What is Compound (COMP)?

Deep Dive

1. Protocol Purpose: Decentralized Lending & Borrowing

Compound is a pioneering DeFi protocol launched in 2018 that creates automated, algorithmic money markets. Users can supply cryptocurrencies like ETH or USDC to earn interest, or use their supplied assets as collateral to borrow other assets. Interest rates for each asset are set dynamically by code based on real-time supply and demand, eliminating the need for traditional financial intermediaries.

2. COMP Token: Engine of Community Governance

The COMP token's primary utility is to decentralize control of the protocol. Holding COMP grants voting rights, enabling a community of users, developers, and applications to govern every aspect of Compound—from adding new supported assets to adjusting risk parameters. This model aims to ensure the protocol evolves transparently according to the collective interest of its users.

3. Distribution & Supply Mechanics

COMP is programmatically distributed to incentivize protocol usage. Approximately 1,639 COMP tokens are allocated daily across various lending markets, rewarding both suppliers and borrowers. Users automatically accrue these tokens, which they must actively claim. With a hard cap of 10 million tokens, this fixed supply creates a scarcity mechanism for the governance right.

Conclusion

Fundamentally, Compound (COMP) is the governance layer for a decentralized, algorithmic credit market, empowering its community to directly steer one of DeFi's foundational infrastructures. As the ecosystem matures, how will Compound's governance model adapt to balance innovation with the stability required for institutional-scale finance?