Compound crypto protocol

Decentralised Finance DeFi is the most promising killer app on Ethereum right now. DeFi services give users access to various financial services that customers were previously only familiar with from banks and other traditional financial institutions. However, DeFi platforms use smart contracts to offer accessible decentralised alternatives. This is why these services are often referred to as Open Finance. The best known DeFi use cases are stable coins, lending protocols, decentralised exchanges and payment networks.

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Content:

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• What is Compound Finance and $COMP?
• If You Were Accidentally Gifted $20M In Cryptocurrency Would You Give It Back?
• What is Compound Finance? A Detailed DeFi Guide
• Introduction #1 Compound Finance
• Compound: Cryptocurrency Interest Rates with Jared Flatow
• Buggy DeFi update mistakenly issues $90m worth of COMP coins to users
• A Graphical Guide to Compound
• Oops! Compound DeFi Platform Gives Out $90M, Would Like it Back, Please

WATCH RELATED VIDEO: Compound Finance Review: DeFi Unleashed!

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Some people might think that cryptocurrencies are only used for online payments. That is a serious misconception, as one of the driving forces for crypto in and was Decentralized Finance.

DeFi offers finance instruments similar to the ones available in a bank, but it does so in a technologically sophisticated fashion. This makes financial transactions more robust, transparent and secure. Just like a bank offers mutual funds, filing taxes, checking the credit card balance, etc.

In , DeFi emerged as one of the greatest contributions of blockchain technology to the world of finance. Compound is creating ripples in the crypto market for the right reasons. In this article, we will tell you what the hype around Compound is about.

First things first. Compound is a DeFi borrowing and lending protocol built on Ethereum that functions as the blockchain version of a money market. An analogy with legacy financial institutions might help you understand things better.

You must have a savings account in your bank where you deposit money to earn interest. Similarly, DeFi protocols like Compound allow you to invest your crypto savings, since your money grows from the interest earned. Just like you can take loans from a bank, Compound also lets you take a loan against collateral. But before that, you must know which of the cryptocurrencies Compound supports. The list is as follows:. You can diversify your investment portfolio when you start putting your savings into Compound.

In return, the protocol will keep paying interest to you for the entire time period that you keep your money. However, if you wish to make some investments elsewhere, you can also take loans from the protocol. As it is already evident by now, Compound constitutes two main actors: lenders and borrowers. Let us explicate their role and how they work in the Compound ecosystem. Lenders deposit or lock their crypto into Compound to earn money at a dynamic annual interest rate.

Lenders receive the Compound interest in the same token that they deposit in the pool. Borrowers can take a loan against their crypto balance in the Compound protocol. When you borrow money from a bank, they usually do a personal finance background check to determine credit ratings.

Thus, in order to avoid debt and bankruptcy, Compound only offers over-collateralized loans. Since you are taking money from the protocol, you need to pay Compound interest on it.

Examples help us visualize a system, so let us use one to explain how it functions. However, he needs to pay Compound interest on the borrowed amount.

How does COmpound work? Unlike banks where interest rates are fixed, Compound interest works in a dynamic fashion. The Compound interest keeps changing depending on the balance of a particular liquidity pool. When the total amount of crypto in a liquidity pool is abundantly available, the annual interest is low for lendings. However, for a smaller pool with a lesser balance, the Compound Annual Growth Rate is high.

This means the annual return is greater for lending crypto to smaller liquidity pools. This kind of floating interest works well to maintain some equivalence in the crypto market. Users are thus incentivized to supply liquidity to smaller pools because the Compounding interest is higher. Similarly, the interest rate for borrowing from a larger pool is less since there is sufficient money to borrow. On the contrary, the interest rate is higher when someone borrows from a small liquidity pool.

The question that still needs answering is how to calculate Compound interest. In banks, you earn simple interest on the initial principal that you deposit. But Compound interest works differently. The principal amount is compounded daily so that your money witnesses exponential growth at an incredibly faster rate. In banks, your savings are locked in for long periods that can be as long as nine years.

In fact, the compounding period is as small as a few seconds. With a phenomenally high annual growth rate, the accumulated interest on your original principal can be sky-high.

Although the interest rate is displayed for annual terms, Compounding periods are as low as 15 seconds. This is approximately the time it takes to mine an Ethereum block. Compounding works with the cTokens that lenders get for their investments in the protocol. It is these ERC tokens that appreciate in value from the accrued interest. The value of cTokens increases in value by the aforementioned growth rate every 15 seconds.

The obvious advantage of such short Compounding periods is that you will be earning interest on a daily compounding basis.

With a floating interest rate, the returns on your initial investment will also be significantly higher. Overall, compounding interest on your starting amount will give you larger returns on your money. It is a governance token with which the token-holders can propose changes and vote on them.

Now that you know you will have your interest compound from this DeFi protocol, the bigger question still remains. Is it safe to put your money into Compound as an investment strategy? DeFi projects are subject to frauds and hacks due to faulty and bug-ridden smart contracts.

An elaborate smart contract audit rules out the possibility of such hacks. OpenZeppelin and Trail of Bits have conducted multiple security audits of Compound, and received its formal verification from Certora.

This means any programmer with a technical background can easily spot errors in the code. This rewards program incentivizes keeping the protocol safe from any undiscovered bugs and faulty code. The supply-demand ratio in crypto markets determines the interest rate which makes your crypto investment balance safe. There are several other solutions where you can open an account to diversify your crypto investment plans.

Following are 3 such alternatives:. Venus - alternative to Compound Protocol. The lenders and borrowers use BEP assets to make fast, low-cost transactions. BlockFi - alternative to Compound. BlockFi is a platform where you can transact cryptos and earn as much as 8. You can also take a loan for just 4.

