Compound Finance
Research and analysis of the project
Compound is a decentralized protocol for working with cryptocurrency markets, allowing users to invest or borrow various assets. Interest rates are set algorithmically, based on the current supply and demand, and can be adjusted approximately every 15 seconds (with each new Ethereum block).
COMP is a proprietary Compound token of the ERC-20 standard, created to decentralize protocol management. COMP holders have the right to vote for the proposed changes and propose them themselves. COMP is automatically distributed among users interacting with the platform in one way or another – depositing funds into the pool, lending, loan repayment.
COMP is a proprietary Compound token of the ERC-20 standard, created to decentralize protocol management. COMP holders have the right to vote for the proposed changes and propose them themselves. COMP is automatically distributed among users interacting with the platform in one way or another – depositing funds into the pool, lending, loan repayment.
The decentralized vending protocol Compound was created by the California company Compound Labs Inc. in September 2018.
CEO
The creator of the Compound Finance protocol and CEO of Compound Labs is web developer and financial markets analyst Robert Leshner. Co—founder and CTO of Compound Labs is programmer Jeff Hayes.
Benefit
Like many other DeFi protocols, Compound is built on the Ethereum blockchain. Initially, the company was centralized, but the recent release of its management token, COMP, marked the first step towards turning the company into a decentralized autonomous organization (DAO) managed by the community.
Income
The Compound protocol allows users to earn income in the form of interest for using the project's products when they borrow or give away crypto assets. The platform supports 9 crypto assets, including Basic Attention Token (BAT), 0x (ZRX) and Wrapped BTC (WBTC).
History of creation and the Compound command
Despite the fact that the cryptocurrency market reports billions of dollars in turnover every day, in fact, most of the coins that exist today simply lie on exchanges or wallets, without bringing profit to their owners.
The creators of the blockchain startup Compound took up the task of correcting this situation, offering users to earn money by lending their crypto assets that were not used in active trading. The creator of the protocol is Compound Labs from San Francisco, which raised $8.2 million in the spring of 2018 as part of the seed round, and then another $25 million in the fall of 2019 in the Series A funding round. The startup's investors were venture giants Andreessen Horowitz, Coinbase Ventures, Paradigm and Polychain Capital.
The first version of Compound was launched in September 2018. In February 2019, the project's WhitePaper was published. And in May, the protocol was updated to v2. According to the data of the analytical service DeFi Pulse, Compound now occupies the third position in the ranking of decentralized financial applications by capitalization with a result of $ 127 million.
The COMP token was launched in June 2020.
The token gives the community of owners the opportunity to vote for key changes in the Compound. COM P can also be delegated to other persons for voting. As a thriving decentralized lending and borrowing center, Compound was already very popular in DeFi before its COMP token was launched.
The creators of the blockchain startup Compound took up the task of correcting this situation, offering users to earn money by lending their crypto assets that were not used in active trading. The creator of the protocol is Compound Labs from San Francisco, which raised $8.2 million in the spring of 2018 as part of the seed round, and then another $25 million in the fall of 2019 in the Series A funding round. The startup's investors were venture giants Andreessen Horowitz, Coinbase Ventures, Paradigm and Polychain Capital.
The first version of Compound was launched in September 2018. In February 2019, the project's WhitePaper was published. And in May, the protocol was updated to v2. According to the data of the analytical service DeFi Pulse, Compound now occupies the third position in the ranking of decentralized financial applications by capitalization with a result of $ 127 million.
The COMP token was launched in June 2020.
The token gives the community of owners the opportunity to vote for key changes in the Compound. COM P can also be delegated to other persons for voting. As a thriving decentralized lending and borrowing center, Compound was already very popular in DeFi before its COMP token was launched.
The developer of the protocol is the company Compound Labs from San Francisco, headed by a certified financial analyst Robert Leshner. The project management does not have administrative privileges.
Robert Leshner is the founder of the project. Certified financial analyst, former economist and founder of two startups.
Geoffrey Hayes is the technical director.The founder of two startups, headed Core Services at Postmates.
Torrey Atcitty is the head. Led the development of mobile applications in Postmates, Kahuna and Aha Mobile.
Calvin Liu is a strategic manager. Previously an analyst at Gusto, advisor to startups in the field of digital currencies at Promontory, a long-time crypto investor. In total, the team consists of 14 participants.
Robert Leshner is the founder of the project. Certified financial analyst, former economist and founder of two startups.
Geoffrey Hayes is the technical director.The founder of two startups, headed Core Services at Postmates.
Torrey Atcitty is the head. Led the development of mobile applications in Postmates, Kahuna and Aha Mobile.
Calvin Liu is a strategic manager. Previously an analyst at Gusto, advisor to startups in the field of digital currencies at Promontory, a long-time crypto investor. In total, the team consists of 14 participants.
Team Compound
Robert Leshner
Cheif Executive Officer
Geoffrey Hayes
CTO
Torrey Atcitty
APPLICATION LEAD
Calvin Liu
STRATEGY LEAD
Coburn Berry
SENIOR ENGINEER
Jared Flatow
SENIOR ENGINEER
Jatson Hobby
HEAD OF DESIGN
Jake Chervinsky
GENERAL COUNSEL
Compound Finance Goals
1
Lending to those who do not have access to banks
The Compound platform belongs to the representatives of DeFi projects (decentralized finance). The purpose of this direction is to remove intermediaries, i.e. banks, and reduce the cost of financial transactions, for example, obtaining loans. It also expands the scope of impact – even people who do not have access to banks can use decentralized banking services.
