In this article, We learn about "Compound (COMP)".Let's Go!
Compound is a decentralized, open-source, blockchain-based protocol that facilitates lending and lending of cryptocurrencies.
The system is built on the Ethereum network and is one of the largest decentralized lending protocols in the world, with over $10 billion in total value locked (TVL).
COMP is an ERC-20 token used to govern the Compound protocol.
Compound allows users to borrow and/or lend assets against their assets to earn income. The platform is completely permissionless, meaning anyone in the world, regardless of wealth or credit score, can use it.
Compound pools depositors’ assets from which borrowers can withdraw funds. This evenly distributes risk and reward among savers looking to earn interest on idle assets.
An algorithm on Compound sets the interest rate. It automatically adjusts them to reflect market demand.
For example, when the demand for borrowing rises, interest rates rise to attract more lenders. When borrowing demand falls, interest rates are lowered to attract more borrowers.
Unlike centralized institutions, Compound uses smart contracts to ensure optimal security and allow users to retain control of their assets.
A smart contract is a self-executing contract in which the terms of the agreement between the parties are written directly into lines of code.
Depositors can withdraw assets from the lending pool at any time of the day, 365 days a year.
Because Compound runs on the Ethereum network, there is no need to hire thousands of employees or rent physical office space.
This allows it to operate at extremely low prices, resulting in more profits for savers and more favorable interest rates for borrowers.
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