fox.exchange proudly announces the listing of Compound (COMP), which is an ERC-20 token used to govern the Compound Protocol.
The Compound Protocol is an algorithm that creates an autonomous and seamlessly functioning money market for Ethereum assets.
Through the Compound Protocol, developers can borrow Ethereum tokens to purchase computing power on the Golem Network for their dApp projects. Traders can also borrow the tokens and short them on an exchange or re-lend for a profit. The protocol also allows investors to supply tokens to a money market and earn interest.
All this is achieved based on a decentralized model that bypasses middlemen.
About the COMP token
Compound recently achieved one of its most important milestones and expanded the governance of the Compound Protocol with an upgrade that replaced the administrative capacity of Compound’s core team with that of the community.
As the distribution of the COMP token progresses, users holding the COMP token are now able to steer the future of the Compound Protocol. Overall, COMP token holders and their delegates can propose changes to the protocol, choose delegates for debates, propose changes, vote and participate in the governance of the network.
Privileges of holding COMP
With a reservoir contract holding over 4 million COMP tokens, 2,800 COMP tokens will be sent to the protocol daily.
COMP tokens will be sent to each money market on Compound based on the interest being accrued in the market. This means that the allocation of COMP will evolve as the market conditions change.
Also, each user gets to receive COMP tokens proportionate to their collateral balance and this is separate from the interest rate in the market.
Apart from voting and choosing delegates, the COMP token enables the administrator of the protocol the following rights:
- The ability to update the oracle address
- The listing of new money markets
- The power to update the interest rate model of a market
- The admin can also withdraw or reserve collateral in a money market
How the Compound Protocol works
As mentioned earlier, the Compound Protocol is an algorithmic money market that enables users to earn interest or borrow assets against collateral. To create collateral, users can deposit their Ethereum tokens on the Compound liquidity pool and immediately start earning interest.
In addition to the COMP token, the Compound Protocol uses the cToken to represent a user’s collateral balance.
As cTokens represent assets supplied to a particular money market, increased demand on particular market results in an increase in the interest accrued.
Compound Protocol users can borrow up to 75% of their cToken value. Furthermore, users get to earn COMP with every transaction where a user is supplying an asset or transferring a cToken.
Unlike margin trades that lock up a user’s collateral, the Compound Protocol allows users to add or remove funds to the liquidity pool at any time based on the quality of their underlying assets.
However, if the debt becomes under-collateralized, the user can liquidate the collateral with a 5% discount.
Algorithmically derived interest rates
The Compound Protocol is transforming crypto’s money market by introducing a trustless borrowing market where asset suppliers and borrowers interact directly and interest is generated algorithmically without negotiations about maturity, collateral, or interest rates.
Users, therefore, get to borrow from the protocol using their cTokens and since there are no terms to generate, each transaction is frictionless, instant, and predictable.
What’s more, each transaction is transparent on a public ledger where generated interest rates are published down to the first block.
Unlike an exchange or a peer-to-peer platform that matches orders from a lender to a borrower, Compound Protocol creates a freely interchangeable resource out of every user’s collateral and uses that to determine interest rates.
As a result of this approach, Compound Protocol generates more liquidity.
A sophisticate blockchain-based money market
Cryptocurrencies are paving the way for the future of finance.
We are proud to be part of this new wave of financing in the crypto world with the listing of the cToken from Compound Finance. Now, our users can seamlessly borrow and earn interest anywhere in the Ethereum ecosystem.
By removing the barriers to entry that characterize most platforms that offer crypto borrowing, Compound, through their Compound Protocol is enabling developers, traders, and investors to get access to money markets for the advancement of the Ethereum ecosystem.
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