Compound, a decentralized lending protocol, is a chain that attracts users to cryptocurrency by depositing them into a pool supported by the platform. By depositing tokens to a compound pool, users can earn Comp Tokens.
Since the release of its mainnet in 2018, the platform has become way more popular.
The compound protocol offers a token called COMP. There are 10 million tokens in total; They present 42% of the tokens to the users. 2,312 COMPs are distributed daily, and this process will go on until 2024, when they will stop the distribution. But what happens to the rest?
24% is given to the shareholders of Compound Labs, matching token, and the company leading the lending platform. Approximately 22% is for the founders and staff. Almost 8% are for those who participate in the project’s governance, and the remaining 4% are for future staff members.
The token on this platform is a “governance token,” which means users that own the token can use them to vote changes to the protocol.
What is Compound?
Defi projects tend to use cryptocurrencies to make better financial products without intermediaries to give users better control over their money. The Compound is one of the most notable projects in the Defi market.
This platform established the “liquidity mining” (yield farming ) in which users lend their crypto to a platform, and in return, the network often gives them interest or share in a cut of the transaction fees.
Users can earn Comp tokens for participating in liquidity mining which allows users to maximize the earning potential of their deposited crypto.
The Compound uses Ethereum’sEthereum’s smart contracts, which fundamentally replace intermediaries with computer programs.
Like most DeFi (decentralized finance) protocols, this is also a system of accessible smart contracts manufactured on Ethereum. This protocol lets borrowers receive loans, and lenders provide loans by locking their assets into the platform. The supply and demand of each crypto asset determine the rates received and paid by lenders and borrowers.
Not all digital currencies can do something for their holders. Compound seeks to change this and allow people who deposit supported Ethereum tokens to earn interest on their balance or get a secured loan through its open lending platform.
COMP holders can propose or vote for changes to the protocol and debate the changes other users have proposed (the protocol’s team is not involved in this process). These proposals include: which crypto to add support for, making changes to the distribution of the token, and adjusting collateralization factors.
You can earn COMP tokens by buying from a third-party exchange platform or interacting with the protocol, like taking out a loan or depositing assets.
This platform is mostly like other decentralized lending protocols; however, it stands out since it tokenizes the assets locked in the network using Comp tokens. Comp tokens are the ERC20 versions, and they represent the user’s funds deposited in the protocol.
Robert Leshner and Geoff Hayes founded Compound in 2017. These two graduates of the University of Pennsylvania released the network in 2018. They raised 8.5 million dollars in funding the same year, and the funding went up to 25 million dollars in 2019 and 1 billion dollars worth of assets locked in 2020.
Both founders had previously been active in high-profile roles at Postmates (an online food delivery service). They both have executive positions at Compound Labs ( the software development company that supports the protocol). Leshner is the CEO, and Hayes is the CTO.
In June 2020, the firm launched the COMP token. The protocol accidentally overpaid users in COMP (worth millions of dollars) in a smart contract vulnerability that brought about a problem with smart contracts, resulting in users and projects losing assets. Users must have the right to trust that the code works correctly.