Compound: everything you need to know about COMP

What is Compound?

Compound (COMP) is a cryptocurrency developed to promote the decentralization of financial services. The project was founded in 2018 and focuses on building a decentralized financial protocol on the Ethereum blockchain. COMP is the native token of the Compound protocol and plays a crucial role in platform governance. 

The goal of Compound is to allow users to borrow, lend, and trade cryptocurrencies and stablecoins on the platform without the need for intermediaries, creating an open and transparent financial marketplace where users can participate on a peer-to-peer basis. 

Platforms like Compound are becoming increasingly important in the world of financial services, and the COMP token plays a key role in this ecosystem. It was designed to reward users for their contributions to the system, making Compound an attractive investment opportunity for those looking to participate in the growing crypto economy. 

How does Compound work?

Compound operates based on a decentralized financial protocol built on the Ethereum blockchain. The protocol utilizes smart contracts that automatically facilitate the exchange of cryptocurrencies and stablecoins. 

There are two main roles in the Compound protocol: borrowers and lenders. They can borrow and lend cryptocurrencies without intermediaries, relying on market prices determined by supply and demand on the platform. 

When someone borrows cryptocurrency or stablecoins, they pay interest to the lender. This interest is automatically calculated and deducted from the borrower's balance by smart contracts. Lenders receive this interest as a reward for lending their tokens. 

The Compound protocol is designed to ensure that market prices for borrowing and lending tokens are always adjusted based on current supply and demand. This allows users to quickly and easily participate in the market and benefit from interest income. 

The Compound token

The COMP token is designed to reward users for their contributions to the financial protocol. When a borrower borrows cryptocurrency or stablecoins on the platform, a portion of the interest they pay is reserved for the issuance of COMP tokens. These tokens are then distributed to lenders and active platform users, including those who contribute to code improvements or report issues. 

This system ensures that platform users are constantly rewarded for their contributions. In turn, it incentivizes users to actively participate in the platform, contributing to the growth and success of the Compound ecosystem. 

Users can also sell COMP tokens on the open market, allowing them to profit from the token's growth and increase in value.

The Technology Behind COMP

The technology behind COMP is based on the Ethereum blockchain and uses smart contracts to implement the financial protocol. These smart contracts automatically facilitate the exchange of cryptocurrencies and stablecoins between borrowers and lenders on the platform. 

The smart contracts on Compound keep track of how much currency is available for borrowing and lending. They work together to calculate interest income and automatically adjust interest rates based on current supply and demand on the platform. 

The blockchain operates on a delegated Proof of Stake consensus mechanism. Furthermore, the Compound protocol is decentralized, meaning the platform is entirely governed by users and smart contracts. This ensures transparency and neutrality and allows market decisions to be made rather than by a central authority.

The Compound ecosystem

The Compound ecosystem consists of several key core components, including users, smart contracts, developers, and the COMP token. 

• Users: Both borrowers and lenders. Borrowers can borrow cryptocurrency and stablecoins on the platform, while lenders can lend money and earn interest income. 
• Smart Contracts: These facilitate the exchange of cryptocurrency and stablecoins between borrowers and lenders. They keep track of available funds for borrowing and lending, calculate interest income, and automatically adjust interest rates based on supply and demand. 
• Developers: Compound is an open-source project. Developers contribute to the code and help solve problems, contributing to the growth and continuous improvement of the platform. 
• COMP Token: The central currency of the Compound ecosystem plays a significant role in its token economy. The token is used to reward users for their contributions to the platform and allows them to profit from the token's growth and value appreciation. 

Benefits of Compound

Every coin has its pros and cons. What are the advantages of Compound? 

• Attractive interest rates and staking rewards 
• Compatible with the Ethereum blockchain 
• Highly liquid market 
• Globally accessible 
• The platform enjoys a good reputation

Drawbacks of Compound

While investors benefit from COMP's advantages, what are the disadvantages of Compound? 

• Limited number of cryptocurrencies on the platform 
• The platform is complex for novice investors 
• Lack of regulation leads to higher risks

Who is the founder of Compound?

Compound was founded by entrepreneurs Robert Leshner and Geoffrey Hayes. Hayes' previous company, Britches, collected inventory from local stores to resell. Leshner is a recognized financial analyst and an alumnus of the University of Pennsylvania, where he graduated in economics.

Price forecasts

In 2026 experts expect a minimal price of €171.29 and a minimal price of €565.94 in 2031.