Compound (COMP)

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What is Compound (COMP)?

COMP is the governance token of the Compound protocol. Compound derives its name from compounding interest, a great tool for those looking to passively grow their wealth. Compound is a collateralized borrowing and lending DeFi platform where users can either gain interest by depositing their funds that would otherwise have sat idle or can borrow assets by providing another asset as collateral. As the governance token, COMP holders have the power to decide important protocol decisions such as what tokens should be provided for borrowing and lending. 

 

What makes it unique?

  • Compound is a DeFi borrowing and lending protocol;

  • Users can either lend out their idle assets to collect interest rewards or borrow the desired asset by placing a greater value than the loan as collateral;

  • Assets on Compound have variable interest rates, meaning that assets in high demand bring higher rewards for those willing to lend them out;

  • Variable interest rates are set by market dynamics of supply and demand;

  • Loans that require more value in collateral than the value being loaned are known as “over-collateralized”, these protect the market from users being unable to pay back their loan;

  • COMP is the governance token of the Compound Protocol;

  • COMP holders hold the voting power to decide on key protocol improvements and maintenance updates.

 

Purpose

COMP, being a governance token, provides its owners with the ability to take part in key decision-making processes regarding Compound Protocol. In short, COMP holders can propose, vote, and implement changes to the protocol. Questions such as “which assets should be supported for borrowing and lending?” or “what should the maximum and minimum interest rates be for a given asset?” are examples of the decisions that COMP holders are in charge of making. The supply of COMP is hard-capped at 10M tokens. 

 

Sources of knowledge


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