Compound (COMP) is a defi protocol and cryptocurrency built to profit from interest rates. In fact, they call Compound “an algorithmic, autonomous interest rate protocol.”
That means Compound contains algorithms that automatically collect and compound interest from cryptocurrencies and other digital assets. For example, Compound was earning 1.96% interest from $448.703 million in Tether (USDT) on 24 July 2022.
Additionally Compound was earning 0.07% on $56.604 million Basic Attention Token (BAT) on 24 July 2022. Compound was earning 0.61% interest on $1.005 billion USD Coin (USDC) on 24 July 2022.
Compound earned interest from $3.717 billion in assets spread across 18 markets on 24 July 2022.
How Compound earns Interest
Users can deploy the Compound Protocol to networks. Users integrate the Compound Protocol through cToken contracts. Each cToken represents an asset Compound is earning interest on. For example, the cETH tokens represents Ethereum (ETH) and the cUSDT token represents Tether.
Compound Protocol users earn interest by minting cTokens. They base the interest on the cToken’s exchange rate.
There are two types of cTokens, Cerc20 and CEether. They build both types with the EIP-20 interface. The Cerc20 wraps the Compound Protocol around an underlying ERC-20 asset such as the Basic Attention Token (BAT). In contrast, the CEther wraps the Compound Protocol around Ethereum (ETH) itself.
cTokens accumulate interest over time through the exchange rate. They claim each cToken becomes convertible to a growing amount of the underlying asset while the number of cTokens in the wallet stays the same.
A cToken’s exchange rate is 0.02% plus the compounding market interest rate. They claim all users will have same cToken exchange rates.
Compound Institutions
Compound integrates with many DeFi protocols and institutions. Institutions compound integrates with include.
Compound Treasury. They claim the Compound Treasury earns a 4% annual percentage rate (APR) on US dollar balances.
Interestingly, Compound’s Treasury has received a B- credit rating from S&P Global Ratings. They claim this makes Compound the first institutional offering rated by a Big Three ratings agency. The Big Three, Standard & Poor’s (S&P), Fitch, and Moody’s rate financial institutions and investments for risks.
A Standard & Poor’s B rating is a speculative investment that meets commitments but faces uncertainties. I guess, a B- rating is a risky speculative investment. Thus, S&P regards Compound Treasury as a Risky Speculative investment.
CoinBase Custody offers secure custody for COMP and cTokens and native support for Compound governance at CoinBase (COIN).
Anchorage offers safe crypto custody with staking, trading, and Compound governance.
Fireblocks allows users to move assets between exchanges, wallets, and Compound.
Bitgo is a full service crypto custodian that supports cTokens and Comp.
Users can access Compound directly from the Ledger Hardware Wallet.
Compound Interfaces
The Compound Interfaces allow users to earn interest on and through popular DeFi protocols and apps.
Argent allows users to earn interest and invest with no gas fees.
OKEx allows users to earn interest and borrow assets on a popular crypto exchange.
Pool Together is a lottery that uses the interest from Compound as a prize.
Compound powers staking on Binance (BNB) one of the biggest crypto exchanges.
Users can interact with Compound through a native integration in the Crypto.com DeFI wallet.
imToken is a fully featured crypto mobile wallet app that integrates Compound.
Zapper is a seamless interface to Compound that works with other DeFi applications.
Exodus allows users to secure, manage, and exchange Compound assets on desktop, mobile, and hardware wallets.
BarnBridge (BOND) is a defi protocol that tokenizes risk. They claim Compound users earn a fixed return or a high-yield through high-risk tranching at BarnBridge.
Compound Manage
Compound (COMP) integrates with several decentralized apps DApps that give users control over their interest and Compound. The Compound apps include:
The Compound Dashboard is the open-source and full featured control panel for Compound.
DeFi Saver is an alternate Compound Dashboard that offers automated portfolio management.
InstaDapp allows users to move Maker DAO Collateralized Debt Positions (CDPS) into Compound. InstaDapp Users can borrow against CDPs in Compound.
Zerion allows users to save, borrow against, and monitor Compound and Ethereum positions.
Ankr easily integrates Compound with a RESTful API (application programming interface).
Comp.Vote gives COMP token holders gas-free delegation and voting.
Enzyme lets users build, scale, and monetize investment strategies.
The B.Protocol allows users to import Compound positions for improved liquidation economics.
Eidoo lets users buy, sell, trade, and earn in-app with the Eidoo Card.
Lumina provides institutional grade portfolio management and tax accounting on Compound.
Tokentax is a tax software and cryptocurrency accounting firm that helps with Compound transactions.
Cointracker is a portfolio tracker and tax calculator tool for Compound activity.
What Value does Compound Have?
Mr. Market has a strong interest in Compound (COMP). CoinMarketCap estimates COMP was the 15th most trending cryptocurrency on 24 July 2022.
In contrast, Compound was CoinGecko’s 115th largest cryptocurrency, with a $52.14 Coin Price on 25 July 2022.
CoinMarketCap gave Compound a $2.768 billion in Total Value Locked, a $357.594 million Market Capitalization, a $521.571 million Fully Diluted Market Cap, and a $108.398 million 24-Hour Market Volume on 25 July 2022. They base those numbers on a Circulating Supply of 6.856 million COMP, a Maximum Supply of 10 million COMP, and a Total Supply of 10 million COMP.
In contrast, CoinBase gave COMP a $52.14 Coin Price, a $374.5 million Market Cap, a $125.7 million 24-Hour Market Volume on 25 July 2022. They base numbers on a Circulating Supply of 7.2 million COMP.
I consider Compound (COMP) a super volatile cryptocurrency because CoinBase gives it an all-time high Coin Price of $911.20. Compound was CoiBase’s 52nd most popular cryptocurrency on 25 July 2022.
Can Compound Earn Interest?
I think Compound’s tools could be useful for speculators. However, I’m skeptical of Compound itself. In particular, I think Compound’s interest rates could be too low.
For example, Compound was earning 0.05% interest on COMP and .07% on Ethereum (ETH) on 24 July 2022. Yet the US inflation rate was 9.01% in June 2022. That means inflation can destroy 8.96% of an American user’s COMP and 8.94% of a US user’s ETH.
Moreover, many of Compound’s interest rates are worse than those for bank savings accounts. For example, Bankrate estimates the US national average interest rate for savings accounts was 0.11% on 20 July 2022. In contrast, some high-interest bank accounts offer higher interest rates than Compound. For example, CIT Bank’s saving account was offering a 1.65% interest rate on 24 July 2022.
In the final analysis, I consider Compound (COMP) an interesting protocol that could be of use to large financial institutions and big investors. However, I don’t think Compound offers enough interest to be useful for ordinary people.
 make money from interest?){kind=link}