Crypto of the Day: Compound (COMP). See Why!

·3 min read

The majority of cryptocurrencies right now are sitting inactive in a wallet. These inactive tokens hold value but aren't doing anything to be productive assets. Compound is a DeFi protocol that hosts lending pools to earn interest on various cryptocurrencies. These pools allow token holders to supply their tokens to others who borrow those tokens at algorithmically set interest rates based on supply and demand.

Lending tokens on Compound are a great way to have your crypto holdings acquire compounding interest over time. Compound currently hosts 14 pools of different cryptocurrencies like Ethereum, Uniswap and also stablecoins like DAI. Each of these pools has different lending and borrowing interest rates which are the same for everyone independently of how many tokens they supply or borrow. You can hold your position within a pool for as long as you want and freely withdraw your funds as you please.

What is Compound?

Compound is a popular decentralized lending platform that was founded in 2017. Its protocol is handled automatically through smart contracts on the Ethereum network. When tokens are deposited into a pool, they are exchanged for a cToken version of that coin. These cTokens represent the initial cryptocurrency while the real tokens are being borrowed from the pool. You will earn more cTokens overtime, which can be transferred back into the underlying token at any time.

When you borrow from a Compound pool, an enforced collateralization factor ensures each pool will make back their tokens with interest. If your collateralized holdings depreciate below the collateralization factor, they will be liquidated to pay back the loan with most of the interest. This ensures all of the pools will always be paid back and your cToken will grow over time.

Compound (COMP) is Up 20% in 24 Hours

Compound has recently struggled with the rest of the market and this upswing probably isn't a turning point for COMP just yet. Since May, the price has fallen from its record high of just over $900 to where it sits currently at around $290. It was one of the worst-hit coins from the recent market downturn with this 75% drop in price. COMP is the compound protocol's governance token that decentrally improves its markets. It is used to run the COMP protocol so liquidations and market problems will have a big effect on the token’s price.

Why is COMP Moving?

There is nothing outstanding that is directly attributed to the recent uptick. However, this movement might be the beginning of a small price correction. Over the past month, COMP hasn't been doing well, which has many holders asking when the dip will stop. Positive movement is always helpful when trying to get back to a bullish bias. However, this is seemingly only a bandaid to the recent price movement of Compound.

Where to Buy Compound

COMP is a popular cryptocurrency that has been around for a long time. Most exchanges like Coinbase and Binance are popular choices that allow you to buy COMP tokens easily. If you want to start earning interest on crypto, the best way to do this is through their website app, which directly connects to a digital wallet like MetaMask or Coinbase Wallet.

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