2
Expansion of supported currencies
Compound supports the following currencies: THE, DAY, USD, ZRX, BAT, USD, BTC, RU, SAI. The table shows how many total funds are contained in the credit pool, how many of them are borrowed, what interest rates on lending and depositing. These indicators are constantly being adjusted.
3
Transactions without intermediaries
According to Robert Langer, at Compound, our goal is to create a financial infrastructure that applications and developers can rely on forever. To achieve this, we intend to completely decentralize the Composite Protocol - remove the largest single point of failure (our team) and create an indestructible open protocol that can develop in a completely new way.
Today we are proud to present a management system that will replace the administrator of the Composite Protocol with community management, allowing you to propose, discuss and implement changes to the Composition without relying on or demanding anything from our team.Individual Approach
Today we are proud to present a management system that will replace the administrator of the Composite Protocol with community management, allowing you to propose, discuss and implement changes to the Composition without relying on or demanding anything from our team.Individual Approach
4
Financing of the real sector of the economy and large percentages
Users of the platform can not only earn crazy interest rates, but also receive a reward in the form of COMP tokens for borrowing or providing cryptocurrency. Given the high price of the COMP token, this opened the door to some level of complexity that allowed users to increase their APY to more than 100%.
5
Supply and demand analysis algorithm
The compound offers floating interest rates – a special algorithm analyzes the supply and demand for a specific currency. Also, 10% of the earned interest goes to the creators of the project. You can withdraw your funds from the pool at any time, the duration of withdrawal to the Eth wallet is no more than fifteen seconds.
6
The client manages his own assets
The essence of the work of Compound resembles a bank. Participants deposit their cryptocurrency and receive interest income on a regular basis. However, the difference is that the company does not keep anyone's assets. Everything is managed by a smart contract. No one person or group of people can control the funds or appropriate them for themselves.
The first experience at the first login/interaction with Compound.
To access the Compound credit market, you do not need to create an account.
Interaction takes place through one of the user interfaces that support working with the protocol - Huobi Wallet, InstaDApp, etc. (the full list is available on the service's website). They are connected via Web 3.0 wallets. For example, when choosing the native Compound interface, you can use MetaMask, Coinbase Wallet or Ledger.
Interaction takes place through one of the user interfaces that support working with the protocol - Huobi Wallet, InstaDApp, etc. (the full list is available on the service's website). They are connected via Web 3.0 wallets. For example, when choosing the native Compound interface, you can use MetaMask, Coinbase Wallet or Ledger.
1. We go to the website compound .finance On the main page in the upper right corner click on the APP button
2. The ERC - 20/ wallet selection window appears. In this example, select Meta Mask. Next, enter the password in the browser extension.
In the selected application, you need to confirm the service's access to the wallet. Immediately after that, a panel opens with a list of available cryptocurrencies, their balances and interest rates on collateral (Supply) and loans (Borrow).
As you can see, the most profitable assets to supply to the market today are DAI and USD stablecoins (7.58% and 4.81% annual returns). But it makes no sense to lend ETH and REP now (0.01%).
It also selects and activates the coins that Compound gets access to, as well as opening supply/borrowing transactions. Moreover, when depositing funds, the limit of possible loans is calculated immediately.
As you can see, the most profitable assets to supply to the market today are DAI and USD stablecoins (7.58% and 4.81% annual returns). But it makes no sense to lend ETH and REP now (0.01%).
It also selects and activates the coins that Compound gets access to, as well as opening supply/borrowing transactions. Moreover, when depositing funds, the limit of possible loans is calculated immediately.
3. Next, the interaction interface opens.
After confirming the request to interact with the Web 3 wallet, the user gets access to an information panel displaying supported assets. To deposit or borrow an asset, you need to click on the page of this asset and unlock it. Immediately after that, a panel opens with a list of available cryptocurrencies, their balances and interest rates on collateral and loans.
A page with a list of assets available for deposit and borrowing on Compound.
As you can see, one of the most assets to supply to the market today are the DAI and USD stablecoin (6.69% and 2.72% annual returns). But ETH is the most profitable,
the annual yield is 25, 61%!
It also selects and activates the coins that Compound gets access to, as well as opening supply/borrowing transactions. Moreover, when depositing funds, the limit of possible loans is calculated immediately.
As you can see, one of the most assets to supply to the market today are the DAI and USD stablecoin (6.69% and 2.72% annual returns). But ETH is the most profitable,
the annual yield is 25, 61%!
It also selects and activates the coins that Compound gets access to, as well as opening supply/borrowing transactions. Moreover, when depositing funds, the limit of possible loans is calculated immediately.
Depositing funds into Compound and calculating the loan limit
All operations in Compound are performed in two simple steps - sending a request and confirming the transaction in the wallet application used.
After unlocking the asset, which involves allowing the smart contract to interact with the funds, the user can lend it at a preset annual interest rate (APR). Each asset has an individual annual percentage return (APY).
To borrow an asset, the user must first place funds on the platform and obtain the so-called borrowing power. This metric represents the amount that can be borrowed. It increases with the growth of the collateral provided.
