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 crypto assets like ETH or USDC to earn interest, or borrow against supplied collateral. Interest rates for each asset are set automatically based on real-time supply and demand within its pools, eliminating the need for traditional intermediaries like banks.

2. COMP Token & Governance Model

The COMP token is an ERC-20 asset that empowers community governance, as described in its official documentation (Compound). Holding COMP grants the right to propose and vote on all protocol changes, from adjusting interest rate models to adding new supported assets. This places the protocol's future directly in the hands of its users and applications.

3. Tokenomics & User Incentives

COMP has a fixed maximum supply of 10 million tokens. A portion is distributed daily to users who supply or borrow assets, incentivizing protocol participation and liquidity provision. The daily distribution amount and its allocation across different markets (e.g., Ethereum, Arbitrum, Base) are themselves determined through the governance process by COMP token-holders.

Conclusion

Fundamentally, Compound is a pioneer of decentralized algorithmic lending, and COMP is the key that gives its community control over this financial infrastructure. As the ecosystem evolves, how will its governance model adapt to balance innovation with the stability required for mainstream adoption?