BUY UP TO Price: $420
HOLD: 2 years
What Is Compound (COMP)?
Compound is a DeFi lending protocol that allows users to earn interest on their cryptocurrencies by depositing them into one of several pools supported by the platform.
When a user deposits tokens to a Compound pool, they receive cTokens in return. These cTokens represent the individual’s stake in the pool and can be used to redeem the underlying cryptocurrency initially deposited into the pool at any time. For example, by depositing ETH into a pool, you will receive cETH in return. Over time, the exchange rate of these cTokens to the underlying asset increases, which means you can redeem them for more of the underlying asset than you initially put in — this is how the interest is distributed.
On the flip side, borrowers can take a secured loan from any Compound pool by depositing collateral. The maximum loan-to-value (LTV) ratio varies based on the collateral asset, but currently ranges from 50 to 75%. The interest rate paid varies by borrowed asset and borrowers can face automatic liquidation if their collateral falls below a specific maintenance threshold.
Since the launch of the Compound mainnet in September 2018, the platform has skyrocketed in popularity, and recently passed more than $800 million in total locked value.
Who Are the Founders of Compound?
Compound was founded in 2017 by Robert Leshner and Geoffrey Hayes, both of whom previously worked in high-profile roles at Postmates — an online food delivery service. The two continue to hold executive positions at Compound Labs, Inc — the software development firm behind the Compound protocol, with Leshner currently serving as CEO, while Hayes is the CTO.
Though both founders have experience founding successful companies, Robert Leshner, in particular, has been particularly active in helping to grow the blockchain space, and has publicly invested in popular crypto platforms including Argent Wallet, Opyn, and Blockfolio.
The Compound team now comprises over a dozen individuals — almost half of which work as engineers.
What Makes Compound Unique?
According to Compound, the majority of cryptocurrencies sit idle on exchange platforms, doing nothing for their holders. Compound looks to change this with its open lending platform, which allows anybody who deposits supported Ethereum tokens to easily earn interest on their balance or take out a secured loan — all in a completely trustless way.
Compound’s community governance sets it apart from other similar protocols. Holders of the platform’s native governance token — COMP — can propose changes to the protocol, debate and vote whether to implement changes suggested by others — without any involvement from the Compound team. This can include choosing which cryptocurrencies to add support for, adjusting collateralization factors, and making changes to how COMP tokens are distributed.
These COMP tokens can be bought from third-party exchanges or can be earned by interacting with the Compound protocol, such as by depositing assets or taking out a loan.