This is what the balance of the user depositing funds looks like after processing the transaction:
To borrow an asset, the user must first place funds on the platform and obtain the so-called borrowing power. This metric represents the amount that can be borrowed. It increases with the growth of the collateral provided.
This is what the balance of the user depositing funds looks like after processing the transaction:
After placing assets on the platform, so-called c-tokens appear in the user's wallet — in this case, Compound Dai (CDAI).
To withdraw the placed assets with accumulated interest income, you need to click on the Withdraw button.
The function of obtaining a loan on the platform
The process of obtaining a loan is as simple as the deposit process. Provided that the user has already received the right to borrow, he can borrow assets using the appropriate panel.
Compound must get permission from the Web 3 wallet to interact with smart contracts. The permission is obtained once. This will require an online transaction involving the payment of a commission on the Ethereum network.
To withdraw the placed assets with accumulated interest income, you need to click on the Withdraw button.
The function of obtaining a loan on the platform
The process of obtaining a loan is as simple as the deposit process. Provided that the user has already received the right to borrow, he can borrow assets using the appropriate panel.
Compound must get permission from the Web 3 wallet to interact with smart contracts. The permission is obtained once. This will require an online transaction involving the payment of a commission on the Ethereum network.
By selecting a supported asset on the right side of the panel, the user can assign the amount he wants to borrow. The Safe Max value represents the maximum amount of borrowed funds with a low risk of liquidation with a decrease in the price of the underlying asset.
After the transaction is initiated, the borrowed asset (in this example, ETH) is deposited into a Web3 wallet.
The interest on the loan is accumulated in accordance with the preset interest rate. The debt can be paid at any time by clicking the Replay button.
What assets are supported by Compound Finance?
As of September 1 , 2020 , Compound supports the following assets:
ETH
WBTC (Wrapped Bitcoin)
USDC
DAY
USDT
ZRX
BAT
REP
In the future, support for more tokens will probably be added.
The interest on the loan is accumulated in accordance with the preset interest rate. The debt can be paid at any time by clicking the Replay button.
What assets are supported by Compound Finance?
As of September 1 , 2020 , Compound supports the following assets:
ETH
WBTC (Wrapped Bitcoin)
USDC
DAY
USDT
ZRX
BAT
REP
In the future, support for more tokens will probably be added.
Conclusion
The experience of interaction with COMPOUND turned out to be positive. Quite a lot of useful articles and instructions were found on the Internet. The interface and usability are at a high level, everything is intuitive. When there were questions, I included a video on YouTube with a detailed review. It was easy to find useful project participants, for this I followed the link on the website to the official Discord. Judging by the activity, the community is friendly and cohesive.
After logging into the DAO, the voting interface did not load. I pressed the refresh button several times, nothing has changed. Shown in the screenshot. Most likely, it should turn on when the voting coins appear. But when entering a beginner, it is obvious not immediately. Looks like a crash.
The first thing that catches your eye is a green circle with the inscription No APY. Any denial on the main page does not have a very good effect on perception, as it seemed to me. It is better to transform this block.
When the cursor selects one of the coins, it is highlighted in green in the form of a
thin line. This is also not obvious, people with poor eyesight may not see. There is no tactile feedback and understanding that this coin was chosen.
thin line. This is also not obvious, people with poor eyesight may not see. There is no tactile feedback and understanding that this coin was chosen.
The second thing that attracted attention in the DAO was the bright DAI logo on the black-and-white interface. He takes almost all the focus on himself. In fact, it is the most popular coin for depositing. I also found a disadvantage, the lack of the ability to sort the title by title and by percentage. It would be more convenient that way.
The formal process of adaptation in the DAO is intuitive, but still the above points can be adjusted.
The formal process of adaptation in the DAO is intuitive, but still the above points can be adjusted.
Participation starts with the Compound governance token, COMP.
In addition to being a standard ERC-20 asset, COMP allows the owner to delegate voting rights to the address of their choice; the owner's wallet, another user, an application, or a DeFi expert. Anybody can participate in Compound governance by receiving delegation, without needing to own COMP. The token also includes code to query an address'
We hope that COMP can set the standard for how governance tokens operate, and our team will write an Ethereum Improvement Plan (similar to the ERC-20 standard) to accelerate decentralization for the entire ecosystem.
COMP empowers community governance — it isn't a fundraising device or investment opportunity. Until the decentralization process is complete, COMP will not be available to the public.
Community, not centralized, decisions
We've designed a simple governance framework so that you can easily participate in shaping the direction of Compound. Here's how it works:
Anybody with 1% of COMP delegated to their address can propose a governance action; these are simple or complex sets of actions, such as adding support for a new asset, changing an asset's collateral factor, changing a market's interest rate model, or changing any other parameter or variable of the protocol that the current administrator can modify.
">">Proposals are executable code, not suggestions for a team or foundation to implement. All proposals are subject to a 3 day voting period, and any address with voting power can vote for or against the proposal. If a majority, and at least 400,000 votes are cast for the proposal, it is queued in the Timelock, and can be implemented after 2 days.
