We will talk about Compound protocol, this is included one great project in Defi, now the compound protocol is ranked #85 on Coinmarketcap. The price of COMP which is the original Compound protocol coin is already high at $194.93.
According to the Compound protocol Whitepaper, the platform establishes as a money market. Where it is a pool where lenders and borrowers interact with each other. Like a bank where investors can save to get an interest rate.
- 1 Compound protocol explained
- 2 When was the compound protocol launched?
- 3 Compound protocol founder
- 4 How does compound protocol work
- 5 Who decides the future of Compound protocol?
- 6 What is compound lending?
- 7 Compound gateway in Polkadot project
- 8 Compound protocol coin
- 9 How to use compound protocol
- 10 Is Compound protocol a good investment?
- 11 Compound protocol price prediction
- 12 Compound protocol technical analysis
- 13 COMP price live chart Tradingview
- 14 Final thought
Compound protocol explained
Compound Protocol (COMP) is a decentralized blockchain-based protocol that runs on the Ethereum network. This protocol comes with its ERC-20 token, COMP.
COMP is a protocol built that serves to incentivize a distributed computer network to become a fully decentralized money market.
The Compound protocol functions as a decentralized application that enables decentralized finance (Defi) features directly on the Ethereum blockchain.
With the Compound protocol, users can request loans or earn interest by lending their cryptocurrency all through autonomous smart contracts.
Simply put, Compound allows users to deposit their cryptocurrency into loan pools designed to be borrowed by other users.
Lenders will then earn interest on their deposits. After users deposit their cryptocurrency for a loan, Compound gives them a new cryptocurrency – known as a cToken. Examples of cTokens like cDAI, cETH, cBAT, etc.
When was the compound protocol launched?
A yahoo finance article mentions the Compound protocol was invented in 2017, but according to Defipulse, Compound launched on Mainnet in September 2018 and got an upgrade to v2 in May 2019.
Compound protocol founder
The compound protocol was invented by Robert Leshner. He is a enterpreneur from San Francisco. Leshner graduated from the University of Pennsylvania with a Bachelor of Arts in Economics and has experience as a Chartered Financial Analyst. He is married to Jenny Stern who is the founder and chief strategist of Allison’s Tubular Labs.
His career began when he founded Safe Shepard with Geoff Hayes on October 1, 2011. Safe Shepard is a company whose services focus on deleting personal information from companies that sell it by scanning the internet and personal databases. The Safe Shepard success in raising $629,000 with their last seeding round held in 2013.
Then in August 2017, Leshner and Hayes launched Compound, a protocol that is an open-source money market built on top of the Ethereum blockchain.
Compound protocol raised more than $33.2 million, mainly from venture capital firm Andreessen Horowitz. The company’s token, COMP, reached $911.per token, all the time around the end of June, making it one of the pillars of the Defi network.
How does compound protocol work
Compound (COMP) is designed to connect lenders and borrowers using a powerful combination of smart contracts – running directly on the Ethereum blockchain.
In the compound protocol there are two main parts for the user:
- Borrowers – users who guarantee cryptocurrency in the Compound pool and are then allowed to borrow other cryptocurrencies backed by Compound at a percentage of the posted value.
- Lenders – users who deposit their cryptocurrencies into loan pools from which borrowers borrow. Lenders earn interest on the cryptocurrencies they deposit.
These lenders get rewards in COMP coins which are ERC-20 tokens. The amount of these rears depends on two factors:
- First the number of cTokens stored in their wallets.
- And secondly, the interest rate varies depending on the supply of available assets. The more liquidity a particular token has, the lower the interest rate it generates.
All lenders are also they can to take out loans in other cryptocurrencies supported by the Compound protocol. However, this condition may open the possibility for the borrower to be liquidated if the borrowed asset increases in value and becomes more valuable than the collateral held.
Of course, the concept of how the Compound protocol works is different from traditional banks which set a fixed interest rate. The rise and fall of the interest rate on the Compound protocol are determined by the money market and its liquidity.
Who decides the future of Compound protocol?
The Compound protocol is managed by a community of COMP holders who have the rights to governance and delegate their tokens to the network.
The COMP token uses three different components to manage the network, the COMP token, governance module, and Timelock.
The community can propose, vote, and implement changes through cToken’s administrative functions or the Financial Supervisory Board.
The proposed proposal might be to change system parameters or it could be to add new functionality to the protocol. To become a delegate it takes at least 65,000 COMP to be able to make a governance proposal. And anyone can lock in 100 COMPs to create an Autonomous Proposal, which becomes a governance proposal after 65,000 COMP delegates. In total, each protocol change takes at least a week which requires a vote of at least 400,000 votes.
What is compound lending?
Simply put, compound lending is a compound pool that allows users to store cryptocurrencies into loan pools for borrowers to access. Anyone who gave the loan will get an interest rate of the amount lent with a fluctuating interest rate.
Ledgers who have deposited cryptocurrencies in the Compound pool will earn what is called a cToken.
