Compound is one of the pioneering platforms in the rapidly evolving decentralized finance (DeFi) landscape. As a protocol built on the Ethereum blockchain, it enables users to lend and borrow cryptocurrencies in a trustless, automated environment. With real-time data showing COMP trading at ¥298.45, down 6.98% over the past 24 hours, interest in its price movements, market performance, and underlying technology continues to grow.
This comprehensive guide explores the current state of Compound, its core functionality, price trends, key metrics, and what drives its value in 2025’s dynamic crypto economy.
What Is Compound?
Compound is a decentralized finance (DeFi) protocol launched in 2018 by Geoffrey Hayes and Robert Leshner. It operates on the Ethereum blockchain and allows users to earn interest on deposited crypto assets or borrow against them using collateral.
The platform runs entirely on smart contracts—self-executing code that automates lending and borrowing without intermediaries like banks. This eliminates counterparty risk and enhances transparency.
At the heart of the ecosystem is COMP, an ERC-20 governance token. COMP holders can propose and vote on changes to the protocol, including interest rate models, asset listings, and reserve allocations. Additionally, users earn COMP tokens as incentives for supplying liquidity or taking out loans.
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How Does Compound Work?
Lending on Compound
When users lend crypto assets on Compound, they deposit supported tokens into liquidity pools. In return, they receive cTokens—such as cETH for Ethereum or cUSDC for USD Coin. These cTokens represent their share of the pool and accrue interest over time.
For example:
- Deposit ETH → Receive cETH
- cETH grows in value relative to ETH as interest accumulates
- Redeem cETH → Get back more ETH than originally deposited
Interest rates are algorithmically adjusted based on supply and demand within each asset pool. High demand for borrowing a specific token increases its lending yield.
Borrowing on Compound
To borrow, users must first deposit eligible collateral. The system requires over-collateralization—meaning borrowers must lock up more value than they intend to borrow.
For instance:
- Deposit $1,500 worth of ETH
- Can borrow up to a certain percentage (e.g., 75%) of that value in another asset like DAI
- Must maintain a healthy collateral ratio; otherwise, liquidation occurs
Liquidation protects the system: if the value of collateral drops too low due to market volatility, part of it is sold off to repay debt.
This mechanism ensures financial stability across the network while enabling permissionless access to credit.
Key Features of the Compound Protocol
- Decentralized Architecture: No central authority controls user funds or decisions.
- Real-Time Interest Accrual: Interest compounds every Ethereum block (~13 seconds).
- Governance via COMP Tokens: Token holders shape the future of the protocol.
- Transparency: All transactions and reserves are publicly viewable on-chain.
- Multi-Asset Support: Supports major Ethereum-based assets including ETH, WBTC, USDC, DAI, and others.
These features make Compound a cornerstone of the DeFi movement, empowering individuals with financial tools once reserved for institutions.
COMP Price Overview (2025)
As of today, COMP is valued at ¥298.45 CNY, with a 24-hour trading range between ¥297.91 and ¥321.15. Over the last day, it has declined by 6.98%, reflecting broader market corrections in the DeFi sector.
52-Week Performance
| Metric | Value |
|---|---|
| 52-week high | ¥1,055.72 |
| 52-week low | ¥245.60 |
Despite recent volatility, COMP remains significantly below its all-time high of ¥2,864.67, reached during the 2021 bull run. Year-to-date returns stand at -43.88%, indicating ongoing challenges in investor sentiment amid regulatory scrutiny and macroeconomic pressures.
Market Statistics
- Market Cap: ¥2.646 billion
- 24-Hour Trading Volume: ¥254 million
- Circulating Supply: 8,868,500 COMP
- Total Supply: 10,000,000 COMP
With only 88.7% of tokens in circulation, future releases could impact price dynamics depending on vesting schedules and community governance decisions.
Recent Market Developments
Recent news highlights growing institutional recognition of DeFi protocols like Compound:
- S&P Global Ratings assigned a 'BBB' credit rating to the Compound Treasury, signaling increasing legitimacy in traditional finance circles.
- Block Earner, an Australian fintech startup, secured $6.4 million in seed funding to offer mainstream investors direct access to fixed-rate products on Aave and Compound.
- Celsius Network repaid $20 million in debt owed to Aave, reducing systemic risk exposure across DeFi platforms—a positive signal for ecosystem health.
These developments suggest that despite short-term price weakness, long-term infrastructure building continues.
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Frequently Asked Questions (FAQ)
What is the purpose of the COMP token?
The COMP token serves two primary functions: governance and incentives. Holders can vote on proposals affecting the protocol’s operation, such as adding new markets or modifying risk parameters. Users also earn COMP as rewards for lending or borrowing on the platform.
Is Compound safe to use?
Compound uses audited smart contracts and has undergone multiple security reviews. However, risks include smart contract vulnerabilities, market volatility leading to liquidations, and potential governance attacks if COMP ownership becomes too centralized. Always conduct due diligence before depositing funds.
How are interest rates determined on Compound?
Rates are set algorithmically based on utilization—the ratio of borrowed assets to total supplied assets in each pool. When demand rises, rates increase to incentivize more supply. Conversely, low demand leads to lower borrowing costs.
Can I lose money using Compound?
Yes. Borrowers face liquidation risk if collateral values drop suddenly. Lenders are generally protected but may be exposed during extreme events like protocol exploits or governance failures. Impermanent loss does not apply since lenders do not provide liquidity in pairs.
Where can I buy COMP tokens?
COMP is listed on major cryptocurrency exchanges including OKX, Binance, Coinbase, and Kraken. After purchasing, users can stake or delegate their tokens to participate in governance.
What makes Compound different from other lending platforms?
Unlike centralized lenders, Compound operates autonomously via code. Its real-time interest accrual model and transparent reserve tracking set it apart. Additionally, its governance-first approach empowers users rather than corporate entities.
Why Monitor COMP Price Trends?
Tracking COMP to CNY and global pricing helps investors assess:
- Market sentiment toward DeFi
- Risk appetite in the broader crypto space
- Potential shifts in yield farming strategies
- Regulatory impacts on decentralized protocols
Given its foundational role in DeFi history, COMP's performance often reflects macro trends affecting algorithmic finance.
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Final Thoughts
While Compound may no longer dominate headlines as it did during DeFi’s explosive growth phase, it remains a critical piece of the decentralized financial infrastructure. Its transparent mechanics, proven security track record, and active governance model continue to attract developers, analysts, and long-term holders.
As Ethereum evolves with layer-2 scaling solutions and improved efficiency, protocols like Compound are well-positioned to expand their reach—potentially bringing decentralized credit systems to millions worldwide.
Whether you're analyzing COMP price charts, considering participation in governance, or simply exploring how DeFi works, understanding Compound offers valuable insight into the future of open finance.
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