In addition to being a standard ERC-20 asset, COMP allows the owner to delegate voting rights to the address of their choice; the owner's wallet, another user, an application, or a DeFi expert. Anybody can participate in Compound governance by receiving delegation, without needing to own COMP. The token also includes code to query an address'
We hope that COMP can set the standard for how governance tokens operate, and our team will write an Ethereum Improvement Plan (similar to the ERC-20 standard) to accelerate decentralization for the entire ecosystem.
COMP empowers community governance — it isn't a fundraising device or investment opportunity. Until the decentralization process is complete, COMP will not be available to the public.
Community, not centralized, decisions
We've designed a simple governance framework so that you can easily participate in shaping the direction of Compound. Here's how it works:
Anybody with 1% of COMP delegated to their address can propose a governance action; these are simple or complex sets of actions, such as adding support for a new asset, changing an asset's collateral factor, changing a market's interest rate model, or changing any other parameter or variable of the protocol that the current administrator can modify.
">">Proposals are executable code, not suggestions for a team or foundation to implement. All proposals are subject to a 3 day voting period, and any address with voting power can vote for or against the proposal. If a majority, and at least 400,000 votes are cast for the proposal, it is queued in the Timelock, and can be implemented after 2 days.
And if you don't like the management structure, great! You can vote for its replacement with a new model.
The main principles of management mechanisms
Any user who has more than 1% of the COMP issue volume at his disposal can make suggestions.
The voting period for any proposal lasts three days.
Any address with the right to vote can vote "for" or "against" a particular proposal.
If a proposal receives at least 400,000 votes, it is queued and implemented two days later.
If the required number of votes is not obtained, the proposal is rejected.
Support for the new token market.
Support for the new token market.
Updating the oracle address.
Withdrawal of the cToken reserve.
Selection of new administrators.
To update the risk parameters of the Compound Finance system, such as the annual interest rate or collateral factor, Compound uses the Timelock mechanism. It changes the parameters with a time delay, guaranteeing protection: any attempts by intruders to interfere with the operation of the system can be tracked and prevented.
"Any proposal for the management of the system is published with a delay of at least two days. For suggestions regarding important updates, such as changing risk parameters, the delay may be 14 days. Timelock currently manages an address whose administrators are members of the Compound team."
"Any proposal for the management of the system is published with a delay of at least two days. For suggestions regarding important updates, such as changing risk parameters, the delay may be 14 days. Timelock currently manages an address whose administrators are members of the Compound team."
Thus, now the risk parameters of the platform are controlled by the company, although with a time delay. However, Compound, using smart contracts for control, may eventually open access to Timelock to a distributed committee of community members. This will give Compound Finance the opportunity to become a Decentralized Autonomous Organization (DAO), similar to MakerDAO.
The advantage of this style of voting is that the cadet can participate in the improvement
project by voting with your token. The downside of such a vote is that funds that have an overwhelming number of tokens can make any decision they want.
The advantage of this style of voting is that the cadet can participate in the improvement
project by voting with your token. The downside of such a vote is that funds that have an overwhelming number of tokens can make any decision they want.
The best solution would be to allow funds to vote, 1 \ 10 of their tokens, so that ordinary investors would have the opportunity to participate in the fate of the project.
Initially, Compound placed 4,229,949 COMP tokens into a specially created account, which the company calls Reservoir. For each Ethereum block generated in Compound, 0.5 COMP is transferred from the Reservoir account to the protocol — approximately 2,880 tokens per day.
These tokens are distributed among the Compound markets (PATH, USD, DAY, and so on) in proportion to the interest that was accrued on them. Within each market, lenders receive 50% of COMP tokens, and borrowers receive 50%.
Initially, Compound placed 4,229,949 COMP tokens into a specially created account, which the company calls Reservoir. For each Ethereum block generated in Compound, 0.5 COMP is transferred from the Reservoir account to the protocol — approximately 2,880 tokens per day.
These tokens are distributed among the Compound markets (PATH, USD, DAY, and so on) in proportion to the interest that was accrued on them. Within each market, lenders receive 50% of COMP tokens, and borrowers receive 50%.
Cryptocurrency Compound Rate (COMP)
At the time of writing, the Compound cryptocurrency is on the 78th line in the CoinMarketCap rating. The market capitalization is $ 1.68 billion, and the daily trading volume is $92 million.
At the time of writing, the Compound cryptocurrency is on the 78th line in the CoinMarketCap rating. The market capitalization is $ 1.68 billion, and the daily trading volume is $92 million.
A little bit about the risks in Compound. Liquidation.
Compound has a liquidation clause that comes into effect when borrowing on the platform. For example, if the cryptocurrency that an investor takes on credit increases in price and exceeds the cost of its collateral, the borrowing account becomes insolvent. In this case, other users can step in and repay part of the investor's outstanding loan in exchange for part of his collateral as a liquidation incentive. Such a liquidation incentive is a discount with which other users can receive the investor's collateral. Thus, if the liquidation incentive is 8% (can be changed by voting in the Compound management system), then other users can receive collateral at a market price of 8% so that they can help repay the investor's loan. Consequently, there are serious incentives for Compound users to liquidate others, and this leads to the fact that the person who has been liquidated may suffer huge losses.
The elimination of software in the DeFi-protocol Compound could be caused by the actions of a hacker
A hacker could have deceived the Compound oracle network, making it think that the value of the DAI stablecoin had really increased dramatically.
