Compound Finance has been one of the leading protocols for lending and borrowing crypto in the DeFi space.
Compound Finance has been one of the leading protocols for lending and borrowing crypto in the DeFi space.
While Compound isn't 100% safe (nothing is), it's one of the safest and most established blockchain projects. It has hundreds of millions of dollars worth of crypto locked in its smart contracts.
Compound Finance is an algorithmically-operated, decentralized, interest rate protocol for lending and borrowing cryptocurrencies. It is a platform where users can frictionlessly supply (lend) cryptocurrencies as collateral, to borrow crypto assets based on interest rates set by real-time supply and demand.
Why is Compound useful? Well, suppliers and borrowers don't have to negotiate the terms as they would in a more traditional setting. Both sides interact directly with the protocol, which handles the collateral and interest rates. No counterparties hold funds, as the assets are held in smart contracts called liquidity pools.
The interest rates for supplying and borrowing on Compound are adjusted algorithmically. This means that the Compound protocol automatically adjusts them based on supply and demand. In addition, COMP token holders also have the power to make adjustments to interest rates.
Compound is one of the most popular lending and borrowing solutions in DeFi. As many other products integrate their smart contracts into their applications, Compound is an integral piece of the DeFi ecosystem.
Once governance is fully decentralized, Compound could strengthen its place in DeFi as one of the core money market protocols.
What is DeFi?
DeFi or “decentralized finance” is an all-encompassing term that refers to the digital assets, financial smart contracts, decentralized applications (DApps), and protocols that run on top of public blockchains.
The process of earning interest or borrowing assets against your collateral is pretty straightforward.
You can immediately earn compound interests by supplying assets to Compound’s liquidity pool.
The compound interest rates adjust accordingly, depending on supply and demand.
There is no lockdown period when it comes to Compound. You have the freedom to withdraw or repay your collateral whenever you want.
Compound has already been audited and formally verified.
Since May 2020, Compound has adopted community governance. Holders of the COMP token and their delegates debate, propose, and vote on all changes to Compound.