Compound hasn’t been around as long as popular coins like Bitcoin and Ethereum, but it’s well-known in the world of decentralized finance (Defi). If you’re looking to get your feet wet in the Defi market but aren’t sure where to start, Compound is a great option. Learn more about it in our Compound FAQs.
What is Compound Finance?
Compound Finance is a Defi lending protocol that lets users lend and borrow cryptocurrencies. To get started, all you need is an Ethereum (ETH) wallet and some Ether tokens. Then, you can begin borrowing money or earning interest immediately.
Robert Leshner launched Compound as a centralized company. However, since the most recent release of its native governance token, COMP, it has evolved considerably. This release was crucial in moving Compound from a centralized platform to a Decentralized Autonomous Organization, or DAO.
The Compound approach enables individuals to lend and borrow cryptocurrency without the involvement of a broker or middleman. The technique benefits both lenders and borrowers because each can potentially earn from their crypto holdings.
Lenders benefit from interest on their crypto assets; meanwhile, borrowers can use the same crypto-assets to obtain credit without having to go to a bank. In addition, users forgo lengthy documentation procedures such as Know-Your-Customer (KYC), Anti-Money Laundering (AML), or credit record verification because Compound does not require any verification checks to access their services on the protocol.
What is the Native Token for Compound Finance
COMP is the native token for the Compound Finance protocol. It has similar utilities as Ether. However, COMP is used primarily for fees on the protocol and to allow the protocol to remain decentralized.
To interact with Compound’s protocols, users need to hold a minimum amount of any supported cryptocurrency, which they link with Compound. Some of the assets supported by Compound Finance include USDC, DAI, USDT, ETH, ZRX, BAT, REP, and WBTC (Wrapped Bitcoin)
How Do The Tokenomics of Compound Work?
The COMP token is an ERC-20-based token that allows for control of the protocol’s governance. Although it was not present initially, Compound Finance introduced the COMP token as its sovereign currency in 2020 to encourage user engagement and decentralized governance.
COMP tokens can be obtained in various ways, including purchasing them here or earning them through lending or borrowing on the Compound protocol.
Users who choose to lend and borrow digital assets receive compensation in proportion to the daily minted COMP tokens distributed evenly based on the amount invested and the current interest rates.
Compound created a custom account called the Reservoir to hold 4,229,949 COMP tokens. Every Ethereum block generated in Compound causes 0.5 COMP to be transferred from the Reservoir account to the protocol – or approximately 2,880 tokens every day.
Governance on Compound Protocol
COMP token holders enable governance on the Compound protocol. The contract typically consists of three major components: the COMP token, Timelock, and the Governance model. When these contracts are combined, the community can use the administrative functions of a cToken to propose, vote on, and implement changes.
Proposals may alter system parameters, support new markets, or introduce entirely new protocol functionality. COMP token holders can also delegate their voting rights to themselves or any address of their choice.
Additionally, governance proposals can be created by addresses that have at least 65,000 COMP, with 100 COMP being the minimum requirement to create an Autonomous Proposal. When an Autonomous Proposal becomes entrusted with 65,000 COMP, it automatically switches to a Governance Proposal.
After a Governance Proposal is created, it must be reviewed for two days before voting can begin. The voting period lasts three days, with a minimum of 400,000 votes required to transition to the Timelock phase. The proposal is then queued in the Timelock and can be implemented two days later.
How Many Compound Tokens are in Circulation?
COMP tokens, like other digital assets, will only ever exist in a limited supply. For example, only 10 million COMP coins will be produced, and only about a third are currently in circulation as of writing.
With a market cap sitting well above CAD $3 billion and over 22 billion locked in assets, COMP is a token worth following. Furthermore, compound tokens witnessed a height of up to CAD $1200, and analysts predict the token may exceed that soon.
Check out the latest price here.
What Wallets Support Compound (COMP) Tokens?
There are numerous types of wallets available in the cryptosphere for storing your coins. Let’s take a quick look at some offline and online wallets available for storing COMP tokens.
The Nano S or Trezor hardware wallets are a popular choice for storing COMP tokens when it comes to security and efficiency. These physical devices offer a simple and straightforward interface that supports a wide range of cryptocurrencies. That means you can hold your COMP and your Bitcoin in the same place.
Software wallets come in many forms. You can choose a desktop wallet, a mobile wallet, or a browser wallet. These wallets need to support ERC-20 tokens if you want to store your COMP in them. A popular browser plugin wallet is Metamask, which works with Chrome, Firefox, and Opera.
You may also hold the COMP you buy on Coinberry, with us. Learn more about our custody here.
Community Support/Social Media
- Reddit –https://www.reddit.com/r/Compound/
- Discord –https://discord.com/invite/874ntdw
- Github –https://github.com/compound-finance/compound-protocol
- Facebook –https://web.facebook.com/0xdd086832d7ea3260c4d1e3810c2e07a6c4762eb7/?_rdc=1&_rdr
- Twitter –https://twitter.com/compoundfinance
Where Can I Buy Compound?
You can buy Compound on Coinberry by signing up for an account here.
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