What Is Compound (COMP) How It Works & Where To Buy It?

Compound (COMP) is the governance token of the Compound DeFi protocol. The Compound platform allows people to lend and borrow digital assets on the platform. Compound tokens play an integral role in establishing and facilitating community governance.

Compound is currently the 4th largest lending and borrowing protocol in the crypto space.

How Compound (COMP) Works

Compound is a platform that allows different types of users to benefit in various ways. For example, lenders receive token rewards for providing liquidity to Compound pools. Essentially, lending pools are also utilized by borrowers wanting to borrow cryptocurrencies supported by the Compound protocol.

Lending pools allow lenders to earn additional income when they lend assets to a lending pool. The income they earn varies according to which assets they’re lending because each pool has a different APY % rate.

Essentially, lenders provide the liquidity for those seeking to borrow assets (which they pay varying interest rates on). COMP token holders also receive voting rights which they can use for proposals that are raised – these proposals affect the Compound protocol.

Compound Labs, the founding company of the Compound protocol, has managed to cement itself as a top-tier platform in the crypto space. The protocol has attracted the attention and investment of some notable venture capital firms, including Bain Capital Ventures and Paradigm Capital. The same investors are also heavily invested in some of the largest crypto projects around today.

What Is Compound (COMP) Used For?

Compound pools are where lenders facilitate the number of tokens being supplied, and where borrowers tap into the liquidity of a specific pool. The process is facilitated through smart contracts, so Compound users can be assured that they’re using a secure and credible platform.

All rewards paid from pools are paid to lenders in the relevant pool tokens. For example, if a lender is supplying DAI tokens as liquidity, they receive cDAI tokens in return.

Lenders can use the received tokens in whatever way they choose – it should be noted that Compound supports a limited number of tokens at the moment.

The Compound platform specializes in certain tokens, and the users of the platform choose Compound specifically for this reason. COMP token holders can also earn interest on their COMP tokens.

COMP tokens are frequently traded, and any holder that wants to sell Compound (COMP) tokens can easily do so on several cryptocurrency exchanges.

Where To Buy Compound (COMP)

COMP tokens are native governance and utility tokens of the Compound lending protocol. Currently, more than 15 cryptocurrencies can be lent or borrowed on the Compound protocol.

Five of the most popular crypto exchanges to buy and trade on are:

1. Binance
2. Gate.io
3. Gate.io
4. ByBit
5. Bitfinex

Many people transfer their tokens off of exchanges and into digital wallets or cold wallets. This is considered to be the most secure option because exchanges can be hacked or exploited.

Trust Wallet is one of the most popular digital wallets and it’s used by hundreds of thousands of people globally.

About Compound Compound (COMP)

How long has Compound (COMP) existed?

The Compound Protocol was founded by Robert Leshner and Geoffrey Hayes in 2018. The founders are extensively experienced – one of their career highlights includes having worked at Britches, a company that facilitates the aggregation of inventory from local shops that will be sold on PostMates.

COMP has become one of the most popular cryptocurrency tokens on the market. The Compound protocol currently accommodates 20 cryptocurrencies on its platform. Most notably, there has been an increased demand for stablecoins.

The tokens with the largest market liquidity are as follows:

• USD Coin – $991 million
• Ethereum – $799 million
• Wrapped BTC – $799 million

What’s controversial about Compound DAI (cDAI)?

The words ”crypto” and ”controversy” seem to come up quite often. The crypto space is growing at a rapid pace, and new projects are popping up on a daily basis.

Most projects have at least a bit of controversy surrounding them, and lending protocols such as Compound are no different. It’s crucial to do as much research on a project before investing. Consider researching the project’s history, its founders, and any other important information involving the project.

Let’s take a look at the top two controversies surrounding Compound (COMP).

• Governance attacks – Protocols with governance tokens and a DAO structure are always at risk of exploiting their systems. Compound protocol’s native COMP token is therefore at risk. Similar to other governance tokens, COMP holders receive voting rights; their voting rights are weighted according to the size of their COMP token allocation.