Over the past 24 hours, due to a jump in prices for DEFI stablecoins, the DeFi-protocol Compound has liquidated over $100 million of assets of users of its lending platform, according to data from the LoanScan service.
The elimination of software in the DeFi-protocol Compound could be caused by the actions of a hacker
A hacker could have deceived the Compound oracle network, making it think that the value of the DAI stablecoin had really increased dramatically.
Over the past 24 hours, due to a jump in prices for DEFI stablecoins, the DeFi-protocol Compound has liquidated over $100 million of assets of users of its lending platform, according to data from the LoanScan service.
Volume of liquidations in credit protocols
The decentralized Oracle Compound network uses price data obtained from the Coinbase Pro cryptocurrency exchange. When the value of DAI on this exchange rose to a 30 percent premium to the market, liquidation occurred, as the volume of loans exceeded the collateral threshold.
The number of affected users included the third largest holder of COMP management tokens — he lost about $46 million. Another major COMP holder lost about $17 million.
The decentralized Oracle Compound network uses price data obtained from the Coinbase Pro cryptocurrency exchange. When the value of DAI on this exchange rose to a 30 percent premium to the market, liquidation occurred, as the volume of loans exceeded the collateral threshold.
The number of affected users included the third largest holder of COMP management tokens — he lost about $46 million. Another major COMP holder lost about $17 million.
Compound is the third largest asset blocked for the needs of the project by the DeFi protocol. According to Delfi Pulse, about $1.55 billion is blocked in its smart contracts.
It is possible that the reason for the liquidation was the actions of an attacker who found a way to manipulate the price of DAI on Coinbase Pro. The hacker could have deceived the Compound oracles, making them think that the value of the stablecoin really rose to $1.3, although under normal conditions it is at the level of $1.
When the protocol received information about the increased cost of DAI, the algorithm decided that some loans were insufficiently secured and liquidated these positions.
As Svanevik explained, if a borrower took out a loan for $100 when DAI was worth $1, and then the price suddenly jumped to $1.3, then the amount of his debt in the "eyes" of the protocol proportionally increased to $130. If the amount of collateral is not enough to cover the loan, the loan will be liquidated.
It is possible that the reason for the liquidation was the actions of an attacker who found a way to manipulate the price of DAI on Coinbase Pro. The hacker could have deceived the Compound oracles, making them think that the value of the stablecoin really rose to $1.3, although under normal conditions it is at the level of $1.
When the protocol received information about the increased cost of DAI, the algorithm decided that some loans were insufficiently secured and liquidated these positions.
As Svanevik explained, if a borrower took out a loan for $100 when DAI was worth $1, and then the price suddenly jumped to $1.3, then the amount of his debt in the "eyes" of the protocol proportionally increased to $130. If the amount of collateral is not enough to cover the loan, the loan will be liquidated.
Advantages and disadvantages of the Compound protocol
The main advantage of Compound is that it is a reliable tool for passive earnings on renting out your crypto savings.
Another advantage is that the protocol is managed by smart contracts, which eliminates the interference of the human factor and ensures a high level of security of financial transactions.
It is also worth noting a well-thought-out system of automatic calculation of interest rates based on an analysis of the current market situation for each of the assets available in the service.
But the size of the bets is both a plus and a minus of Compound. For borrowers, 2-4% per annum on some assets are very favorable conditions. But for those who supply funds to the liquidity pool, the annual profitability will at best be 5-8%, which is a rather modest result for the world of cryptocurrencies.
In this regard, credit markets are significantly losing out to the currently popular staking. However, the possibility of free withdrawal of assets present in Compound can play a decisive role when choosing a tool for multiplying funds.
insurance payments are provided for reimbursement of users' funds in a critical situation.
Security
The Compound Finance platform, like all applications running on the basis of smart contracts, is at risk of hacking contracts by hackers, who thereby gain access to their contents — namely, the cryptocurrency locked in them.
However, work is continuously underway to improve the code and eliminate any vulnerabilities. The open source code of Compound is available to anyone who has technical knowledge and can evaluate it. The developers also offer rewards to those who can detect bugs or vulnerabilities.
Security audits (by Open Zeppelin, Trail of Bits) and official checks have been conducted repeatedly.
Thus, although nothing is 100% secure, Compound is one of the most reliable DeFi projects to date. Hundreds of millions of dollars are blocked in smart contracts. As of mid-2020, no security breaches have been noticed.
Additionally, insurance payments are provided for the reimbursement of users' funds in a critical situation.
cTokens, on which the Compound market system operates, are actively integrated into different
Popular DeFi products are Dharma, Uniswap, etc. These projects use them to give
participants have the opportunity to receive passive income in the markets calculated in stablecoins,
such as Day or USD.
Considering that many modern DeFi solutions use Compound smart contracts as an integral part of the product, we can conclude that this platform is a reliable, secure and convenient credit space. Now Compound and the COMP token are very profitable, since developers of many new applications are interested in the protocol, and the token is gaining popularity among cryptocurrencies. Many existing DeFi projects seek to follow the path of Compound in order to earn credibility and popularity — all that the protocol already has.
What is Compound used for? Getting percentages is the easiest use case, and the Compound user interface is very convenient for beginners. However, Compound is also used by more advanced traders to increase leverage on positions.
