Compound
A decentralized lending protocol powering permissionless money markets on Ethereum and beyond.
Compound is a leading decentralized finance (DeFi) lending protocol on Ethereum, allowing users to lend and borrow cryptocurrencies through algorithmic interest rates. It has expanded to Polygon, Arbitrum, and Base.
Quick Facts
- Type
- Decentralized Lending Protocol
- Blockchain
- Ethereum Mainnet
- Polygon
- Arbitrum
- and Base
- Native token
- COMP
- Core mechanism
- Algorithmic Interest Rates
Lore & Background
Compound is a major DeFi lending protocol on Ethereum, launched in 2018, that enables users to earn interest on deposits and borrow assets by supplying collateral. Its native token, COMP, governs the protocol's parameters.
Reader's Guide
It only defines the term in other contexts.
Did You Know?
- Compound was one of the first DeFi protocols to introduce liquidity mining, distributing its COMP token to users in 2020.
- The protocol's interest rates adjust algorithmically based on supply and demand for each asset.
- Compound has been audited multiple times and is a foundational building block of the DeFi ecosystem.
Frequently Asked Questions
What is Compound?
Compound is a decentralized lending protocol built on Ethereum that functions as an autonomous money market without traditional banking intermediaries. It relies on immutable smart contracts to facilitate borrowing and lending activities directly between users.
How does Compound determine interest rates?
Instead of fixed terms set by loan officers, the protocol uses an algorithmic system where interest rates adjust in real-time based on live supply and demand for each asset. This dynamic environment ensures that rates reflect current market conditions instantly.
What is the role of the COMP token?
The native COMP token was introduced to pioneer liquidity mining, fundamentally changing how value is distributed within decentralized finance. It rewards active participants who contribute to the protocol's liquidity rather than just passive holders.
Which blockchains support Compound?
While originally launched on the Ethereum blockchain, the protocol has expanded its operations to include the Gnosis Chain as well. This multi-chain presence allows users to access its lending services across different decentralized networks.
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