Compound (COMP) is an Ethereum token that enables community governance of the Compound protocol. The protocol is a series of decentralized interest rate markets that allow users to supply and borrow Ethereum tokens at variable interest rates. COMP token holders and their delegates can also debate, propose, and vote on changes to the protocol.
What Is Compound Coin (COMP)?
Compound (COMP) is an Ethereum-based token that allows the community to govern the Compound protocol. The protocol consists of a series of decentralized interest rate markets that enable users to supply and borrow Ethereum tokens at variable interest rates.
To begin with, the primary users of the platform consist of:
Lenders: Lenders are users (could be anybody) who want to lend a cryptocurrency on the Compound platform. The lenders can do so by sending their tokens to an Ethereum address managed by Compound in order to generate interest.
Borrowers: Borrowers are users (could be anybody) who share cryptocurrency collateral on the Compound platform. They are permitted to borrow cryptocurrencies supported by Compound at a percentage of the posted value.
As per the whitepaper, asset suppliers (and borrowers) interact directly with the protocol, earning and paying a floating interest rate without needing to negotiate terms like maturity, interest rate, or collateral with a peer or counterparty.
Moreover, the platform has two types of tokens—COMP and cToken.
Each asset supported by the Compound protocol is integrated through a cToken contract.
By minting cTokens, users can earn interest via the cToken's exchange rate, thereby increasing the value of the underlying asset, and users can also gain the ability to employ cTokens as collateral.
Using cTokens is the primary method of communicating with the Compound protocol. The cToken contract is used when a user mints, redeems, borrows, repays a borrow, liquidates a borrow, or transfers cTokens on the Compound protocol.
cToken has two types of its own: CErc20 and CEther. Both these types employ the EIP-20 interface. However, CErc20 includes an underlying ERC-20 asset, while CEther includes Ether only. EIP-20 is an interface that enables any tokens on Ethereum to be reused by other applications (from wallets to decentralized exchanges). A cToken contract integrates each asset that is supported by the Compound protocol. As such, the core functions that involve transferring an asset into the protocol have slightly different interfaces depending on the type.
COMP is an ERC-20 token that gives its owner the ability to delegate voting rights to any address, including their own. The delegate's voting rights are automatically adjusted when the owner's token balance changes. The Compound protocol uses three distinct components: the COMP token, governance module, and Timelock. These contracts, when combined, enable the community to propose, vote on, and implement changes via the administrative functions of a cToken. Proposals can change system parameters, support new markets, or add entirely new protocol functionality.
COMP token holders have the authority to delegate their voting rights to themselves or another address of their choice. Governance proposals can be created by addresses that have been delegated at least 65,000 COMP. 100 COMP need to be locked to create one autonomous proposal. Accordingly, the autonomous proposal evolves into a governance proposal after being delegated (handed) 65,000 COMP.
When a governance proposal is drafted, it goes through a two-day review period, after which voting weights are recorded and voting begins. Voting lasts three days. Further, if a proposal gets a majority and at least 400,000 votes, the proposal gets queued in the Timelock and can be effected two days later. Any protocol change takes at least one week.
History of Compound Coin (COMP)
Compound Labs was founded in August 2017 by Geoffrey Hayes and Robert Leshner. The company has its headquarters in San Francisco, California, USA. The whitepaper for the Compound protocol was published in February 2019 and authored by Robert Leshner and Geoffrey Hayes.
Geoffrey Hayes is the CTO. Torrey Atcitty is the application lead, and Calvin Liu is the strategy lead. Further, the team has four senior engineers: Antonina Norair, Zachary Skolnik, Jared Flatow, and Coburn.
In 2018 Compound raised $8.2 million in funding from notable venture capital firms Andreessen Horowitz and Bain Capital Ventures, the venture-capital arm of the consulting firm Bain. Compound raised an additional $25 million in 2019 from many of the same investors, along with new participants like Paradigm Capital, a fund started by a cofounder of Coinbase.
How Are New Compound Coins Created?
COMP tokens are not minable—only the Compound Labs team issues new COMP tokens. Every day, 2800 new coins are issued. These newly issued tokens are then distributed equally amongst borrowers and lenders. 50% of tokens are issued to borrowers, which helps decrease their loan amount. The remaining 50% of tokens are issued to lenders.
How Many Compound Coins Are There?
The total supply of Compound coins is 10 million.
How to Buy Compound Coins
Compound coins can be purchased and traded on Coinbase.