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What is Compound (COMP)

Compound (COMP) is a version of software running on Ethereum and connected to a distributed network of computers within a traditional money market. It is one of the latest decentralised finance (DeFi) protocols and uses multiple crypto assets to enable a process of borrowing and lending without using a financial intermediary such as a bank.

Compound users can deposit cryptocurrency into lending pools that borrowers can access. Those lenders will then earn interest on the currency that they deposited.

As soon as they make a deposit, Compound will create a cToken to represent the deposit in the eyes of the lender. Each of these tokens can be traded or transferred without issue, but it can only be redeemed for the particular cryptocurrency within the initial protocol. All this takes place in the background automatically and is regulated by the Compound code, so lenders are able to access the deposit at any time.

Origins of Compound

Compound was originally set up by Geoffrey Hayes and Robert Leshner in 2018 and raised initial capital funding of more than US$8 million from venture capital firms such as Bain Capital Ventures. The entrepreneurs raised an additional sum of 25 million USD the following year from the same sources and other major investors.

Compound in action

Compound initiates a sequence of smart “contracts” that run on Ethereum and enable collaboration between lenders and borrowers.

Lenders can lend the cryptocurrency through Compound by sending tokens to an Ethereum address within the network and, in doing so, will earn interest. Borrowers need to post collateral through Compound in cryptocurrency form. They can then borrow other cryptocurrencies supported by Compound.

Developing the Compound token

While the original founder initially held the project tightly, with absolute control over its operation, this changed a couple of years ago when Compound decided to move towards community governance instead. This is why they created the COMP token and gave the holders of each token the power to vote in all matters related to how Compound should be developed.

The shareholders (COMPOUND Labs) still own around a quarter of all the Compound tokens and distribution, with a further allocation held by the founders. The rest are distributed within the protocol, giving the community power and rewards. The aim is to help the protocol evolve as time goes by and become more popular.

Using COMP

Compound will give lenders COMP tokens based on how many cTokens they have in their wallets. This transaction will be subject to the interest rate prevalent at that moment based on the available supply. Therefore, the more liquid the market, the lower the interest rate will be.

COMP coin tokens allow holders to take part in a certain amount of governance related to the software. They can vote on proposals or assign any voting rights to somebody else to vote instead. So it’s possible that a third party who does not actually hold any COMP tokens could weigh in on any particular issues as and when they arise. Token holders can vote on interest rates and other critical issues impacting values, profitability and revenues.

Compound can operate with Basic Attention Token (BAT), Ether (ETH), 0x (ZRX), Augur (REP) and DAI. Investment pools are created to serve loans and generate profit to give the investors and participants their return. So, Compound is the leading platform, and Compound coins are used to govern the platform. Individual tokens are traded, generating interest.

Frequently asked questions

What is Compound (COMP) token?

Compound is an Ethereum-based token found within the burgeoning DeFi space, while COMP powers the system and gives users a say in how the system operates. The protocol allows users to borrow Ethereum tokens at changing interest rates.

How do they work out the price of Compound?

Compound works on the basis of a floating exchange rate, so the price is set by individual participants based on the amount of supply and demand. It’s a complex structure, and much will depend on the trading volume, exchange rates, order books and service fees at each Compound exchange.

How safe is Compound?

So long as you use a known and reputable exchange platform, it’s safe enough to buy Compound.

BTC Markets is recognised with the ISO 27001 certificate on the basis of its excellent risk management, operational flexibility and adaptability, data protection, customer and stakeholder trust, and legal compliance in one of the world’s fastest, most rapidly evolving industries.

How do you buy Compound coin in Australia?

To buy Compound coin in Australia, create an account with BTC Markets. Within your account, you will see the various payment options for your deposit, but BTC Markets support BPay as well as instant OSKO payments. Once you have the funds in your account, you’re able to place a buy order for Compound. The easiest way to buy any digital assets such as this is to select a Market Order, which enables you to buy or sell immediately at the best available price.

What do I do after I buy Compound (COMP)?

Once you buy Compound crypto, you have various options. You can either buy and hold (position trading) or aim to realise price appreciation over the long term. You can go long or short depending on whether Compound is bullish or bearish.

Buying and trading Compound with BTC Markets

If you are interested in Compound as a way of helping you to diversify your crypto assets or develop another income stream,check out BTC Markets. We provide a secure, reliable and convenient platform to make it easy for you to buy orsell COMP, whether you are just starting out or are an experienced investor.

When you sign up for a BTC account, we will walk you through the process. You can find out more about BTC Markets, check out some frequently asked questions, or get in touch with a member of our experienced team for more advice.

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