Buy Compound (COMP)

Compound is a Decentralized Finance (DeFi) platform on Ethereum used for borrowing and lending assets. Using blockchain technology, Compound solves the accessibility and efficiency problems of borrowing and lending assets. The platform allows users to borrow and lend cryptocurrency without the need for traditional financial intermediaries, such as banks.

Users can lend their crypto by depositing it into Compound, thus becoming 'lenders'. As proof of the deposited amount, they receive cTokens, which allow them to earn interest. These cTokens, such as cETH, cDAI, and cBAT can be freely traded and exchanged for the originally deposited cryptocurrency at any time. The cTokens system not only promotes liquidity within the platform, but also rewards users with COMP tokens for their participation. This incentivizes further engagement and investment.

Borrowers are users who borrow tokens on the platform. They put up collateral as proof that they are creditworthy and able to repay the loan. To take out a loan, users pay fees in the form of COMP tokens, which are then paid out to the lenders as interest.

In addition to being used to reward users, COMP tokens also give holders voting rights within the platform’s governance model. This decentralizes decision-making and allows users to directly influence the development and changes to the protocol.

Who founded Compound?

Compound was founded by Robert Leshner and Geoffrey Hayes, two entrepreneurs with experience in both the technology and finance sectors. Their previous venture, Britches, focused on aggregating inventory from local stores to sell on platforms like PostMates. In 2017, they launched Compound, which is now managed by Compound Labs, Inc., with Leshner as CEO and Hayes as CTO. The team behind Compound consists of a team of experts, including developers, engineers, and lawyers.

Compound has several functions and applications, including:

• Lending cryptocurrency: Users can lend their crypto assets to earn interest. The process is simple and automated, making it an accessible way to generate passive income.
• Borrowing cryptocurrency: Users can borrow crypto by providing collateral and paying a small fee. The borrowed assets come directly from other users who have supplied their crypto to the protocol.
• Governance: COMP token holders can participate in the governance of the protocol, making decisions about future developments and changes to the platform.
• Earning rewards: Compound offers crypto holders the opportunity to earn rewards with cryptocurrencies they don't plan to use in the short term.

Compound uses smart contracts on the Ethereum blockchain to provide a decentralized platform where users can safely lend and borrow crypto. The core technology behind Compound is the automation of the financial exchange process, supported by the issuance of cTokens and COMP tokens.

cTokens and earning interest

When users deposit assets, they receive cTokens corresponding to their deposit. These cTokens not only represent ownership of the underlying assets, but also entitle them to interest income. The interest is calculated based on supply and demand within the platform and may change over time.

COMP Tokens and Governance

Users receive COMP tokens for various activities on the platform, such as lending or borrowing cryptocurrency. COMP tokens allow users to vote within Compound’s governance model, giving them direct influence on the future direction and development of the protocol.

Liquidation process

A key aspect of Compound’s operation is the liquidation process, which is triggered when the value of the collateral falls below the value of the borrowed assets. This can happen when the price of the collateral drops, which is common in volatile cryptocurrencies. This mechanism automatically closes a loan and protects both borrowers and lenders from risky consequences.

The COMP token plays a crucial role in the operation and governance of the platform. Users have the ability to stake COMP to vote on important decisions within Compound, such as protocol changes, new market additions, and interest rate adjustments. This creates a decentralized governance structure, where power is not held by one central authority, but is distributed among the platform’s users.

The maximum supply of COMP tokens is set at 10 million. Of this total supply, 4.2 million tokens will be distributed to users over a 4-year period. Additionally, 2.4 million COMP tokens will go to Compound Labs shareholders, of which 2.2 million tokens will go to the founders and team over a 4-year period. Additionally, 775,000 tokens are reserved for governance purposes and 332,000 tokens are made available for future team members.

A large portion of this is allocated to users of the protocol through a reward mechanism that incentivizes active participation and investment in the platform. This mechanism contributes to improved liquidity and functionality.

Compound distinguishes itself from other projects through several features:

• Decentralized lending protocol: Compound was one of the first decentralized lending protocols for cryptocurrencies, making it at the forefront of this DeFi movement.
• cTokens mechanism: Users receive cTokens in exchange for depositing assets. The cTokens are a proof of deposit and give users the right to earn interest on the loaned tokens.
• Automatic liquidation: The protocol ensures the safety of loans through automatic liquidation procedures. When the collateral of a loan is less than the value of the loan itself, the loan is automatically closed, minimizing the risk for borrowers and lenders.
• User governance: The decentralized governance structure enabled by COMP tokens places the power in the hands of the users, allowing them to directly influence the development of the protocol.

You can purchase Compound (COMP) from Bitvavo. Bitvavo is suitable for both newcomers and experienced investors. Here are the steps for purchasing COMP via our website and app:

1. Log in to your Bitvavo account or create a new account.
2. Add funds to your account by selecting "Deposit".
3. Go to the Compound (COMP) buy page.
4. Enter the desired amount in euros or the number of COMP tokens you wish to purchase and confirm with "Buy".

The price of COMP is directly linked to the market price. After purchase, the COMP tokens are automatically added to your Bitvavo account, where you can manage and sell them. This makes it possible to respond quickly to price changes.

Your COMP tokens are safely stored in your Bitvavo account, with the majority of the funds secured in cold storage that is managed offline. We recommend enabling two-factor authentication (2FA) for an extra layer of security.

For users who prefer to manage their COMP personally, many software and hardware wallets now support Compound. COMP can be easily purchased and transferred to an external wallet by linking the wallet address to your Bitvavo account, giving you full control over your tokens.