Compound is software run on the Ethereum network. It aims to incentivize computers to run a traditional money market.
This guide will help you understand the fundamentals of COMP and how to buy Compound online in 2023.
Best Platforms to Buy Compound - 2023
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What Is Compound?
Compound is an emerging decentralized finance protocol designed to incentivize the use of traditional money markets. It uses several crypto assets to offer this service, enabling the lending and borrowing of money without a financial intermediary such as a bank, however, crypto lending rates may apply in this case. To get involved, individuals can deposit cryptocurrencies into lending pools that can be accessed by borrowers. Lenders will then earn interest on the assets they deposit. After making a deposit, lenders are awarded a new cryptocurrency known as a cToken. These include cETH, cBAT, and cDAI.
Compound was founded in 2018 by entrepreneurs Robert Leshner and Geoffrey Hayes. Previously, the two had founded the firm Britches, which collected inventory from local shops to be sold on PostMates for a profit. In its first year, Compound raised $8.2 million in funding from several venture capital firms. Notably Andreessen Horowitz and Bain Capital Ventures. In 2019 they raised an additional $25 million from the same investors, as well as Paradigm Capital, a well-known fund started by the co-founder of Coinbase. Initially, a small supply of Compounds currency (COMP) was distributed among investors in the company and employees.
On the platform, each eToken can be traded without any restriction, however, is only redeemable for the cryptocurrency locked in the protocol. For example, you can only redeem cETH with ETH. The whole process is run by Compound code, meaning lenders can withdraw their deposits at any time without the need for human interference. To incentivize individuals using the platform, Compound awards its users with its native cryptocurrency COMP. Every time someone interacts with the Compound market they are rewarded with COMP tokens. This could be for repaying an asset, borrowing, or withdrawing funds. This new model has been very popular and has been adopted by several other cryptocurrencies. In 2020, over $500 million in assets were locked in the Compound protocol.
As of August 2021, one COMP token costs $430.93. It has a market cap of $430.93 with 4.4 million tokens in supply. It has a total supply of 10 million and a fully diluted market cap of $4,336,369,185. The token reached its highest price of $854 in May 2021.
- By removing the middleman, COMP makes it much easier to make a return on your investment. In the modern financial system, banks offer very small interest rates for your funds. This works as a great alternative that gives users as much control as they want. They can withdraw their funds whenever they want without any inconvenience.
- COMP tokens are exclusive to the Compound platform. Outside of the platform, they have no use. This means the platform must be a success for the tokens to be worth anything. If it fails to attract and maintain an audience, its token will become worthless.
How Does Compound Work?
Compound connects lenders and borrowers using Ethereum smart contracts. There are two main users on the platform, lenders, and borrowers. Lenders consist of anyone who wants to lend a cryptocurrency on Compound. They’ll earn interest by doing so. Borrowers consist of anyone who posts collateral on Compound using cryptocurrency. They can borrow cryptocurrency at a percentage of the posted value.
Lenders are rewarded with COMP based on the number of cTokens held in their wallets. The interest they receive is based on the available supply of the asset. The more liquid the market, the lower the interest rate. Borrowers can also get liquidated if the asset they borrow increases in value and becomes more valuable than the posted collateral.
Now that you know what COMP is and how it works, you can use one of the brokers above to buy Compound. However, if you're still unsure about how to get started, continue reading!
How to Buy Compound Online
You can buy Compound on several exchanges. The most popular places to buy COMP tokens are eToro, Coinbase, OKEx, Binance, and Coinjar.
Here’s a step-by-step guide on how to buy Compound online:
Step 1: Create an Account
Step 2: Fund Your Account
Step 3: Complete the Transaction
Congratulations, you've just bought your first Compound!
How to Trade Compound
You can trade COMP on Coinbase, Binance, and eToro, though trading the token isn’t a popular option amongst investors. With the token having so few uses outside of the platform, traders don’t see a need to buy it and therefore trading popularity is relatively low.
