{"id":37405,"date":"2021-07-01T08:00:00","date_gmt":"2021-07-01T05:00:00","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=37405"},"modified":"2025-08-29T16:34:10","modified_gmt":"2025-08-29T13:34:10","slug":"what-is-compound-comp","status":"publish","type":"post","link":"https:\/\/u1f987.com\/en\/what-is-compound-comp\/","title":{"rendered":"What is Compound (COMP)?"},"content":{"rendered":"
\n

What is Compound?<\/strong><\/h2>\n

Compound Finance<\/a> is a decentralised lending protocol in which interest rates are set algorithmically based on supply and demand. It functions as an open money market where users supply cryptoassets and borrow funds.<\/p>\n<\/div>\n

\n

Who created Compound Finance?<\/strong><\/h2>\n

The creator of the Compound Finance protocol and CEO of Compound Labs is web developer and financial-market analyst Robert Leshner.\u00a0<\/p>\n

Compound Labs\u2019 co-founder and CTO is programmer Geoff Hayes.<\/p>\n<\/div>\n

\n

How did Compound Finance emerge and develop?<\/strong><\/h2>\n

Penn graduates Leshner and Hayes collaborated for several years on various projects (Britches, Postmates and others). In 2013 Leshner, who had worked as a certified auditor, portfolio manager and banker, took an interest<\/a> in cryptocurrencies.\u00a0<\/p>\n

On August 28, 2017 Leshner and Hayes registered<\/a> Compound Labs, Inc.<\/a> with headquarters in San Francisco.\u00a0<\/p>\n

On January 31, 2018 Leshner published<\/a> an article about building the Compound protocol.<\/p>\n

On May 7, 2018 the company raised<\/a> $8.2m in seed funding. The round included Bain Capital Ventures, Andreessen Horowitz, Polychain Capital, Transmedia Capital, Compound Ventures, Abstract Ventures, Danhua Capital and Coinbase Ventures.\u00a0<\/p>\n

In September 2018 Compound Labs introduced<\/a> the first version of the protocol, enabling borrowing of five cryptoassets: ETH, TUSD, ZRX, BAT and REP.\u00a0<\/p>\n

In February 2019 the project\u2019s white paper<\/a> was published. On May 23, 2019 Compound Labs released<\/a> the second version of the protocol with cTokens, which represent claims on the underlying assets of Compound Finance money markets.\u00a0<\/p>\n

In November 2019 Compound Labs raised $25m in a Series A round led by Andreessen Horowitz. Bain Capital Ventures, Polychain Capital and Paradigm also participated.\u00a0<\/p>\n

Early on, Robert Leshner stated an intention to decentralise the protocol progressively, removing Compound Labs\u2019 admin privileges in favour of the community.\u00a0<\/p>\n

In February 2020 Compound Labs issued<\/a> the COMP<\/strong> governance token to encourage community participation.\u00a0<\/p>\n

On April 16, 2020 governance on Compound shifted from administrators to COMP holders, who gained the ability to change the list of supported assets, adjust risk parameters, interest-rate curves, and more.<\/p>\n<\/div>\n

\n

How does Compound work?<\/strong><\/h2>\n

Compound resembles a bank: users deposit various cryptocurrencies and earn interest. Unlike a bank, however, Compound does not custody deposits: funds sit in smart contracts that users interact with directly.\u00a0<\/p>\n

Lenders and borrowers do not negotiate terms. They interact directly within the protocol, which controls interest rates and collateral requirements. There are no intermediaries holding funds.\u00a0<\/p>\n

Anyone with a Web3 wallet such as MetaMask can access the platform<\/a>.<\/p>\n

\"\u0427\u0442\u043e
Data: Ivan on Tech Academy<\/a>.<\/figcaption><\/figure>\n

After approving the Web3 wallet connection, a user gets access to a dashboard showing supported assets. To supply or borrow an asset, select its page and unlock it.<\/p>\n

\"\u0427\u0442\u043e
List of assets available to supply and borrow on Compound. Data: Ivan on Tech Academy<\/a>.<\/figcaption><\/figure>\n
\"\u0427\u0442\u043e
Example: the Dai stablecoin. Data: <\/em>Ivan on Tech Academy<\/a>.<\/em><\/figcaption><\/figure>\n

Once an asset is unlocked\u2014authorising the smart contract to interact with the funds\u2014the user can lend it at a preset annual percentage rate (APR). Each asset has its own annual percentage yield (APY<\/span>).\u00a0<\/p>\n

To borrow, the user must first supply funds to the platform and obtain so\u2011called borrowing power. This metric is the amount that can be borrowed and increases with more collateral.\u00a0<\/p>\n

This is what a depositor\u2019s balance looks like after the transaction is processed:<\/p>\n

\"\u0427\u0442\u043e
Data: Ivan on Tech Academy<\/a>.<\/figcaption><\/figure>\n

After supplying assets to the platform, cTokens appear in the user\u2019s wallet\u2014for example, Compound Dai (cDAI).\u00a0<\/p>\n

To withdraw supplied assets with accrued interest, click Withdraw.\u00a0<\/p>\n

Borrowing on the platform<\/em><\/p>\n

Borrowing is as simple as supplying. Provided the user already has borrowing power, they can take out loans using the borrow panel<\/a>.\u00a0<\/p>\n

Compound requires one\u2011time permission from the Web3 wallet to interact with its smart contracts. Granting permission is an on-chain transaction that incurs an Ethereum fee.<\/p>\n

\"\u0427\u0442\u043e
Borrow panel. Data: Ivan on Tech Academy<\/a>.<\/figcaption><\/figure>\n

After choosing a supported asset on the right side of the panel, the user specifies the amount to borrow. Safe Max is the maximum loan size with low liquidation risk if the collateral\u2019s price falls.<\/p>\n

\"\u0427\u0442\u043e
Data: Ivan on Tech Academy<\/a>.<\/figcaption><\/figure>\n

Once the transaction is initiated, the borrowed asset (ETH in this example) is sent to the Web3 wallet.\u00a0<\/p>\n

Loan interest accrues at the preset rate. The debt can be repaid at any time by clicking Repay.<\/p>\n<\/div>\n

\n

How does Compound\u2019s two\u2011token system work?<\/strong><\/h2>\n

cToken<\/em><\/p>\n

These tokens represent the balances of users interacting with a Compound liquidity pool. A given cToken\u2019s underlying asset both earns interest and serves as collateral.\u00a0<\/p>\n

cTokens are ERC\u201120 assets: they can be viewed in the Etherscan block explorer, stored in a wallet and sent to others. Compound currently supports 14 cryptoassets.\u00a0<\/p>\n

Example.<\/em> A user supplies 1,000 BAT to the liquidity pool at an exchange rate of 0.02. They receive 50,000 (1,000\/0.02) cBAT. If, after a few weeks, the exchange rate is 0.021, withdrawing will convert 50,000 cBAT into 1,050 BAT (50,000*0.021).<\/p>\n

cToken features:<\/em><\/p>\n