The Compound protocol is used as a decentralized cryptocurrency exchange (dex) for crypto lending and deposit account creation via smart contracts on the ERC 20-based blockchain. In general, it provides the opportunity to take loans and make investments with interest rates determined instantly according to the demand and supply amount of cryptocurrencies, and by doing this in a decentralized way, it eliminates bank institutions and file costs. The cTokens obtained for cryptocurrencies locked on the Compound platform provide the opportunity to continue using the money until the lockout expires. At the end of the maturity period, the remaining cTokens will be charged as a percentage of interest, which is determined at the beginning and updated continuously. Thanks to Compound, crypto assets are used for investment purposes to earn interest income and continue to be spent in the meantime. DeFi protocols and dex's would have won another battle against banks in terms of both interest and use of money. The Compound project runs on the Ethereum network.
The founder of the platform and developer of the project, Robert Leshner, aims to completely decentralize Compound.
On the Compound platform, those who want to borrow and those who want to lend can do this without knowing or seeing each other. Smart contracts on the network enable this to be done. There is no borrowing from the bank as in the banking system, Compound only acts as an intermediary here. The rights to present ideas, develop projects and vote on the Compound platform also belong to COMP owners. In other words, the platform is again managed by the users of the platform.
Compound (COMP) is the 59th most valuable cryptocurrency with a market cap of $1.85 billion. There are 4,682,249 COMPs in circulation while the total supply is 5,506,107.51 COMP.
How much interest is shown in the coin we have locked in the market, how much is wanted to be bought and used, the annual interest percentage is determined accordingly. We can deposit and lock as many cryptocurrencies as we want on the platform, and in return, both cToken and interest income are obtained. The cTokens obtained in exchange for the deposited amount of crypto money can be spent until the locked amount is due. When the deposited crypto money becomes due, the cTokens lent in return are taken back and the deposited amount is paid with interest. In cases where there is not enough cToken to cover the deposited amount, the amount of missing cToken is deducted from the deposited crypto money amount. The smart contract system turns the system in a loop like this. The Compound platform can be accessed with Metamask, Ledger, Coinbase or similar wallets. The recommended wallet by the Compound platform is MetaMask.
Debt and Loan Interest Calculation
The algorithm used by the platform calculates a new interest percentage every 15 seconds. This calculation is done in response to instant supply and demand. When the interest level rises, more users deposit cryptocurrencies, so as the supply increases, the interest level decreases. Even if the interest rates drop a little more, the interest level rises as investors break their collateral and withdraw their cryptocurrencies. Thus, interest levels have a balance.
As of now, the cryptocurrencies that can be traded on the Compound platform are as follows:
USD Coins
DAI
USDT
Wrapped BTC
ETH
0x
Basic Attention Token
Augur
SAI
For example, when the Basic Attention Token is locked on the platform, cBAT is obtained in return. Currently, the highest collateral interest rate is 6.44% on USD Coin. The highest debt interest rate is 11.95% in Augur v1. The lowest debt interest rate is on Ethereum with 2.86%. The Compound platform continues to be traded in volumes of more than $100 million per day. The platform currently has more than $12 billion in supply and more than $5 billion in loans.