What is Compound?

Compound (COMP) is a decentralized lending protocol that enables users to lend and borrow cryptocurrencies without intermediaries. Launched in 2018, Compound allows users to deposit assets into liquidity pools and earn interest, while borrowers can take out overcollateralized loans.

The protocol is governed by Compound's native token, COMP, which grants holders voting rights over protocol upgrades and parameter changes.

How is Compound useful?

Compound streamlines decentralized lending and borrowing, allowing users to earn passive income on idle assets. By removing the need for traditional financial institutions, Compound provides permissionless access to liquidity, making it a key player in the DeFi ecosystem. Lenders earn interest by supplying assets, while borrowers use crypto collateral to access liquidity without selling their holdings.

The COMP token enables community governance, allowing stakeholders to vote on interest rate models, asset additions, and protocol improvements.

How does Compound work?

Compound operates through smart contracts on Ethereum, which automate interest rate calculations based on supply and demand. Users deposit assets into liquidity pools, receiving cTokens in return, which represent their stake and accrue interest over time. Borrowers can take out overcollateralized loans, ensuring risk mitigation and protocol security.

The COMP token is distributed to users as an incentive for lending, borrowing, and participating in governance.

Compound milestones

• Introduction of Algorithmic Interest Rates: Established a decentralized, market-driven lending system.

• COMP Governance Launch: Transitioned to community governance, enabling token holders to steer protocol development.

• Multi-Asset Lending Support: Expanded asset offerings to include various cryptocurrencies.

• Integration with Layer-2 and Cross-Chain Solutions: Improved scalability and transaction efficiency.

• Institutional DeFi Adoption: Attracted traditional finance players seeking exposure to decentralized lending.

Compound continues to lead DeFi lending, offering a transparent, autonomous, and efficient borrowing and lending ecosystem for crypto users.

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