Compound

About Compound (COMP)

What Is Compound (COMP)?

Compound is a decentralized lending protocol on Ethereum and several EVM-compatible networks, where users supply assets to earn interest and borrow against collateral. Rates are set algorithmically from supply and demand, and borrowing is over-collateralized, with automatic liquidation if collateral falls too far. COMP is the governance token: holders and their delegates vote on every change to the protocol.

Official resources:

• Compound website
• Documentation
• Governance forum
• Compound III source
• COMP contract

Who Founded Compound? (History)

Compound was founded in 2017 by Robert Leshner and Geoffrey Hayes, who incorporated Compound Labs in San Francisco that August. It raised an 8.2 million dollar seed round in May 2018 backed by Bain Capital Ventures, Andreessen Horowitz and Polychain. COMP was deployed in March 2020, and distribution to suppliers and borrowers began on June 15, 2020, setting off that summer's liquidity mining wave. Comet, or Compound III, arrived in August 2022.

How Compound Works

Compound v2 uses pooled money markets: supplying an asset returns a cToken whose exchange rate rises as interest accrues, a collateral factor per asset sets borrowing power, and rates move with utilization.

Compound III narrows this. Each Comet market has one base asset that can be borrowed and that earns interest when supplied. Other assets can be posted as collateral but do not earn interest and cannot be borrowed, isolating risk to that market.

Key Ecosystem Components

• Compound v2, the original cToken money markets.
• Compound III, or Comet, deployed per the public repository on Ethereum mainnet, Arbitrum, Base, Linea, Mantle, Optimism, Polygon, Ronin, Scroll and Unichain.
• Comet markets by base asset, most often USDC, USDT and WETH.
• Governor and Timelock contracts administering both versions.

COMP Token Utility

COMP is a governance token with a fixed supply of 10,000,000. Voting works through delegation to exactly one address, so anyone can take part by receiving delegation without owning COMP. Timing is fixed: a proposal needs more than the threshold, historically 25,000 COMP, then a two-day review, three days of voting, a 400,000-vote quorum in favor, and execution two days later through the Timelock, so nothing changes in under a week. Of the supply, 42.3 percent was reserved for protocol users.

What Makes Compound Unique?

Compound established the template most DeFi lending markets still use: utilization-based rates, over-collateralized borrowing, tokenized supply positions and permissionless liquidation. Compound III differs by restricting assets rather than adding them.

How Compound Differs from Similar Projects

Aave supports a broader asset list, cross-collateral borrowing and flash loans, while Compound III accepts less flexibility for more contained risk. Morpho builds isolated markets and routes capital through curated vaults. Compound's traits are conservative listings and a slow, fully on-chain change process.

Use Cases of Compound

• Supplying an asset to earn algorithmically determined interest.
• Borrowing a base asset against collateral without selling that collateral.
• Delegating COMP to a representative, or voting on behalf of others.
• Integrating Compound markets into other protocols as a lending primitive.

How Compound Is Secured

A Timelock contract administers both Compound III and Compound v2, acting only on proposals that cleared the full governance process. On other networks a Bridge Receiver reads the executed mainnet proposal and a local Timelock adds a further delay, so no operator can change a deployment alone.

Risks and Considerations

Smart contract risk is unavoidable at this scale, but governance risk is more distinctive here. In late September 2021, Proposal 62 introduced a Comptroller bug that over-distributed COMP, exposing up to 280,000 tokens, and Proposal 64 patched it only after the mandatory governance delay. In July 2024, Proposal 289 passed narrowly and would have moved 499,000 COMP of treasury funds into a yield product built by an outside group. It drew allegations of a governance attack and was canceled after negotiation, showing a concentrated bloc can carry a proposal over broad objection.

Borrowers face liquidation if collateral falls or the borrowed asset rises, and oracle failure can trigger unjust ones. Bad debt is possible if a market moves faster than liquidators. COMP has no built-in revenue claim.

Why Compound Matters

Compound is a reference implementation of onchain credit. Its rate model, cToken accounting and governance pattern were adopted widely enough that much of DeFi lending is a variation on it.

Where Can You Buy Compound (COMP)?

COMP is an ERC-20 token at 0xc00e94cb662c3520282e6f5717214004a7f26888 on Ethereum, with bridged versions on Base, Arbitrum, Polygon and others. It is listed on most large centralized exchanges and swappable on Ethereum decentralized exchanges such as Uniswap. Confirm the address for the network you use, since bridged versions differ.

Storage Options After Purchase

COMP can be held in any Ethereum-compatible wallet, such as MetaMask or Rabby, and in hardware wallets including Ledger and Trezor. Self-custody is necessary to delegate voting weight, since exchange-held tokens usually cannot be delegated. Voting happens on Ethereum, so governance needs the mainnet token.

Related Coins

• Aave (AAVE)
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