What is Compound (COMP)?

Deep Dive

1. Purpose & Value Proposition

Compound solves fragmented capital efficiency in crypto by pooling assets into algorithmic "money markets." Lenders earn passive yield by supplying assets like ETH or stablecoins, while borrowers access liquidity by overcollateralizing loans. This eliminates intermediaries like banks, creating permissionless financial infrastructure accessible globally.

2. Technology & Architecture

Built on Ethereum, Compound uses smart contracts to automate lending/borrowing via cTokens (e.g., cUSDC). When users deposit assets, they receive cTokens that automatically compound interest through exchange-rate adjustments. Interest rates update algorithmically based on real-time supply/demand within each asset pool. The protocol expanded to Layer 2s (Arbitrum, Polygon) via Compound III, optimizing gas costs and risk isolation.

3. Tokenomics & Governance

COMP’s fixed supply (10 million) is distributed daily to lenders/borrowers, incentivizing protocol participation. Holders delegate voting power to steer development:
- Adjusting collateral factors
- Adding new assets (e.g., tETH on Arbitrum)
- Managing risk parameters via integrations like Gauntlet.
This community-led model ensures decentralized upgrades without corporate control.

Conclusion

Compound fundamentally reimagines lending as transparent, algorithmic markets governed by users. How will its multi-chain expansion and governance refinements further shape decentralized finance’s accessibility?