Altcoins: Compound (COMP) - What Is It? - A Deeper Look Into the Compound (COMP) Platform
Aa
Share
Summary:
- What is The Compound Platform and how does it work?
- Advantages of the Compound exchange.
- Compound’s past, present and future price positions.
Read next: Altcoins: Balancer (BAL) - What Is It? - A Deeper Look Into the Balancer (BAL) Platform
The Compound Platform
Compound is an algorithmic, autonomous interest rate protocol that is built for developers, to unlock a universe of open financial applications. Compound is a decentralised finance (DeFi) lending protocol, the protocol allows its users to earn interest on their cryptocurrencies through depositing them into one of the many pools that are supported on the platform.
Compound's native token is COMP, the current total market capitalization of the crypto currency is more than $385 million, there is a maximum supply of 10 million tokens and 7,157,897.96 COMP tokens are currently in circulation.
When a platform user deposits tokens into one of the Compound pools, they receive c”Tokens” in return and these represent the users stake in the pool and can be used to redeem the underlying crypto that was initially deposited into the pool at any time. The idea is that over time the exchange rate for these underlying assets to the cTokens increases, thus users redeem their cTokens for more than the value they deposited them at - this is how the interest is distributed.
In addition, the opposite is also possible, users who wish to borrow can take a loan from a Compound pool of their choice by depositing collateral. The Loan-To-Value (LTV) ratio varies, however currently ranges between 50-75%. The interest rate paid is borrowed asset dependent and borrowers may face automatic liquidation if their collateral falls below a specific maintenance threshold.
The Compound platform is secured through smart contracts automatically, which mint cTokens after Ethereum and ERC20 tokens are deposited. In addition, the protocol ensures that there is collateralization for all assets that are supported by the platform, thus ensuring each pool is overcollateralized at all times.
The Compound Platform works through the use of Yield farming, Compound lending pools, Interest, decentralised governance, use of COMP, and cTokens.
How is Compound unique?
Compound does not wish to be yet another cryptocurrency protocol that does nothing for their holders, instead, through their open platform, they allow any users who deposit Ethereum supported tokens to earn interest easily or take out secured loans.
Compound’s community governance separates it from some of its similar protocols, COMP holders have the chance and right to propose protocol changes, implement and vote on changes that are suggested by other holders - the Compound team does not interfere.
COMP tokens are available for purchase from third-party exchanges, or can be earned through interaction with the Compound protocol.
Advantages of the Compound platform
- Compound allows regular users to secure passive income.
- Compound has the ability to use Bitcoin in DeFi environments, this is possible through the platform's introduction of Wrapped Bitcoins (WBTC) which are ERC-20 representation of locked Bitcoin.
- Compound leverages smart contracts that are audited, which successfully completes desired tasks autonomously. The contracts on the network take care of all the network's vital functions.
- The Compound platform is secure through many means, it has gone through audits from reputable agencies.
- The Compound platform meets the general DeFi consensus and interoperability. The network is open to the integration of third-party assets and platforms.
Past, present and future prices of The Compound network (COMP)
Since the launch of the Compound mainnet during September 2018, the platform has skyrocketed in terms of popularity and passed $800 million in total locked value recently. The price of the COMP token did not see much change overall, during 2021 however, the price jumped and fell, reaching a maximum overall price of $803.99 during April. Since then the price has staggered in both the upward and downward directions, the crypto has seen much volatility, which is a normal trend for the volatile nature of the crypto market.
Over the past few months, the global markets have been facing strong investor risk-off sentiment in the wake of the geopolitical tensions, Covid-19 lockdowns in China and supply chain issues. The cryptocurrency market has followed the trends of the greater market during these times, therefore the price of most cryptocurrencies have been falling, COMP does fall under this category.
According to some analysts, the future price of The Compound network (COMP) could reach up to $250 by 2025 and could see a price of more than $1977 by 2030. However, it is important to remember that this future price prediction is based solely on data and does not take into account factors such as investor sentiment and the ever changing market conditions, both of which make it difficult to make accurate future price predictions.
COMP Price Chart
Sources: finance.yahoo.com, coinmarketcap.com, compound.finance, securities.io, priceprediction.net
