Decentralized money market protocol
Compound is a platform built on the Ethereum blockchain that enables users to borrow or lend from a pool of assets. When users deposit assets, they begin earning interest that accrues every time a block is added to the Ethereum blockchain. Rather than interest rates being set by individuals, they are determined algorithmically based on the proportion of assets lent out. The protocol also allows users to withdraw from the pooled assets of others.
Compound’s native token is COMP, which is a “governance token.” A governance token is used to vote and make decisions about how the protocol should be managed.
Compound allows users to earn interest on their holdings, short assets they think are overvalued, or obtain assets they need without having to purchase them. For example, a user who has Ether but needs Dai (a different cryptocurrency) to use an application can borrow Dai from Compound’s protocol to complete their project, then repay with Ether.