What is Compound?

4 min readFeb 1, 2021


Compound is a DeFi lending protocol that allows users to earn interest on their cryptocurrencies by depositing them into one of several pools supported by the platform. Compound price on January 20th is $218.20 USD with a 24-hour trading volume of $218,568,181 USD. Compound was down 3.68% in the previous 24 hours.

What is Compound?

Compound is a DeFi lending protocol. It allows its users to earn interest on their cryptocurrencies by depositing them into one of several pools supported by the platform. Since the launch of the Compound mainnet in September 2018, the platform has shot up in popularity, and recently passed more than $800 million in total locked value.

When a user deposits tokens to a Compound pool, they receive cTokens in return, representing the user’s stake in the pool. It can also be used to redeem the underlying cryptocurrency that was initially deposited into the pool and it can be done at any time. The interest is distributed by the increase of the exchange rate of these cTokens to the underlying assets over time; on the other hand, borrowers can take a secured loan from any Compound pool by depositing collateral. The maximum loan-to-value (LTV) ratio varies based on the collateral asset, but currently ranges from 50 to 75%. The interest rate paid varies by borrowed asset and borrowers can face automatic liquidation if their collateral falls below a specific maintenance threshold.

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How secure is the Compund network?

The protocol enforces a collateralization factor for all assets supported by the platform. It is done so that these measures can ensure that each pool is overcollateralized at all times. If the collateral falls below the minimum maintenance level, it will be sold to liquidators at a 5% discount, paying down some of the loan and returning the remainder to an acceptable collateralization factor. Transactions and all other processes are handled automatically by smart contracts to help ensure borrowers maintain their collateral levels, provide a safety net for lenders and create an earning opportunity for liquidators.

Where can you buy Compound and how many coins are in circulation?

COMP is currently available to trade on hundreds of cryptocurrency exchange platforms, including Coinbase Pro, Binance and Huobi Global. Currently, you can trade it against most other popular cryptocurrencies, as well as a range of fiat currencies. The latter includes, but doesn’t limit to, the U.S. dollar (USD), Indian rupee (INR) and Australian dollar (AUD).

The total supply of COMP is capped at 10 million and less than a third are in circulation (~3.3 million) presently. Out of these 10 million tokens, just over 4.2 million tokens will be distributed to Compound users over a 4-year period, while 2.4 million COMP goes to the Compound Labs, Inc shareholders, and, additionally, 2.2 million tokens will be distributed to the Compound founders and current team with a 4 year vesting schedule.

Also, 775,000 COMP are reserved for community governance incentives.The remaining 332,000 tokens will be allocated to future team members.

Why is Compound unique?

According to the founders, Compound is not one of those cryptocurrencies that sit idle on exchange platforms, doing nothing for their holders. Its community governance sets it apart from other similar protocols, since olders of the platform’s native governance token (COMP) can propose changes to the protocol. They are allowed to debate and vote whether to implement changes suggested by others without any involvement from the Compound team. Additionally, COMP tokens can be bought from third-party exchanges or can be earned by interacting with the Compound protocol, such as by depositing assets or taking out a loan.

Who are the people behind Compound?

Compound was founded in 2017 by Robert Leshner and Geoffrey Hayes. Both men previously worked in high-profile roles at an online food delivery service called Postmates. Currently, Lashner serves as CEO with Hayes being the CTO at Compound Labs, Inc. Robert Leshner has been particularly active in helping to grow the blockchain space, and has publicly invested in popular crypto platforms including Argent Wallet, Opyn, and Blockfolio.

The compound team at present consists of over a dozen individuals with almost a half of them working as engineers.




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