The cTokens can be transferred or traded without restrictions. But can only be exchanged for cryptocurrencies that are initially locked into the protocol.
This process uses an algorithm or smart contract that allows the borrower to withdraw the cryptocurrency at any time. All those services use COMP native tokens.
If any user interacts with the Compound marketplace either borrowing, withdrawing, or transferring they will be awarded additional COMP tokens.
This process appears to be quite complex but has proven to be adept at attracting users and encouraging other Defi cryptocurrencies to adopt the model.
Compound gateway in Polkadot project
Gateway Compound is a new blockchain provided by Compound that will allow cross-chain collateral. It is a gateway that is interoperable. This can reduce costly operations on the Ethereum network and allow for more interoperability in the Defi ecosystem so that it can also connect to Polkadot networks and others.
Using this compound Gate it is possible to borrow native assets from one chain, which is what this Gateway is to a cross-chain interest rate marketplace on Ethereum, with collateral from other chains, such as Polkadot or Celo.
Compound Gateway uses Substrate architecture which is the next-generation blockchain. The substrate is a modular framework for developers to create custom-built high-throughput blockchains. This substrate supports the Polkadot network.
Further Compound will build ‘Starports’ which will function as on, and off-ramp, to connect to the new blockchain to either borrow or hold assets as collateral. Gateway Compound also has the original unit which is CASH.
Although it was built by the Compound protocol team, the Gateway will also have a native coin called CASH. This unit will be the default value of paying transaction fees.
Gateway Compound is currently running on the Ropsten Ethereum network as a Testnet. However, there is no definite date for it to be launched on Mainnet.
Compound protocol coin
The Compound protocol has a native token called COMP, which in the Compound environment is called cToken.
cTokens will be printed if any user deposits their crypto assets into the Compound protocol. For example, a user will take out a loan using ETH as collateral, automatically receiving cETH tokens in exchange for the ETH deposited. If users deposit USDC into the lending pool, they will later receive cUSDC. Etc.
This COMP token has a maximum supply of 10,000,000 COMP, and currently, the total coins in circulation reach 63% or 6,277,698.30 COMP.
Distribution COMP token
The distribution of tokens according to its founder Robert Leshner is divided into five different portions:
- About 2.4 million COMP for shareholders Compound Lab inc. creates the Compound protocol.
- 2.2 million COMP for founder and team in 4 years.
- More than 372,000 COMP for future teams hired.
- 775 thousand COMP for community reserves as governance and other meanings.
How to use compound protocol
How to start users can interact with the Compound protocol directly on the compound. finance using the dApp browser or a regular browser equipped with MetaMask or other wallet options like Ledger, Wallet connect, and Coinbase wallet.
Once the wallet is connected, the user can then use Compound to borrow, or deposit crypto assets to lend to earn interest rates.
Is Compound protocol a good investment?
The compound protocol has advantages for example users can start with low capital to get the interest rate. COMP token holders also have the right to sell their cToken at any time, and as a bonus, they will get a 5% discount on liquidation. In addition, the governance of the Compound protocol is rational, as it reduces the centralization by Compound Labs, Inc.
However, the risk remains in the Compound protocol, such as a bug in the system, this can cause an incomplete transaction to fail. In addition, uncertain liquidity can affect the borrower’s income. Other risks are major scams, flash loan hacks, and several companies going bankrupt due to code vulnerabilities in 2020.
The compound has provided some benefits for both crypto and DeFi users. In an opinion on Quora, the Compound protocol is a good investment.
Compound protocol price prediction
Coinquora predicts COMP from year to year will increase gradually. Where the current price is $184.40, in 2025 the price is predicted to reach $3000.
CryptonewsZ, predicts COMP price will increase gradually from year to year and will reach $1000 by 2025.
Caspital.com predicts COMP’s price to increase significantly year over year. From its current price forecast in 2028 to $830
Tradingbeast predicts the COMP price from year to year is significantly good. Until the forecast in 2024 reaches a price of $542,653
Compound protocol technical analysis
The COMP price trend refers to the daily time frame showing a downtrend trend by reading the 30 MA where the price is still below the MA line. So it is concluded that it is in a downtrend.
This downward trend has started since COMP prices reached an all-time high last June. The price was then slowly in a downward trend to date.
We see the RSI level is 35, this is an indication the price is entering the oversold zone. This allows the price to continue waiting for a trend reversal.
Now we go to the H1 timeframe, where price behavior seems volatile with the current trend declining, which is indicated by the COMP price still below the 30 MA. However, the RSI value at 24.70 represents the current zone of 24 RSI levels.
COMP price live chart Tradingview
The compound protocol is currently developing the platform so that it can be interoperable with other blockchains. Although currently, the COMP token price is facing a decline after reaching an all-time high.
And the unique fact is that some analysts don’t even give a bad impression their value goes up from year to year.
Note: This article is for personal information and opinion only, it is not investment advice, each investor is responsible for his investment.
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