Suppose a trader has a long position on ETH and provides ETH to the Compound protocol. Then he borrows USDT for the provided ETH and buys even more ETH with them. If the price of ETH rises so much that it compensates for the interest paid for the loan, the trader makes a profit.
However, this comes with certain risks. If the price of ETH falls, the trader will still have to pay the borrowed amount with interest, and the ETH that he used as collateral can be liquidated.
What other risks can you face? Compound has been tested by companies such as Trail of Bits and OpenZeppelin. Although they are considered reputable audit firms, errors and vulnerabilities can occur in any software, which often leads to unexpected problems.
Before sending funds to a smart contract, it is necessary to take into account all possible risks. But, regardless of the type of financial product, never risk more than the amount you are willing to lose.
However, work is continuously underway to improve the code and eliminate any vulnerabilities. The open source code of Compound is available to anyone who has technical knowledge and can evaluate it. The developers also offer rewards to those who can detect bugs or vulnerabilities.
Security audits (by Open Zeppelin, Trail of Bits) and official checks have been conducted repeatedly.
Thus, although nothing is 100% secure, Compound is one of the most reliable DeFi projects to date. Hundreds of millions of dollars are blocked in smart contracts. As of mid-2020, no security breaches have been noticed.
Additionally, insurance payments are provided for the reimbursement of users' funds in a critical situation.
cTokens, on which the Compound market system operates, are actively integrated into different
Popular DeFi products are Dharma, Uniswap, etc. These projects use them to give
participants have the opportunity to receive passive income in the markets calculated in stablecoins,
such as Day or USD.
Considering that many modern DeFi solutions use Compound smart contracts as an integral part of the product, we can conclude that this platform is a reliable, secure and convenient credit space. Now Compound and the COMP token are very profitable, since developers of many new applications are interested in the protocol, and the token is gaining popularity among cryptocurrencies. Many existing DeFi projects seek to follow the path of Compound in order to earn credibility and popularity — all that the protocol already has.
What is Compound used for? Getting percentages is the easiest use case, and the Compound user interface is very convenient for beginners. However, Compound is also used by more advanced traders to increase leverage on positions.
Suppose a trader has a long position on ETH and provides ETH to the Compound protocol. Then he borrows USDT for the provided ETH and buys even more ETH with them. If the price of ETH rises so much that it compensates for the interest paid for the loan, the trader makes a profit.
However, this comes with certain risks. If the price of ETH falls, the trader will still have to pay the borrowed amount with interest, and the ETH that he used as collateral can be liquidated.
What other risks can you face? Compound has been tested by companies such as Trail of Bits and OpenZeppelin. Although they are considered reputable audit firms, errors and vulnerabilities can occur in any software, which often leads to unexpected problems.
Before sending funds to a smart contract, it is necessary to take into account all possible risks. But, regardless of the type of financial product, never risk more than the amount you are willing to lose.
DAO and Regulators
Another problem that may affect some DAOs is the handling of their tokens by global regulators. The U.S. Securities and Exchange Commission has taken several preliminary steps in an attempt to control the expanding cryptocurrency ecosystem. However, the DAO tokens had to be qualified as securities. Thus, their issuer — the DAO itself - had to be registered with the regulatory body.
Thus, the exact composition of the DAO affects the classification of management tokens in the SEC. If the SEC files a lawsuit, the legal classification of such a group will become an even more pressing issue. Issuers of tokens, previously regulated by the regulatory body as securities, received significant fines. As we mentioned earlier, not being a legal entity, DAO members themselves may be personally liable for similar fines.
An important advantage of the DAO compared to traditional company structures is their transparency. The code that the DAO runs on is open source, which means anyone can check how the group functions before participating.
In addition to the transparency of the structure itself, participants can be identified by the tokens they store in the chain, and voting takes place publicly. Combined with multi-signature treasury wallet implementations such as Gnosis, these factors reduce the likelihood of managerial corruption affecting DAO performance.
Managing the DAO is more natural. For example, the Ethereum Name Service is intended to be a public good for all Internet users, not a commercial enterprise. Given its distributed appeal, handing over control to platform users seems appropriate.
Thus, the exact composition of the DAO affects the classification of management tokens in the SEC. If the SEC files a lawsuit, the legal classification of such a group will become an even more pressing issue. Issuers of tokens, previously regulated by the regulatory body as securities, received significant fines. As we mentioned earlier, not being a legal entity, DAO members themselves may be personally liable for similar fines.
An important advantage of the DAO compared to traditional company structures is their transparency. The code that the DAO runs on is open source, which means anyone can check how the group functions before participating.
In addition to the transparency of the structure itself, participants can be identified by the tokens they store in the chain, and voting takes place publicly. Combined with multi-signature treasury wallet implementations such as Gnosis, these factors reduce the likelihood of managerial corruption affecting DAO performance.
Managing the DAO is more natural. For example, the Ethereum Name Service is intended to be a public good for all Internet users, not a commercial enterprise. Given its distributed appeal, handing over control to platform users seems appropriate.
How is Compound developing?
In August 2020, Compound joined the Global DeFi Alliance, an international consortium of centralized and decentralized financial service providers and platforms formed by the Huobi cryptocurrency exchange.
In August 2020, the project launched its own oracle of cryptocurrency prices as part of the transition to a price flow channel with free access to Open Price Feed.
