We’d like to announce the listing of COMP, the native token of the Compound platform. We’ll launch COMP/USD trading and COMP deposits on August 25. Withdrawals will go live on August 27.
👉 What are Compound and COMP?
Compound is a decentralized lending protocol. It allows users to borrow crypto assets using other assets they hold as collateral. Under the hood, Compound is a set of Ethereum smart contracts. The platform users govern it directly.
Each asset that users can deposit to Compound has a corresponding collateral token, or cToken. For example, when a user deposits ETH, they’ll receive a corresponding amount of cETH tokens that will collect interest to the wallet they’re located in.
Apart from cTokens, there’s a platform-specific COMP token for decentralized platform governance. Any user holding at least 1% of the total COMP supply can stake COMP with a protocol amendment proposition in the form of executable code. Other users can vote for or against the proposition with their respective COMP stakes. Once 400,000 votes are in, the proposition is voted for and can be implemented within two days.
👉 What problem does Compound solve?
One of the basic principles of finance is the ability of people to deposit their free assets to earn interest and the ability of other people to borrow the assets they lack and pay a relatively small rate of interest. For years, the blockchain has lacked functionality over which many services can be built. Attempts to develop such a service have been too controllable and human- or business-dependent.
👉 What is the innovation behind Compound?
The platform accepts deposits of ETH and several ERC-20 tokens as collateral and issues a corresponding amount of Compound’s cTokens, which earn interest automatically. The major difference is that cTokens are free to move, trade, and sell, and hence the lender retains control of their funds even when they’re loaned out. For example, a user can sell the deposit in the form of cTokens, which will start earning interest for the new owner.
The system calculates the amount of interest using the laws of supply and demand. There’s no single person or business in control of the fees.
👉 Compound’s ecosystem
The Compound platform itself is quite straightforward. Platform users take part in both lending and borrowing markets by offering crypto assets as collateral for loans in another crypto. Once a user deposits collateral, they’re eligible for a loan of the same value. Once they return the loan, users can withdraw their collateral back to their wallets.
The first public version of the Compound protocol was released in January 2018. To date, Compound has been backed by six major crypto investment funds. The platform currently holds over $1.8 billion of collateral across all its markets.
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Note: Please be aware that COMP is currently available for non-US residents only.
Disclaimer: The above content is for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Please study the asset on your own before making any investment or trading decisions.