Compound Finance is a decentralized service that allows users to lend and borrow crypto assets. Most investors look to buy and store their crypto assets safely in a wallet or on an exchange without earning any interest in the sense that a traditional bank or savings account would. However, Compound Finance is on a mission to change that.
Compound Finance allows users to easily earn interest on their Ethereum, Dai, BAT etc. As well as lending you can also use your assets as collateral and borrow against your crypto. Allowing both lenders and borrowers to get more out of their cryptocurrency. In this tutorial, I will show you how to get started and this can all be done within a few minutes and without the headaches or rules of traditional banks.
Who Are Compound Finance?
Compound Finance are a San Francisco based company who have the backing of some very prominent investors such as the lieks of Polychain Capital, Bain Capital and Coinbase who have also recently annouced the support for the governance token COMP.
What are COMP Tokens?
The COMP ERC20 token is given to lenders and borrowers to incentivise them to participate in the different markets across the compound protocol.
Every day 2,880 COMP tokens are distributed to lenders, suppliers and borrowers and this is done proportionally to how much interest is being paid to each market. With the majority being paid to whichever has the most interest.
COMP tokens can be collected and withdrawn or exchanged on the likes of Uniswap. Or you can use them to vote on proposals for the Compound protocol. Which you can vote for manually or you can delegate this out to another user if you wish.
The COMP price has rocketed recently which may be due to Coinbase announcing their support.
What Are Compound Finance Rates?
Lending rates with Compound Finance are variable and not fixed and will depend on the market conditions at the time. However, below is a list of current rates for lending and borrowing.
What Tokens Are Available with Compound Finance?
Users can lend and borrow popular cryptocurrencies which currently include; Tether (USDT), USD Con (USDC), Ether (ETH), Basic Attention Token (BAT), 0x (ZRX), DAI (DAI), Wrapped BTC (WBTC), Augor (REP) and Sai (SAI).
Compound Finance Loans
Many Compound Finance users fixate on the high-interest rates that can be achieved for lenders. However, taking out a loan is an easy process too. All you need is some crypto to deposit as collateral and because it’s decentralised there are no credit checks, income statements, or delays.
You can use the assets that you currently have as collateral to take out Compound Finance loans. However, please do be careful, as there is a liquidation clause. So don’t ever over-borrow.