The history of lending is as old as the history of the formation of monetary and commodity relations. In 2009, decentralized digital currencies entered the economy modestly. The emergence of a blockchain platform aimed at enabling decentralized lending from that moment has become a matter of time. In the fall of 2018, the idea was embodied in the form of Compound mainnet.
What is Compound (COMP)
Compound (COMP) is a DeFi protocol created to serve crypto loans. It is a system of smart contracts based on Ethereum.
Network users can lend and take out loans by locking their digital coins in the protocol. Unlike the traditional financial system, interest rates in Compound are determined depending on the ratio of supply and demand for each of the assets. Interest rates are generated with each mined block, and blocked funds can be withdrawn at any time.
How it works
To earn on their crypto assets, the user can place them in one of the existing pools. When a user contributes coins to the Compound pool, they receive sTokens. These tokens represent the depositor’s share in the pool and can be used to redeem deposited coins at any time. Over time, the exchange rate of Stocks to the underlying asset increases. That is, the user can redeem a larger amount compared to the initially invested.
Borrowers can take out a loan in any of the available Compound pools by depositing collateral. The ratio of loan and collateral value (loan-to-value, LTV) for different assets is different and varies within 50-75%. The interest rate is charged depending on the asset. If the collateral falls below the minimum collateral threshold, the borrower may face automatic liquidation.
The native COMP token, an asset of the EPC-20 standard, is used to manage the platform. token holders can propose changes to the protocol, take part in discussions, votes and implementation of proposed updates.
Updates may include adding supported cryptocurrencies, changing collateral rates, changing the way tokens are distributed.
COMP tokens can be earned by interacting with the protocol or bought on a cryptocurrency exchange. COMP is traded on over a hundred exchanges. In addition to trading pairs with popular cryptocurrencies, many platforms support the exchange of COMP for fiat sovereign currencies.
LetsExchange – an easy way to exchange cryptocurrency
The easiest way to buy or sell a COMP is using the LetsExchange functionality. You do not need to create an account and provide any personal information. You just go to the platform and fill in the exchange widget:
- Select COMP and another coin in the “you send” and “you receive” fields.
- Specify the swap amount.
- Enter the address of your crypto wallet.
- Send coins for deposit.
- Click the Let’s Exchange button.
The Smart Rate system will analyze the available trades on the supported exchanges and select the best one. As soon as the coins are deposited, the transaction will be completed and the purchased coins will be credited to your wallet.
LetsExchange – crypto exchange online, where 350+ coins and tokens are available. All transactions are fast, secure and anonymous.