Compound Price | COMP Price, Charts

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The price of Compound (COMP) today stands at $41.37**, with a 24-hour trading volume of **$54.62 million. Over the past day, COMP has seen no price change, registering a 0.00% movement. The token maintains a circulating supply of 9.39 million COMP, nearing its maximum cap of 10 million tokens, making it a deflationary asset by design.

As one of the foundational pillars of decentralized finance (DeFi), Compound continues to play a crucial role in shaping how users interact with digital assets through lending and borrowing. This guide explores the mechanics, history, utility, and future potential of the Compound protocol and its native COMP token.

What Is Compound?

Compound is an Ethereum-based decentralized lending and borrowing platform that operates without intermediaries. It enables users to earn interest on deposited crypto assets or take out loans by providing collateral—fully automated through smart contracts.

Unlike traditional financial institutions, Compound requires no credit checks or personal identification. Instead, it uses algorithmically determined interest rates that adjust in real-time based on supply and demand for each supported asset.

The platform's native governance token, COMP, is an ERC-20 token that gives holders the power to vote on protocol upgrades, parameter adjustments, and new market integrations. This decentralized governance model ensures that the community collectively shapes the future of the protocol.

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A Brief History of Compound

Founded in 2018 and headquartered in San Francisco, Compound began with a seed round that raised $8.2 million. The project was launched by Robert Leshner, a former financial economist and member of San Francisco’s Revenue Bond Oversight Committee. His deep understanding of traditional finance systems fueled his vision for a transparent, permissionless alternative—ushering in a new era of DeFi.

In November 2019, Compound secured $25 million** in a Series A funding round led by prominent venture capital firm **Andreesen Horowitz**. That same year, it received **$1 million in USDC from Coinbase’s USDC Bootstrap Fund, accelerating its development and ecosystem growth.

A major milestone arrived on June 16, 2020, when Compound introduced its COMP governance token. Distributed directly to users through liquidity mining, the token quickly gained traction and became the largest DeFi token by market capitalization within just 24 hours of trading.

By May 13, 2021, Compound achieved a record-high Total Value Locked (TVL) of $12.45 billion**, reflecting widespread trust and adoption across the DeFi landscape. As of mid-2022, its TVL remained strong at over **$4 billion, underscoring its resilience amid shifting market conditions.

How Does Compound Work?

At its core, Compound operates using yield farming and automated smart contracts to create a seamless, trustless financial experience.

Lending and Earning Interest

Users can deposit supported cryptocurrencies into liquidity pools and begin earning interest immediately. These rates fluctuate based on usage—when more people borrow a particular asset, its lending rate increases.

Supported assets include:

Interest accrues in real time and can be claimed or reinvested at any moment.

Borrowing Against Collateral

To borrow funds, users must first deposit collateral worth more than the amount they wish to borrow—typically at a ratio exceeding 150%. For example, to borrow $1,000 worth of DAI, a user might need to deposit $1,500 worth of ETH.

If the value of the collateral drops below a safe threshold due to market volatility, the system automatically triggers a liquidation event, selling part of the collateral to repay the loan and protect the protocol.

This mechanism ensures stability and security across the network.

Smart Contract Security

Compound relies on audited, open-source smart contracts to manage all operations—from fund storage to interest calculations. The codebase has undergone rigorous reviews by leading cybersecurity firms such as OpenZeppelin and Trail of Bits, both of which have confirmed its robustness and reliability.

These audits enhance user confidence and minimize the risk of exploits—a critical factor in maintaining trust within DeFi.

What Is the COMP Token Used For?

The COMP token serves two primary functions within the ecosystem: governance and incentivization.

Governance Rights

As an ERC-20 token built on Ethereum, COMP grants holders full participation in protocol governance. Token owners can:

Each COMP token equals one vote, ensuring a democratic decision-making process. Users can also delegate their voting power to others, enabling broader community engagement even among smaller holders.

This decentralized approach empowers users to shape the evolution of Compound without centralized control.

Incentive Distribution

To encourage active participation, Compound distributes approximately 1,139 COMP tokens per day to users who supply or borrow assets on the platform. These rewards are split evenly:

This dual incentive model promotes balanced liquidity across markets and keeps the ecosystem dynamic.

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Frequently Asked Questions (FAQ)

What is Compound in crypto?

Compound is a decentralized finance (DeFi) protocol on Ethereum that allows users to lend and borrow cryptocurrencies in a permissionless way. It uses algorithmic interest rates and smart contracts to automate financial services without intermediaries.

How does the COMP token gain value?

The value of COMP comes from its utility in governance and its scarcity—capped at 10 million tokens. As more users participate in lending and borrowing on the platform, demand for COMP in governance and incentives increases, potentially driving up its market price.

Can I earn passive income with Compound?

Yes. By depositing supported cryptocurrencies into Compound’s liquidity pools, you earn interest continuously. Additionally, active users earn COMP tokens as rewards for supplying or borrowing assets—creating multiple income streams.

Is Compound safe to use?

Compound uses audited smart contracts and has undergone multiple security assessments by reputable firms like OpenZeppelin and Trail of Bits. While no system is entirely risk-free, especially in DeFi, Compound is considered one of the more secure and battle-tested platforms in the space.

What happens if my collateral value drops?

If the value of your collateral falls below the required threshold, your position becomes eligible for liquidation. The protocol will automatically sell part of your collateral to cover the outstanding debt, minimizing losses to the system.

How is interest calculated on Compound?

Interest is calculated in real time based on utilization rates—the percentage of deposited assets currently being borrowed. Rates adjust dynamically every block (approximately every 15 seconds on Ethereum), ensuring alignment between supply and demand.

Why Compound Matters in DeFi

Compound was among the first protocols to introduce liquidity mining and on-chain governance at scale. Its innovative distribution model—giving tokens directly to users—set a precedent followed by countless other projects.

Moreover, its transparent, code-driven approach eliminates gatekeeping and enables global access to financial tools. Whether you're in New York or Nairobi, all you need is an internet connection and a crypto wallet to start earning or borrowing.

As DeFi continues to evolve, platforms like Compound remain central to building an open, inclusive financial system—one that prioritizes user sovereignty and transparency.

Final Thoughts

With a solid track record, strong security practices, and active community governance, Compound stands as a cornerstone of the DeFi ecosystem. While competition grows, its early innovation, reliability, and user-centric design keep it highly relevant.

Whether you're looking to earn yield, access liquidity, or influence protocol decisions, Compound offers powerful tools for engaging with decentralized finance.

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