  This poses a unique risk because the Compound protocol allows users to borrow large amounts of various assets, including Compound (COMP). There’s a possibility that malicious individuals could borrow a significant amount of COMP to sway proposals.

  Most notably, TRON’s founder, Justin Sun, borrowed more than 90k COMP, and it is believed that he was trying to manipulate a critical governance vote. This sent shock waves through the Compound community and left many users with concerns. Many wondered if this would be a concern again in the future, and if it could possibly be devastating for the protocol.

• Lenders vs. Borrowers – Lending protocols rely on a large level of liquidity to maintain a platform that functions optimally and can meet users’ requirements. When users borrow assets, there needs to be sufficient collateral available; this is the role that lenders fill.

  Maintaining a balance is critical, along with increasing the number of users utilizing the platform. However, there are some concerning discrepancies between the number of borrowers on the platform and the number of lenders (collateral providers).

  One of the most notable concerns surrounding the Compound protocol is this imbalance. There is a definite shortage of demand, and this is highlighted by the low borrowing activity.

  Essentially, the number of tokens being lent to the platform has grown significantly but the demand for borrowing has remained relatively low. The general consensus is that most crypto investors are skeptical of lending protocols; this could be one of the factors for the lack of borrowing interest.

How many Compound (COMP) tokens are there?

At the time of writing, Compound (COMP) has a circulating supply is 7,142,133.85 COMP

The total supply of Compound (COMP) is 10,000,000

The max supply of Compound (COMP) is 10,000,000

Can Compound (COMP) be mined?

Compound (COMP) is not a mineable cryptocurrency. COMP tokens are the native utility governance tokens of the Compound protocol and aren’t mineable.

However, users can earn interest on tokens they lend to Compound pools. Compound raised interest rates slightly, and the interest paid to lenders is seen as relatively generous. Users can lend multiple crypto assets to the platform with peace of mind because every transaction is securely facilitated through a smart contract.

The COMP cryptocurrency plays the most vital role for the protocol, and it’s essentially the backbone of what makes Compound work. Users can earn COMP tokens by making use of certain DeFi features in the Compound wallet.

What is the market cap of Compound (COMP)?

The market cap of any cryptocurrency can be calculated by using the same formula: the total amount of coins in circulation times the current market price.

Compoun (COMP) Market Cap = 7,142,133.85 COMP x $35.09 = $250,58 million.

The market cap is always fluctuating according to circulating supply and the COMP price.

Biggest Competitors Of Compound (COMP)

The Compound lending protocol has quickly grown to become one most popular platforms globally. The platform has seen an increase in the number of users, and collateral levels recently peaked on the platform.

Many individuals are still wary of using lending protocols and opt for other DeFi platforms that offer yield farming or staking. However, there is a distinct use case for lending protocols, and many of them have performed well over recent years.

Compound’s biggest competitors are:

• Maker
• AAVE

What Are The Future Plans For Compound (COMP)?

Most people consider Compound to be an incredibly trustworthy and credible platform. The Compound team has announced its intention to possibly list more assets on the patform.

This would mean that lenders could supply collateral to new Compound pools where they could earn interest on their collateral.

The increase of tokens available on the Compound market is likely to attract more individuals to the Compound platform.

Pros And Cons Of Compound (COMP)

Pros:

• Unique Rewards mechanism – Lenders receive unique tokens when they provide liquidity to a Compound pool. For example, using the lend DAI to a pool receive cDAI rewards.
• Top Lending Protocol – Compound is the 4th largest lending protocol by market cap.
• Excellent UI Experience – Crypto can often be complex and seem abstract to even the most seasoned crypto investors. However, the Compound protocol has a simple and easy-to-navigate platform that ensures a seamless user experience.
• Liquidity/collateral – The protocol has excess liquidity and can easily meet the demand for borrowing cryptocurrency.

Cons:

• Governance Attack – There have been previous attempts to attack the governance of the protocol by borrowing 90,000 COMP tokens (Justin Sun). Such situations could adversely affect the Compound protocol.
• Low-interest rates / APY – Many potential lenders refrain from using the Compound protocol because of the low interest rates. Users typically earn less than 4% on the tokens they lend to Compound pools.