Compound is an algorithmic, open-source financial protocol that enables users to borrow digital assets using collateral or earn on their cryptocurrency deposits. Built on the Ethereum blockchain, it also supports the Polygon network.
Origin and Investments
Compound, a pioneering algorithmic financial protocol featuring open-source code, was established in September 2017 by economist and entrepreneur Robert Leshner, alongside software engineer Geoffrey Hayes. Their ambition was to create an open and self-governing financial system capable of democratizing access to financial services.
Between 2018 and 2019, the project successfully attracted $33.2 million in funding from venture investors, including prestigious funds such as Andreessen Horowitz (a16z), Polychain Capital, and Bain Capital Crypto.
Compound's Functionality
The Compound protocol streamlines the pairing of lenders and borrowers through smart contracts. Users' assets are provisionally locked and converted into protocol tokens (cTokens), symbolizing their respective shares in the credit pool.
To secure a cryptocurrency loan via the Compound platform, users must submit collateral exceeding the loan's value. This approach safeguards those who lend their crypto assets with interest, while also alleviating the need for borrowers to verify their identities.
Compound Platform Source: app.compound.finance
Introducing COMP
COMP serves as the native token for the Compound protocol, empowering its holders to engage in platform governance by voting on proposals and updates.
The issuance of COMP is restricted, with approximately 73% of its maximum supply of 10 million tokens currently in circulation.
COMP is available for purchase on centralized exchanges including WhiteBIT, Binance, Coinbase, Kraken, OKX, Bitfinex, Kucoin, and others.
The Case for Investing in COMP
COMP tokens' future prospects hinge on the Compound platform's success. Presently, the platform may not be viewed as exceptionally competitive due to its limited support for various blockchains and cryptocurrencies. Nonetheless, this indicates potential for growth. As per data from DefiLlama, Compound occupies the third position in terms of total value locked (TVL) among all crypto lending platforms (at the time of writing).
TVL of Crypto Lending Platforms Source: DefiLlama
From a security perspective, the protocol is deemed reliable, having undergone a range of audits conducted by firms such as Trail of Bits and Open Zeppelin. Despite this, audits do not offer a 100% guarantee, as history shows.
Dmytro Psevdonimenko
Author
Has been exploring the enigmas of the crypto industry since 2017, transforming them into accessible narratives. Relies on dark chocolate and nuts as a secret source of energy and inspiration.
