Compound is a decentralized finance (DeFi) protocol built on the Ethereum blockchain that allows users to deposit their cryptocurrencies into any of the pools and earn interest on them. The project was created by two former Postmate employees (an online food delivery system in the United States) Robert Leshner and Geoffrey Hayes and founded in 2017. In September of 2018, the Compound testnet was launched and has been well received by the public, particularly since the DeFi industry has grown exponentially.
The Compound pool works in two ways. One option is to deposit a supported cryptocurrency and receive cTokens in return (if you deposit ETH you will receive cETH). These tokens represent your stake in the pool and can be redeemed at any stage. Over time the cToken and the initial deposited currency’s exchange rate will increase, increasing the interest a user earns through the process.
Another option on the DeFi platform is to take out a loan from any pool by depositing collateral. Based on which asset the user deposits, a different loan-to-value (LTV) will be established (roughly 50 - 70%). Interest rates are then paid to the borrowers, while an automatic liquidation will execute should the collateral fall below the maintenance threshold. These money markets are based on algorithms that obtain interest rates through evaluating the supply and demand of different cryptocurrencies. The maximum supply of COMP tokens is 10,000,000. See the chart above depicting the COMP price data and use the Buy button to start trading.