COMP is a "governance token" for the Compound platform. Holders of this COMP token have the right to participate in decisions regarding the Compound protocol by voting on proposals and updates. This includes changes to interest rates and integrations with other protocols. The COMP token is distributed to users who borrow and lend assets on Compound, providing incentives for participation and contributing to the platform's decentralization.
Compound works by allowing users to deposit their crypto assets into the platform's smart contracts, creating a liquidity pool. This pool is then used to provide loans to other users. Interest rates on loans and deposits are determined algorithmically based on supply and demand. Users who deposit assets earn interest in real-time, while those who borrow pay interest on their loans. Everything happens without intermediaries, making the entire setup transparent.
Why does Compound exist?
Compound aims to revolutionize how people interact with financial services by offering a decentralized, open, and accessible alternative to traditional banks. The platform gives users control over their own assets and creates a fair and inclusive financial ecosystem. By eliminating the need for intermediaries and creating a transparent credit market, Compound strives to improve the efficiency and accessibility of financial services globally.
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Compound's website: https://compound.finance/
Compound's white paper: https://compound.finance/documents/Compound.Whitepaper.pdf
Compound's Wikipedia: https://iq.wiki/wiki/compound/