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Compound
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About Compound
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Value Proposition
COMP is the native cryptocurrency of Compound, a DeFi (decentralized finance) lending platform that allows users to borrow or earn interest for lending their cryptocurrencies. It lives on Ethereum, the second-largest blockchain in the world after Bitcoin.
COMP price
Compound’s token COMP has a hard cap of 10 million total tokens. Forty-two percent of the tokens will be distributed through the protocol to users, and each day, 2,312 COMPs are distributed. That will keep going until the year 2024 when the distributions will stop.
The rest of the tokens are divided as follows: 24% goes to shareholders of Compound Labs, the firm steering the lending platform and matching token. Roughly 22% goes to the Compound founders and staff. Almost 8% goes to those who participate in the project’s governance, and about 4% goes to future Compound staff members.
The token is a “governance token,” meaning users who hold the tokens can use them to vote on important changes to the protocol.
After COMP was launched in June 2020, it peaked at $337.05, according to CoinMarketCap. But the price ebbed after that, bouncing between $80 and $250 for the remainder of 2020.
COMP’s price reached its all-time high of $854.48 in May 2021 during a crypto-wide bull run, before it fell swiftly to $342.96 on May 22 and hit a low of $221.85 on June 20, 2021. Since then, the price has been hovering between $200 and $500 (as of November 2021), reaching a peak of $508.91 in September 2021.
How Compound works
Compound is one of the best-known projects in the DeFi market. DeFi projects aim to use cryptocurrencies to build better financial products without intermediaries, handing users tighter control over their own money. Compound takes that approach for lending, making it possible to match lenders and borrowers algorithmically without an intermediary.
Compound pioneered the concept of “liquidity mining,” which has become popular in the DeFi world. In DeFi, users lend their cryptocurrency to earn interest. Some users “yield farm,” or hunt around to figure out where they should lend their money to gain the largest return.
Liquidity mining builds on top of that practice. With liquidity mining, in addition to the normal yield, users can earn COMP tokens for their participation. That allows users to maximize the earning potential of their deposited crypto assets. Many other cryptocurrency projects have copied Compound by introducing a token for liquidity farming.
Compound makes use of Ethereum’s smart contracts, which essentially replaces intermediaries with computer programs.
Key events and management
Compound was founded in 2017 by Robert Leshner and Geoff Hayes, two University of Pennsylvania graduates.
The network went live in 2018 and raised $8.5 million in a seed funding round that year. The round was led by Bain Capital Ventures, Polychain Capital and Andreessen Horowitz (a16z), a venture-capital firm that has backed many DeFi projects. In 2019, Compound raised $25 million in a Series A funding round that was also led by a16z.
In 2020, Compound topped $1 billion worth of assets locked into its platform, and in June of that year, Compound launched its COMP token, kickstarting the liquidity mining craze.
In 2021, Compound accidentally overpaid users millions of dollars in COMP in a smart contract vulnerability that highlighted a problem with smart contracts. So far, cryptocurrency users and projects have lost millions of dollars due to smart contract bugs. Though users don’t have to trust intermediary companies in the DeFi world, they do have to trust that the code works properly.
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