fiat currencies, such as the U.S. dollar, Indian rupee, and Australian dollar. For those new to crypto, there are guides available on converting fiat currency into digital assets like COMP.