Compound is a DeFi lending protocol that allows users to earn interest on their cryptocurrencies by depositing them into one of several pools supported by the platform.
Compound is a decentralized blockchain protocol that allows users to lend or borrow selected cryptocurrencies. It establishes money markets by pooling assets together and algorithmically setting interest rates based on supply and demand of assets. To supply or lend crypto assets on Compound, users will have to deposit their crypto assets into the Compound protocol and it will be aggregated into a liquidity pool. Once users have made the deposit, they will receive cTokens in return. Users will start accruing interest by holding the cTokens. COMP price is actively monitored by many DeFi enthusiast.
Over Collateralized
Once assets are supplied to Compound, users are allowed to use the assets as collateral. Based on the collateral factor of the assets deposited, users can start borrowing from Compound. Because Compound uses an overcollateralization model, you can never borrow more than what is collateralized.
Compound v/s Traditional Finance
Compound behaves similarly to a bank but it is more easily accessible. To use Compound, users are not required to provide personal and private information. Anyone with an internet connection could sign up for Compound and start interacting with the protocol. All they need is some crypto assets stored on a crypto wallet like Metamask. In addition, the return rates for Compound are more attractive compared to traditional banks. For example, if you store money in a savings account, it will only generate a measly 0.05% APY. On the other hand, Compound would offer up to 4% APY depending on the assets supplied. Do note that the higher interest rate offered is due to the additional risks incurred by using the Compound smart contract.
Distribution
Each day, approximately 2,312 COMP will be distributed to users of the protocol; the distribution is allocated to each market (ETH, USDC, DAI…), and is set through the governance process by COMP token-holders. Within each market, half of the distribution is earned by suppliers, and the other half by borrowers.
Let us review COMP price
COMP Price Prediction
COMP is currently trading below the resistance at $567. If it can break this resistance, we could start seeing a move towards $589, $652, $742, $857 and $1189. Failure to break the resistance at $567 could lead to a drop towards $447, $401 and $318.
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