Compound (COMP) is considered to be the rising star in the space of decentralized finance (DeFi). The ERC-20 native token of the eponymous blockchain platform has been on the market for little over two weeks - the coin itself was released in April - but has already become the talk of the town, mainly because of the interesting underlying fundamentals.
In a nutshell, Compound was designed to afford an opportunity for borrowers and lenders to earn interest while also being able to use these funds in other decentralized applications for the purpose of trading, making transactions, and other operations. In other words, it’s as if you were able to put money in a savings account at the traditional bank but retain the option to use them at any given time. Compound utilizes a proprietary decentralized lending protocol that generates the so-called cTokens in the amount equivalent to a deposit in other cryptocurrencies. It’s cToken that actually earns the holder the interest which can be redeemed at any time along with the borrowed funds.
The fundamental value of COMP stretches beyond lending and earning interest, but we won’t delve into further details here. Let’s just say that Compound is one of the few newly emerged altcoins that actually brings a noteworthy solution to this space.