What is COMP? Compound DeFi Review

The DeFi ecosystem is built on the Ethereum blockchain, which allows you to use smart contracts and build on themother decentralized applications (dApps) with their own cryptocurrencies.

Compound– one of the DeFi protocols, the main functions of which are related to lending services in cryptocurrency.

What is Compound?

Compound– is a decentralized blockchain protocol that allows you to lend and borrow cryptocurrency.

The platform works with its own tokenscTokens Compound, which allow you to receive interest, and transfer, trade and use these tokens in other decentralized applications.

cTokens Compound – What is this?

Compound tokenizes assets locked in its system using cTokens.

cTokens – these are ERC20 tokens representing funds deposited in Compound. By staking ETH or other ERC20 into the protocol, users receive an equivalent amount of cToken. 

For example, for a USDC deposit, the protocol generates cUSD. You can exchange your cUSDCs for regular US dollars at any time.

When a user's assets are blockedconverted to ERC20, they become freely moved, traded and used in other decentralized applications (dapps). Using cTokens makes it possible to combine different protocols as building blocks.   

How are cTokens produced?

New cTokens are created whenthe user enters cryptoassets into the protocol. If users want to take out a loan using ETH as collateral, they automatically receive cETH in return for the deposited ETH. If users want to block USDC for interest, they receive cUSDC when they deposit USDC into the system.

How do I deposit cryptocurrency on Compound?

To get started, go to the official website https://app.compound.finance/. From the dashboard, select which cryptocurrency you want to provide to the platform by clicking on it.

For example, USDC gives an annual percentage yield(APY) of 0.12%. So, you can earn 0.12% per annum if you deposit USDC on the platform. Enter the amount and confirm by clicking “BET”. 

Compound has floating interest rates,which can change. The algorithm analyzes the supply and demand for a particular cryptocurrency and then sets an interest rate that adjusts based on market conditions. Compound also deducts 10% of your earned interest. Users can withdraw their cryptocurrencies at any time.

How to get a loan from Compound?

Deposited cryptocurrencies can be used inas collateral for borrowing other cryptocurrencies. Compound requires users to contribute up to 75% of the value of the intended loan. At the same time, there are risks of liquidation of the collateral. If the value of your collateral falls too much, you could be liquidated – the collateral will be automatically sold to repay the loan.

Borrowing cryptocurrencies also requires paying a commission. For example, getting a loan in BAT will cost 29.4% per year.

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