Compound allows users to deposit cryptocurrency into lending pools for access by borrowers. Lenders then earn interest on the assets they deposit. Once a deposit is made, Compound awards a new cryptocurrency called a cToken (which represents the deposit) to the lender.
How is COMPOUND used?
Compound is a decentralized finance token on the Ethereum network, blockchain-based protocol that allows you to lend and borrow crypto — and have a say in its governance with its native COMP token.
Locking your crypto in with Compound is just like putting your money in a savings account, but with a decentralized, blockchain-based protocol. Instead of depositing your money into the bank, you are sending your crypto to the Compound wallet.
Anyone who owns at least 1% of the total COMP supply can submit and vote on proposals to change the protocol. Every COMP token represents one vote.
The main backbone of today’s DeFi movement is Ethereum, a decentralized blockchain that enables smart contracts upon which other decentralized blockchain-based applications (dApps) with native cryptocurrencies can be built onto of its network. All fees paid must be paid in Ether. Compound is one such protocol, primarily concerned with the financial services of borrowing and lending your crypto.