What Is Compound Finance?
Compound Finance is a protocol that allows users to borrow and lend crypto assets, earning interest in the process.
Background
Robert Leshner and Geoffrey Hayes founded Compound Finance in 2017.
How It Works
Users can deposit tokens into any listed money market on Compound and earn interest by holding cTokens. Users can also borrow from these markets because they have provided sufficient collateral. If a loan’s collateral value falls below a certain ratio, the loan can be liquidated. Any user can liquidate the loan by purchasing the collateral at a discounted price. Users also have the option to use flash loans, which allow them to borrow without posting collateral as long as they repay the loan in the same transaction.
COMP is the platform’s governance token. COMP holders can vote on various issues, such as supporting different collateral assets, adjusting loan-to-value ratios, and managing treasury assets. The tokens also incentivize users to deposit and borrow on the platform.
Key Takeaways
- Compound Finance is a protocol that enables users to lend and borrow crypto assets.
- It was founded by Robert Leshner and Geoffrey Hayes in 2017.
- Users can deposit tokens in money markets to earn interest or borrow from these markets if they provide adequate collateral.
- COMP is the governance token of the platform, allowing holders to vote on various matters and serving as incentives for platform use.
- The platform also offers flash loans, which allow users to borrow without collateral, provided they repay the loan within the same transaction.
