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Compound is a decentralised lending platform on the Ethereum network.
In a nutshell, users deposit assets with Compound to earn interest, while others can borrow those assets by paying interest. It functions in a similar manner to a bank, but with an automated protocol replacing the branches, infrastructure and authority of traditional banks.
Lending pools are created for each asset, with interest rates determined on a supply-demand basis. If people want to borrow a scarce asset, the interest rate goes up. If there’s more supply than demand, the interest rate goes down.
When a lender contributes tokens to a pool, they receive an equivalent amount of cTokens in return (i.e. cETH, cUSDT). Borrowers must collateralise their position
COMP is the governance token for the Compound protocol. Holders of the token can vote on changes to the protocol. COMP is distributed to both borrowers and lenders as an extra incentive to keep the platform’s money markets active.
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