What is Compound ?
Compound (comp) is a cryptocurrency that runs on the DeFi protocol and hosts lending of pools to earn a better interest varying to different numbers of cryptocurrencies. It is regarded as software that runs on Ethereum. It allows better control over the compound protocol.
The compound is an autonomous algorithmic protocol affiliated with the interest rate. It was primarily designed for the developers and to create a platform for financial applications. It is regarded as the safest protocol to secure all the money on different platforms.
Who created Compound?
Compound was founded by serial entrepreneurs Robert Leshner and Geoffrey Hayes, whose previous firm, Britches, aggregated inventory from local shops to be sold on PostMates.
In 2018 Compound raised $8.2 million in funding from notable venture capital firms Andreessen Horowitz and Bain Capital Ventures, the venture-capital arm of the consulting firm Bain.
Compound raised an additional $25 million in 2019 from many of the same investors, along with new participants like Paradigm Capital, a fund started by a co-founder of Coinbase.
A share of the total supply of COMP cryptocurrency was initially distributed to investors in the company and to employees.
Primary features of Compound
- It creates a better platform for all financial applications and makes them more secure.
- The Compound cryptocurrency is regarded as the safest protocol for saving your money.
- It aims at creating an incentive-based platform for networks and creating better operations for the traditional market.
- It uses multiple assets of the crypto to decentralize finance.
- It allows easy deposits to cryptocurrency so that a borrower can easily take it.
- It provides trading of its token without any restriction.
How does Compound work?
Compound connects lenders and borrowers using a combination of smart contracts running on Ethereum and incentives paid in cryptocurrency.
The two main users of the platform include:
- Lenders : Anyone wishing to lend a cryptocurrency on Compound can send their tokens to an Ethereum address controlled by Compound to earn interest.
- Borrowers : Anyone who posts collateral on Compound in the form of a cryptocurrency. They are allowed to borrow cryptocurrencies supported by Compound at a percentage of the posted value.
Compound rewards lenders with COMP tokens based on the amount of cTokens held in their wallet based on a varying interest rate dependent on the available supply of that asset. The more liquidity in a market, the lower the interest rate.
Users who lend assets to the protocol, can take out a loan in any other cryptocurrency that Compound offers, up to the amount of collateral posted.
Importantly, borrowers can get liquidated if the asset they borrow increases in value and becomes more valuable than the posted collateral.
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Cryptocurrency