The developers have also created an aggregator of information about the declared prices. The data is available directly from each publisher via their API.
In September 2020, the MakerDAO community voted to add COMP tokens as a new option to ensure the release of the DAI stablecoin.
Currently, Compound only works with coins of the Ethereum ecosystem. In the future, it is planned to support tokenized versions of real-world assets: the US dollar, the Japanese yen and Google shares.
On December 17, 2020, Compound presented a white paper with a detailed description of Compound Chain— a new protocol designed to ensure the interaction of assets from various blockchains.
Subsequently, Compound Chain was renamed Gateway. The testnet protocol was launched on March 1, 2021. The main network will be launched in the summer or near the end of 2021.
Gateway functions similarly to the Compound protocol on Ethereum. However, there are differences:
Gateway allows you to borrow and lend assets on any blockchain.
Interest is paid in dollars (stablecoins) via the Gateway CASH — native unit of account.
Gateway has a more effective risk assessment mechanism. It is based on the volatility of collateral and borrowed assets. This increases the capital efficiency of using less volatile coins.
Gateway is focused on cross-chain interaction, and its functionality resembles THORChain.
Gateway users can download supported assets from various independent blockchains using a system of linked peer-to-peer chains. Each chain has a Starport contract associated with it. It allows you to lock and unlock assets on Gateway.
In August 2020, the project launched its own oracle of cryptocurrency prices as part of the transition to a price flow channel with free access to Open Price Feed.
The developers have also created an aggregator of information about the declared prices. The data is available directly from each publisher via their API.
In September 2020, the MakerDAO community voted to add COMP tokens as a new option to ensure the release of the DAI stablecoin.
Currently, Compound only works with coins of the Ethereum ecosystem. In the future, it is planned to support tokenized versions of real-world assets: the US dollar, the Japanese yen and Google shares.
On December 17, 2020, Compound presented a white paper with a detailed description of Compound Chain— a new protocol designed to ensure the interaction of assets from various blockchains.
Subsequently, Compound Chain was renamed Gateway. The testnet protocol was launched on March 1, 2021. The main network will be launched in the summer or near the end of 2021.
Gateway functions similarly to the Compound protocol on Ethereum. However, there are differences:
Gateway allows you to borrow and lend assets on any blockchain.
Interest is paid in dollars (stablecoins) via the Gateway CASH — native unit of account.
Gateway has a more effective risk assessment mechanism. It is based on the volatility of collateral and borrowed assets. This increases the capital efficiency of using less volatile coins.
Gateway is focused on cross-chain interaction, and its functionality resembles THORChain.
Gateway users can download supported assets from various independent blockchains using a system of linked peer-to-peer chains. Each chain has a Starport contract associated with it. It allows you to lock and unlock assets on Gateway.
After uploading to Gateway, users can deposit and borrow assets of various blockchains. For example, you can borrow Ethereum tokens using Solana as collateral, or borrow Celo assets using Polkadot assets, etc.
Gateway is designed to give blockchains the opportunity to interact directly, without wrapping tokens.
For example, to wrap bitcoins (WBTC), DeFi users are forced to turn to intermediaries in the person of BitGo or Ren. Because of this, they weaken control over their private keys. Gateway offers a solution that allows bitcoin holders to interact with other blockchains without resorting to the services of third parties.
Switching to Gateway will allow Compound users to avoid high Ethereum fees.
CASH is the Gateway native unit of account. It is used to pay transaction fees. Similar to MakerDAO's Dai stablecoin, this token is created through a loan. The amount of CASH in circulation is equal to the number of coins borrowed.
It is assumed that initially CASH will correspond to one US dollar. Subsequently, this parameter can change the community by a collective decision. CASH could potentially become a competitor to DAI and USDC.
All users and validators who own CASH tokens receive income that increases based on the interest rate index. This happens whenever the user/validator generates, repays, borrows, returns or liquidates CASH.
Gateway uses the Proof-of-Authority (POA) algorithm. The network is managed by trusted validators. Consensus is achievable even if one third of the nodes violates the rules. The block is finalized when at least two-thirds of the nodes agree to add the block to the chain. Borrowers pay validators a percentage for each block that they confirm. Validators also receive a commission for the transfer of assets.
The Proof-of-Authority model allows banks and centralized crypto exchanges to become Gateway validators.
COMP token holders will manage Gateway within the framework of the Compound Governance system on Ethereum.
At first, Gateway will be primarily an interest income market based on interconnected blockchains. Over time, other dapps may integrate with this system — for example, decentralized exchanges.
On June 28, 2021, Compound Treasury, a new company under the auspices of Compound Labs, began operating. Compound Treasury enables non-banks and other fintech companies to convert US dollars into USDC stablecoin. USDC tokens will be used in Compound at a guaranteed interest rate of 4%. This is much more than what companies can receive within the framework of traditional bank savings accounts (0.55%-0.7% per annum).
Gateway is designed to give blockchains the opportunity to interact directly, without wrapping tokens.
For example, to wrap bitcoins (WBTC), DeFi users are forced to turn to intermediaries in the person of BitGo or Ren. Because of this, they weaken control over their private keys. Gateway offers a solution that allows bitcoin holders to interact with other blockchains without resorting to the services of third parties.
