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Compound Finance is a cryptocurrency lending platform. Users can borrow at any time as long as they have assets in an Ethereum-based cryptocurrency wallet. Compound is a DeFi protocol like Uniswap. Therefore, no third party trust is required when the user makes a loan. In addition to lending, users can deposit assets for DeFi protocol operation and farm interest.
Compound Finance is a cryptocurrency lending platform operated by the DeFi protocol. The platform has automated asset management with smart contracts. Anyone can access the compound through an Ethereum-based cryptocurrency wallet (third party) and make a loan or interest farm. A protocol that does not require third-party trust. Therefore, compound finance does not require complicated procedures unlike traditional finance. Using assets deposited in smart contracts called MMFs (Money Market Funds), users can make loans whenever they want. Compound's interest rate is automatically adjusted according to the algorithm of the DeFi protocol. At this time, compound ecosystem token COMP holders can adjust the interest rate through governance voting. When depositing tokens in the MMF, the provider receives COMP of the same value as the deposited tokens. All transactions are recorded on the Ethereum blockchain. Each time a block is created, interest is compounded and accumulated. Compound Finance encourages liquidity in the DeFi ecosystem, so users can withdraw their assets from MMF at any time they want.
Compound utilizes an Oracle system to receive price feeds from CEX. For smart contract operation, Oracle provides various data to the blockchain network in an API way. An oracle that pulls external data is essential for smart contracts that require a variety of data. A typical Oracle project is Chainlink. Compound is also receiving an on-chain cryptocurrency price feed from Chainlink's Oracle. DeFi DApps that rely on Chainlink include Compound, Ave, Synthetic, etc.
Policies for compound finance operation such as interest rate model establishment, cToken listing, oracle update, manager selection, etc. are decided through governance voting. The influence on governance is determined by the amount of governance token COMP holding. COMP holders can exercise influence through voting in governance. COMP can be obtained by supplying liquidity to MMFs or by buying on exchanges.
ERC-20 based tokens can be borrowed using Ethereum as collateral.
Editor YB(Gate.io Korea, Marketing Agent)'s Comments
Compound Finance builds a platform where anyone can borrow whenever they want, and there is no regulation of traditional finance. With these advantages, the growth of the cryptocurrency lending platform is expected even more. Gate.io also provides services for Cryptocurrency Borrowing and Yield Farming.