Compound Price (COMP)

Compound (COMP) is a decentralized finance (DeFi) protocol and cryptocurrency that operates on the Compound blockchain. It was created to enable users to lend and borrow crypto assets in a permissionless and transparent manner. Compound provides an alternative solution for individuals and institutions to earn interest on their cryptocurrencies, and borrow assets against collateral.

COMP is the native token of the Compound blockchain, playing a vital role within the Compound ecosystem. It serves as a governance token, with voting rights allowing holders to participate in the decision-making process regarding protocol upgrades, parameter adjustments, and the introduction of new features. COMP holders can propose and vote on changes to the protocol, making it a more decentralized and community-driven platform.

The protocol is designed to continuously distribute tokens to participants over time. This ongoing distribution is based on the amount of activity and usage of the protocol. The more one interacts with Compound through lending, borrowing, using money markets, or participating in governance, the more COMP tokens they can earn.

Compound supports a variety of cryptocurrencies, including popular tokens like Compound (COMP), Wrapped Bitcoin (WBTC), and Dai (DAI), among others. Users can deposit their assets into the Compound protocol, which then allows others to borrow those assets against collateral. In return, lenders cam earn interest on their deposits, which is accrued in real-time.

Since its launch in 2018, Compound has gained significant attention and popularity within the DeFi ecosystem. Its approach to lending and borrowing has attracted a wide range of users, from individual investors to institutions.

Compound price history

2020

COMP was launched in June 2020. The price of Compound started at $78.58, briefly passed the $300-mark in late June, before ending the year at around $140. The COMP token price increased significantly in 2020 due to the growing popularity of DeFi.

Further, the Compound platform had already been up and running since 2018 – it wasn't until 2020 that the native token was launched – so the project had already proven over time that it wasn't a bust.

2021

The COMP price continued to increase in 2021, reaching an all-time high of $911 in May.

The price of COMP increased in 2021 due to Compound’s position in the growing DeFi ecosystem and the overall crypto bull market.

2022

The COMP price hit its lowest price in years at $26.52 in June 2022. COMP experienced a slight rebound in September, hitting a peak of $63.59 before ending the year at $31.19.

The reason for the price drop of the COMP token is primarily because of the overall bear market. Poor price recovery for COMP could be attributed to the failure of similar borrow-lending protocols and the FUD surrounding them.

2023

COMP experienced several price swings in 2023, starting the year at $31.58 before instantly running up to several peaks at around $57 per token. COMP displayed even greater resilience in July, when it surged up to $77.37, its highest price paid per token since May 2022. 

How does Compound work? 

At its core, the Compound network operates through smart contracts that automate the lending and borrowing process. Users can interact with the protocol by depositing supported tokens into the Compound ecosystem. These assets include popular cryptocurrencies like Compound (COMP), USD Coin (USDC), Ethereum (ETH), Polygon (MATIC), and more.

Once a user deposits an asset, they receive an equivalent amount of cTokens (e.g., cCOMP, cWBTC, cDAI) in return. These cTokens represent the user's balance and are used to track the amount of the deposited asset and the accrued interest over time. The interest accrual starts immediately, and Compound users can always view their growing balance of cTokens.

cTokens can be used to access liquidity on the Compound platform. This means that you can use them to borrow other assets, or to trade them for other tokens.

The interest rates for lending and borrowing assets on Compound are algorithmically determined based on supply and demand dynamics.

When more users borrow a particular asset, the interest rate for supplying that asset increases, incentivizing lenders to deposit and earn interest. On the other hand, if borrowing demand decreases, the interest rate decreases as well. This mechanism ensures that a floating interest rate attempts to remain efficient and reflective of market conditions.

Who are the founders of Compound?

Compound was founded by Robert Leshner and Geoffrey Hayes.

Robert Leshner is an experienced entrepreneur, investor, and the co-founder and CEO of Compound. He has a background in finance and previously worked as a portfolio manager at two prominent hedge funds.

Geoffrey Hayes is a software engineer with expertise in blockchain technology, and is the co-founder and CTO of Compound.

What is Compound used for?

Compound is primarily used for lending and borrowing cryptocurrencies. Users can deposit supported assets into the Compound ecosystem to earn interest in return, which is calculated based on a system of algorithmic rates. Additionally, users can withdraw their funds at any time with no penalty or fees.

Compound is also used as a decentralized exchange (DEX), allowing users to trade cTokens for other supported tokens. This allows anyone to access liquidity on the Compound platform.

What makes Compound unique?

One of the key features of Compound is the algorithmic interest rate model. The interest rates for lending and borrowing assets on the platform are determined by supply and demand dynamics. 

As more users borrow a specific asset, the interest rate increases, incentivizing lenders to supply more of that asset. Conversely, if the borrowing demand decreases, the interest rate decreases as well. This mechanism ensures that interest rates remain efficient and reflective of market conditions.

Additionally, Compound has a liquidation mechanism to mitigate the risk of default on borrowed assets. If the value of the collateral falls below a certain threshold, anyone can liquidate the collateral to repay the loan and receive a reward in COMP tokens. This mechanism helps to ensure the stability and security of the protocol.

How can I mine or stake Compound (COMP)?

Compound does not use a traditional mining or staking mechanism like some other cryptocurrencies. Instead, users can participate in the Compound ecosystem by lending or borrowing assets on the Compound network, earning or paying interest, respectively.

To earn interest on your assets, you can lend supported assets to the Compound protocol. By supplying assets to the protocol, you receive cTokens in return, which represent your balance and accrue interest over time. The earned interest is automatically reflected in your growing cToken balance.