Let’s find out What is Compound Crypto and How to Use Compound (COMP) Governance tokens. The evolution of blockchain and cryptocurrencies has created a completely new ecosystem with many investors traders and enthusiasts decentralized finance offers finance instruments similar to the ones available in a bank.
But allowing borrowers to take out loans and lenders to provide loans by locking their crypto assets side should be developed.
Imagine that instead of depositing your money into the bank you are sending your crypto to the decentralized network.
And just like lending to a bank you immediately begin to earn interest on your crypto. The interest you earn is denominated in the same token that you lent.
Meaning if you sent Tether you earn interest in Tether. Today we will investigate such a protocol primarily concerned with the financial services of borrowing and lending your crypto compound protocol Antoni from kk technologies to understand the compound protocol.
HOW TO USE COMPOUND (COMP) GOVERNANCE TOKEN – WHAT IS COMPOUND CRYPTO? EXPLAINED:
Well, let’s discover this autonomous interest rate protocol built for developers to unlock a universe of open financial applications.
Like most decentralized finance protocols compound is a system of openly accessible smart contracts built on Ethereum.
The system works like this when a user locks in funds on the lending side of the compound protocol they receive C tokens or digital assets representing the amount that they have deposited.
Examples of C tokens include CFC bad and c die c tokens are ERC-20 tokens built using the Ethereum blockchain protocol.
WHAT IS COMPOUND CRYPTO?
There are different compound tokens for each crypto on the compound this entire process is automatic and handled by the compound code.
Meaning lenders can withdraw deposits at any time owners of the tokens can transfer trade or use them on other dapps.
The tokens will continue to earn interest on the compound protocol while they are being used throughout the defy ecosystem.
Locking up USDC in the protocol generates cusd tokens.
Which automatically earns interest for you at any time you can redeem your cusdc for normal usdc.
Plus interest paid in usdc interest rates is calculated by the supply and demand of each crypto asset.
In addition to earning interest on your crypto assets compound allows you to borrow additional crypto assets through C tokens generated each time a user deposits their crypto assets into the compound protocol.
Both lenders and borrowers on compound deal directly with the protocol itself which sets the interest rate algorithmically and without any need for users to negotiate terms.
Non-technical users can interact with the compound protocol using an interface like an argent coin base wallet or app.
Compound finance developers can create their own applications that interact with compound smart contracts when it comes to the governance of compound.
It is being slowly decentralized and it is all thanks to the comp tokens these tokens entitle the users who hold these tokens to governance rights and fees over the protocol compound.
Connects lenders and borrowers using a combination of smart contracts running on Ethereum and incentives paid in cryptocurrency.
Lending Anyone wishing to lend a cryptocurrency on a compound can send their tokens to an Ethereum address controlled by a compound to earn interest also referred to as locking sending or depositing.
This is similar to depositing fiat currency into a savings account that starts earning interest immediately after borrowing.
ANOTHER COMP FEATURE:
The other main feature of the compound protocol is the ability to borrow against deposited and locked funds.
Anyone who posts collateral on a compound in the form of a cryptocurrency they are allowed to borrow cryptocurrencies supported by a compound at a percentage of the posted value.
The amount a user can borrow depends on how much they deposit and each cryptocurrency has different rates.
Like many defy projects compound also operates on the principle of over-collateralization.
This means that users who want to borrow have to have collateral that is more than what they want to borrow that way the lender in the system is exposed to zero risk.
To sum up the compound and define more broadly wants to help people have more access and control over the money they earn and save the aim of compound finance is to be fully decentralized over time and transfer authority of the underlying protocol to the decentralized autonomous organization governed by the compound community.
Cryptocurrencies are also highly volatile so your cash can go down as well as up in the blink of an eye as always you should never invest in something you don’t understand.
What are your thoughts about compound protocol would you use or invest in it let me know in the comment section below thanks. And don’t forget to follow us on Facebook.