Switching to Gateway will allow Compound users to avoid high Ethereum fees.
CASH is the Gateway native unit of account. It is used to pay transaction fees. Similar to MakerDAO's Dai stablecoin, this token is created through a loan. The amount of CASH in circulation is equal to the number of coins borrowed.
It is assumed that initially CASH will correspond to one US dollar. Subsequently, this parameter can change the community by a collective decision. CASH could potentially become a competitor to DAI and USDC.
All users and validators who own CASH tokens receive income that increases based on the interest rate index. This happens whenever the user/validator generates, repays, borrows, returns or liquidates CASH.
Gateway uses the Proof-of-Authority (POA) algorithm. The network is managed by trusted validators. Consensus is achievable even if one third of the nodes violates the rules. The block is finalized when at least two-thirds of the nodes agree to add the block to the chain. Borrowers pay validators a percentage for each block that they confirm. Validators also receive a commission for the transfer of assets.
The Proof-of-Authority model allows banks and centralized crypto exchanges to become Gateway validators.
COMP token holders will manage Gateway within the framework of the Compound Governance system on Ethereum.
At first, Gateway will be primarily an interest income market based on interconnected blockchains. Over time, other dapps may integrate with this system — for example, decentralized exchanges.
On June 28, 2021, Compound Treasury, a new company under the auspices of Compound Labs, began operating. Compound Treasury enables non-banks and other fintech companies to convert US dollars into USDC stablecoin. USDC tokens will be used in Compound at a guaranteed interest rate of 4%. This is much more than what companies can receive within the framework of traditional bank savings accounts (0.55%-0.7% per annum).
Compound Future
Compound is one of the most popular solutions for lending and borrowing in DeFi. Since many other products integrate smart contracts into their applications, Compound is also an integral part of the DeFi ecosystem.
When management becomes fully decentralized, Compound will be able to gain a foothold in DeFi as one of the main money market protocols.
When management becomes fully decentralized, Compound will be able to gain a foothold in DeFi as one of the main money market protocols.
The cryptocurrency Compound seems to be very promising and in demand. Compound Labs has already surpassed the former leader Maker DAO, and the total amount of funds blocked in DeFi applications has exceeded $1,500,000,000.
Security and ease of use will be the main drivers of the rise of DeFi and the growth of trading volumes on DEX. If you have free funds in cryptocurrency, then why not use them to earn money. And the Compound project serves just that purpose.
In the end, it seems that Compound is one of the rare and recent examples of a fully functioning DeFi project on a par with RenVM from Ren, which allows for decentralized, secure and private cryptocurrency exchanges between blockchains.
cTokens, on which the Compound market system operates, are actively integrated into various popular DeFi products - Dharma, Uniswap, etc. These projects use them to give participants the opportunity to receive passive income in markets with settlement in stablecoins, such as Dai or USDC.
Considering that many modern DeFi solutions use Compound smart contracts as an integral part of the product, we can conclude that this platform is a reliable, secure and convenient credit space.
Unlike traditional corporate governance structures, DAOs seek to provide control to the people most interested in a blockchain-based project. This democratization of leadership is certainly a laudable goal and gives many voices the opportunity to put forward ideas about future development.
Eco can take all the positive experience of COMPOUND in terms of token management and voting. This is a powerful tool for attracting new investors. Eco can also take the structure of lending, but also attract the real sector of the economy, food, industrial, and other industries to redit. To do this, you must first independently assess the value of the company's assets and allocate tokens to the company in dollar terms at the current exchange rate at the asset value
Also, Eco needs to support and develop the community in Discord and cooperate with other projects so that the audience is exchanged and it grows. The eco community is much more active and cohesive than in COMPOUND. This is a strong side of Eco,
which is developed with time and effort.
Security and ease of use will be the main drivers of the rise of DeFi and the growth of trading volumes on DEX. If you have free funds in cryptocurrency, then why not use them to earn money. And the Compound project serves just that purpose.
In the end, it seems that Compound is one of the rare and recent examples of a fully functioning DeFi project on a par with RenVM from Ren, which allows for decentralized, secure and private cryptocurrency exchanges between blockchains.
cTokens, on which the Compound market system operates, are actively integrated into various popular DeFi products - Dharma, Uniswap, etc. These projects use them to give participants the opportunity to receive passive income in markets with settlement in stablecoins, such as Dai or USDC.
Considering that many modern DeFi solutions use Compound smart contracts as an integral part of the product, we can conclude that this platform is a reliable, secure and convenient credit space.
Unlike traditional corporate governance structures, DAOs seek to provide control to the people most interested in a blockchain-based project. This democratization of leadership is certainly a laudable goal and gives many voices the opportunity to put forward ideas about future development.
Eco can take all the positive experience of COMPOUND in terms of token management and voting. This is a powerful tool for attracting new investors. Eco can also take the structure of lending, but also attract the real sector of the economy, food, industrial, and other industries to redit. To do this, you must first independently assess the value of the company's assets and allocate tokens to the company in dollar terms at the current exchange rate at the asset value
Also, Eco needs to support and develop the community in Discord and cooperate with other projects so that the audience is exchanged and it grows. The eco community is much more active and cohesive than in COMPOUND. This is a strong side of Eco,
which is developed with time and effort.
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