Decentralized Borrowing & Lending Platform
An Algorithmic Autonomous Interest Rate Protocol
Compound was founded by an economist Robert Leshner in 2018 and is built on a system of permissionless smart contracts utilizing the Ethereum blockchain. In a nutshell, Compound offers decentralized finance services to borrowers and lenders, to earn interest trade and transfer their crypto. With traditional cryptocurrency, funds are stored in a wallet or on an exchange and some might have wondered what they could do in terms of growing interest on those funds like with savings accounts through banks, but with faster growth and without dealing with banks, their fees or the approval process.
What you should know about Compound
Lenders – Will earn interest and tokens to incentivize the use of their tokens across markets. In addition, lenders are eligible to vote when changes are proposed to the app.
Borrowers – Will put up their crypto to gain access to credit
– You can withdraw funds whenever you would like with out penalties
– KYC requirements don’t exist for the sake of privacy
When setting out to either borrow or supply a market with Compound, you will want to see the Markets tab at the top of the screen which allows you to take in the information such as the different markets that are available, their gross supply, supply APY, gross borrow and borrow APY.
Clicking the APP button at the top of the screen will take you to an area to connect your wallet, you can choose Coinbase, Ledger or Metamask. Then, you can choose whether you would like to supply or borrow, select the asset you would like, the pop-up will show you in-depth information such as the supply APY, price, collateral factor and wallet information. Next you’ll choose how much you would like to supply or borrow and within 5 minutes your transaction should be completed. So, we’re talking 5 minutes to do something that is either impossible with traditional banking (lending to strangers) or take out a crypto loan.
On the dashboard, you will see your supply balance, net APY and borrow balance. The net APY is an averaged number if you are supplying more than one token.
– Each day, 2,880 comp tokens are distributed to lenders, suppliers and borrowers which can be withdrawn, swapped or used to vote.
– Comp tokens can be earned as a borrower as well when farming tokens
– Use your crypto as collateral
– No credit checks, income verification or anything of the sort for borrowing
Compound takes out the middle man, the banks in the transactions that should only take a few minutes at best, to process. Added features like tokens, help you to have some control over how the platform changes with voting. In addition to permissionless lending and borrowing, you won’t see fees like with traditional banks and in fact, you can earn interest when supplying crypto asset. Risk assessments are available for you to see when borrowing, also unlike with banks.