CompoundCOMP

Compound is a decentralized finance (DeFi) lending protocol that enables users to earn interest on their cryptocurrencies by depositing them into various pools supported by the platform. By depositing tokens into a Compound pool, users receive cTokens representing their stake in the pool. These cTokens can be redeemed for the underlying cryptocurrency initially deposited. Borrowers can also take secured loans from any Compound pool by depositing collateral, with interest rates varying depending on the borrowed asset.

Since its mainnet launch in September 2018, Compound has gained significant popularity, with over $800 million in total locked value.

Founders of Compound

Compound was founded in 2017 by Robert Leshner and Geoffrey Hayes, who both previously worked in high-profile roles at Postmates, an online food delivery service. Leshner serves as the CEO, while Hayes is the CTO of Compound Labs, Inc, the software development company behind the Compound protocol.

What Makes Compound Unique?

Compound aims to change the way cryptocurrencies sit idle on exchange platforms by offering an open lending platform. Users can deposit supported Ethereum tokens to earn interest on their balance or take out a secured loan in a trustless manner.

The community governance aspect of Compound sets it apart from similar protocols. Holders of COMP, the platform's native governance token, can propose changes to the protocol, debate, and vote on implementing suggested changes without any involvement from the Compound team.

COMP tokens can be purchased from third-party exchanges or earned by interacting with the Compound protocol, such as by depositing assets or taking out a loan.

Compound (COMP) Token Circulation

The total supply of COMP tokens is capped at 10 million, with approximately 3.3 million in circulation as of writing. Over a four-year period, just over 4.2 million tokens will be distributed to Compound users. Compound Labs, Inc shareholders will receive nearly 2.4 million COMP, while 2.2 million tokens will be distributed to the Compound founders and current team with a four-year vesting schedule.

Compound Network Security

The Compound platform relies on smart contracts to handle operations automatically, such as minting cTokens when Ethereum and ERC20 assets are deposited. The protocol enforces a collateralization factor for all assets supported by the platform, ensuring overcollateralization at all times. If collateral falls below the minimum maintenance level, it will be sold to liquidators at a 5% discount to maintain an acceptable collateralization factor.

This arrangement ensures borrowers maintain their collateral levels, provides a safety net for lenders, and creates an earning opportunity for liquidators.