What is Compound?
Compound is a DeFi project that enables users to take out loans or provide loans by locking up their properties via Ethereum-based smart contracts. The availability and demand of each crypto asset dictate the sum of interest earned by creditors and lenders.
The platform enables creditors and lenders to lock their crypto assets into the protocol and receive interest rates dictated by each asset’s supply and demand.
The native token of Compound, cTokens, allows users to earn interest in their money as well as move, exchange, and use the money in other games.
For instance, cUSDC has been implemented into TokenSets, the popular DeFi dapp, which enables users to reap the benefits of algorithmic trading.
It was revealed in late July 2020 that Compound will be introducing its own autonomous oracle approach that will complement the lending mechanism of the project.
Initially, only signed pricing details from exchanges like Coinbase Pro can be used by Compound. As a type of insurance that the data is right, the solution uses the on-chain Uniswap V2 price feed.
What is the history of Compound?
In 2017, Robert Leshner and Geoffrey Hayes, long-time business associates, formed Compound. On the Ethereum mainnet, Compound was publicly introduced in 2018 and its headquarters are in San Francisco.
How does Compound work?
Compound functions close to a bank, but is simpler to reach. Users are not needed to include personal and private details in order to access the compound. Anyone with an internet link will sign up for the Compound and begin communicating with the protocol.
All they need is some crypto properties, including Metamask, stored in a crypto wallet.
Moreover, relative to conventional banks, the return returns for the Compound are more competitive. For starters, it would only produce a measly 0.05 percent APY if you store money in a savings account. On the other side, based on the assets offered, Compound will give up to 4 percent APY.
Notice that because of the added costs taken when utilizing the Compound smart contract, the higher interest rate offered is due.
Compound, also known as cTokens, are ERC20 tokens reflecting the funds deposited in Compound by a customer. They get an equal number of cTokens anytime a consumer deposits ETH or another ERC20 like USDC into the protocol.
They can get cTokens in exchange after users have made the deposit. By keeping the cTokens, users can start to accrue interest.
Users are entitled to use the assets as collateral after assets are delivered to the Compound. Users will begin borrowing from the Compound depending on the leverage component of the deposited funds.
Although the over-collateralization model is used by Compound, you should never borrow more than what is collateralized.
Where can I hold Compound (COMP)?
COMP can be held on any ERC20 Ethereum wallet. Metamask, MyEtherWallet, and MyCrypto are the 3 most common Ethereum based wallets. There are, however, several other alternatives available, such as Argent, Trust Wallet, and Coinbase Wallet.
