What Is Compound?
Compound is the native utility token of the network under the same name. It powers the ecosystem of the platform specializing in lending and borrowing crypto. It belongs to a DeFi lending protocol that allows users to earn interest on their cryptocurrencies by depositing them into one of several pools supported by the platform.
Compound is distributed daily and has a fixed supply. The exact number of the remaining tokens, as well as those in circulation, can be seen on the website which also has a FAQ about the tokens. According to the answers provided there, token holders can debate, propose, and vote on all changes to the protocol using COMP. The platform retains a 50 percent distribution of tokens between the suppliers and borrowers on various markets. Every interaction on the ecosystem also results in the automatic transfer of COMP to your wallet.
Pros and Cons of Compound
Advantages of Compound
With COMP, users can lend and borrow crypto immediately, without having to spend the time, effort, or cost of dealing with a traditional financial intermediary. It has real value and brings benefit rather than being just a token. COMP and its use-cases incentivize the user to stay loyal to the platform. Compound’s CTO and CEO have previously worked in high-profile roles at Postmates and continue to hold executive positions. They also claim to have world-class investors. Nowadays, COMP occupies a place within the top-50 cryptos. Another advantage is that it can be traded for both fiat and crypto. COMP is also represented on Binance and many major exchanges.
Disadvantages of Compound
Despite the goal, most Compound users are speculators and this causes fluctuations in price. The researchers argue that once the COMP token began trading on major exchanges like Binance and Coinbase, most of the owners chose to sell it immediately. The fall in COMP’s price caused by listings is contradictory in its nature. COMP’s developers still have a long way to go to motivate users to actually use the platform. Cryptocurrencies like Aave are also Compound's biggest competitors. There’s constant pressure on which crypto is more successful since they are are head to head in the race to be users’ favorite. Now DeFi tokens are among the riskiest but also most promising in terms of coin growth. The strongest assets in this area are Maker (MKR), Uniswap (UNI), and Chainlink which can also cause competition with Compound.