Compound is a DeFi project that enables users to take out loans or provide loans by locking their assets via smart contracts built on Ethereum. The amount of interest received by borrowers and lenders is determined by the supply and demand of each Cryptocurrency asset.
Compound provides a decentralized finance protocol built on Ethereum. The platform allows borrowers and lenders to lock their Cryptocurrency assets into the protocol and earn interest rates that are determined by the supply and demand of each asset.
Compound’s native token, cTokens, allows users to earn interest on their money as well as transfer, trade, and use that money in other applications. For example, cUSDC has been integrated into the popular DeFi dapp, TokenSet, which allows users to reap the benefits of algorithmic trading.
In late July of 2020, it was announced that Compound would be implementing its decentralized oracle solution that will support the project’s lending system. Initially, Compound will just use signed price data from exchanges like Coinbase Pro. The solution uses the on-chain Uniswap V2 price feed as a form of insurance that the data is correct.
How is compound different from traditional finance?
Compound behaves similarly to a bank but it is more easily accessible. To use Compound, users are not required to provide personal and private information. Anyone with an internet connection could sign up for Compound and start interacting with the protocol. All they need is some crypto assets stored on a crypto wallet like Metamask.
In addition, the return rates for Compound are more attractive compared to traditional banks. For example, if you store money in a savings account, it will only generate a measly 0.05% APY. On the other hand, Compound would offer up to 4% APY depending on the assets supplied.
Do note that the higher interest rate offered is due to the additional risks incurred by using the Compound smart contract.
Also known as cTokens, Compound are ERC20 tokens that represent the funds a user has deposited in Compound. When a user deposits ETH or another ERC20 like USDC into the protocol, they get an equivalent amount of cTokens. For example, if a user locks up USDC in the protocol they will receive cUSD–tokens which automatically earn interest. At any time, cUSDC can be redeemed for normal USDC in addition to the interest paid in USDC.
cTokens were created in two original types: CErc20 and CEther. CErc20 wraps an underlying ERC-20 asset, while CEther simply wraps Ether itself.
As of December 11, 2020, users can participate on the platform with the following currencies: Ethereum, USD Coin, Dai, Tether, 0x, Uniswap, Augur, Wrapped BTC, Basic Attention Token, Sai (Legacy Dai).
How to Buy Compound – $COMP
How do I buy Compound – $COMP Token?
While some cryptocurrencies, including bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency.
To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as bitcoin or Ethereum. Here’s more on how to invest in bitcoin.
Coinbase is one popular cryptocurrency trading exchange where you can create both a wallet and buy and sell bitcoin and other cryptocurrencies. Also, a growing number of online brokers offer cryptocurrencies, such as eToro, Webull, and Sofi Active Investing. Robinhood offers free cryptocurrency trades (Crypto.com is available in most, but not all, U.S. states).