What is Compound (COMP)?

Deep Dive

1. Protocol Purpose & Core Function

Compound is a decentralized lending protocol that creates algorithmic money markets. Users can supply cryptocurrencies like ETH or USDC to earn interest, or borrow assets by locking up overcollateralized crypto. Interest rates for each asset are set automatically based on real-time supply and demand within its pool, eliminating the need for traditional financial intermediaries.

2. COMP Token & Governance

The COMP token is the engine of decentralized governance. As an ERC-20 token (a standard on the Ethereum blockchain), it empowers its holders to collectively steer the protocol's future. COMP holders debate, propose, and vote on all upgrades, from adjusting interest rate models to adding new supported assets, ensuring the protocol evolves through community consensus (Compound).

3. Incentive Mechanism & Distribution

To incentivize usage and decentralize governance, the protocol distributes COMP daily to users who supply or borrow assets. The amount distributed to each market (e.g., ETH, USDC) is itself determined through governance votes, creating a flywheel where active participants are rewarded with influence.

Conclusion

Fundamentally, Compound is a community-governed DeFi infrastructure that provides permissionless lending and borrowing, with the COMP token serving as both its incentive mechanism and its democratic steering wheel. How will its governance model adapt as the protocol expands across multiple blockchain networks?