It supports 17 cryptocurrencies for its lending pools, and provides aTokens for each supporting cryptos. These aTokens are interest-holding tokens through which all lenders and borrowers receive or pay interest.

The protocol is powered by AAVE token which functions as a governance token. Compound is an interesting solution for those that want to leverage their digital assets and earn interest on their holdings. It also allows you to leverage crypto by borrowing on an interest rate calculated by the protocol. However, if the available solutions are not satisfying for your client base, you can build your own.

We have also built such solution for retail. Crypto enthusiast. Always on the lookout for the next growth opportunity. Blockchain Cryptocurrency Bitcoin. How Does Compound Interest Work?

Share on. Mateusz spent over a decade on launching and marketing tech products. Related posts. The future for blockchain industry looks bright. Over a hundred billion dollars was invested into Fintech companies in alone.

What is Compound Finance and $COMP?

Now, the founder is making a plea — and issuing a few threats — to incentivize the voluntary return of the platform's crypto tokens. Otherwise, it's being reported as income to the IRS, and most of you are doxxed," continued the tweet. Whether reward recipients choose to return many millions of dollars to the platform remains to be seen, though if history is any indication, it is certainly possible. DeFi protocols such as Compound are designed to recreate traditional financial systems such as banks and exchanges using blockchains enriched with self-executing smart contracts. On Wednesday, Compound rolled out what should have been a pretty standard upgrade.

If You Were Accidentally Gifted $20M In Cryptocurrency Would You Give It Back?

In the conventional system of finance, the users are bereft of any option to generate interest in the cryptocurrencies sitting stationary in a digital wallet. Owing to aggrandizement in decentralized finance DeFi , the mechanism of lending and borrowing crypto assets to earn interest is becoming a new normal in the life of crypto investors. Even though being a highly unpredictable commodity, cryptocurrency has turned the world upside down with incredible benefits in a short time. Until now, there was a lack of a decentralized system of finance that could ease the process of monetizing the assets of Cryptography. The gap is filled by Compound that has recently stepped up as the biggest lending protocol in decentralized finance. It is a mechanical money market protocol that lets users deposit cryptocurrencies and harvest interest or borrow other crypto assets against them. The approach to borrow and lend crypto assets with Compound has been made frictionless and easily accessible to everyone all over the world. Although, read this Compound Finance review and know all the details of this lending platform. To bring revolutionary enhancements in the crypto market, Compound Finance was effectuated by a Californian company Compound Labs Inc.

What is Compound Finance? A Detailed DeFi Guide

Compound is an algorithmic, autonomous interest rate protocol built for developers that unlocks a large selection of open financial applications. It made headlines in June when its pioneering governance token COMP skyrocketed in value and created a slew of copycat governance tokens. Compound Finance was to implement Proposal , an upgrade to split COMP token rewards to users and aid in bug fixes. Hours after approval and implementation of the upgrade, the development team noticed an issue with the distribution, with some users getting much more than they were due.

Introduction #1 Compound Finance

Please change the wallet network. Change the wallet network in the MetaMask Application to add this contract. United States Dollar. Compound is up 0. It has a circulating supply of 6,, COMP coins and a max.

Compound: Cryptocurrency Interest Rates with Jared Flatow

Decentralised Finance or DeFi is definitely one of the most fascinating topics at the intersection between technology and finance nowadays. For this reason, together with some fellow guilders of the Fintech Guild, we decided to analyze the most critical DeFi protocols around. We decided to kick-off with Compound. Compound is a money market protocol that allows users to lend and borrow crypto-assets in a global, permission-less, transparent and very rapid way, without a middleman. The protocol solves two crucial problems in this parallel financial ecosystem: it brings time value to the asset supported and it creates an automated money market. Compound natively integrated this feature.

Buggy DeFi update mistakenly issues $90m worth of COMP coins to users

One of the core aspects of finance is the time value of money. The problem a lot of people had back in was that there was no way to short any of the multitudes of altcoins hitting multi-billion dollar valuations. If you had seen Dragonchain do a x with disbelief, the only thing to do at the top was to pour a little out for the homies about to suffer a Without delving too deeply into conspiracy, it was the launch of Bitcoin futures on the CME that marked the top of the market.

A Graphical Guide to Compound

In a traditional savings account, you put money into the bank and earn interest on that money. What if you could spend the money your savings earned while still saving? That's an idea DeFi, or decentralized finance is hoping to solve. One of the companies working on offering this service in the DeFi world is Compound. Below we explore how this Ethereum based project is trying to help people access their savings. Like most Decentralized Finance DeFi protocols, Compound is a system of openly accessible smart contracts built on Ethereum.

Oops! Compound DeFi Platform Gives Out $90M, Would Like it Back, Please

As outlined in our post , the aim of the Committee is to create educational resources and investment insights. We are kicking off this initiative with an introductory series on the underlying DeFi Pulse Index tokens. Over the coming weeks, we will publish articles analyzing protocols within the DeFi Pulse portfolio and explaining them in a simple way. Compound is a protocol on the Ethereum blockchain that allows users to borrow and lend crypto tokens. Interest rates are set algorithmically based on the supply and demand for each asset. Lenders and borrowers interact directly with the protocol, earning and paying a floating interest rate, without having to negotiate terms such as maturity, interest rate, or collateral with a peer or a counterparty.

Just a few years later, Compound Finance is now one of the largest Decentralized Finance DeFi protocols in the world and has become a primary building block within the Ethereum ecosystem. The project was originally coined Compound Chain but has since been positioned as Gateway to more accurate what the product will deliver. The new chain will provide a bridge for assets without demanding token wrapping or other piecemeal shortcuts for getting blockchains to talk to each other.