COMP is an ERC20 token of the Compound Finance DeFi platform that empowers community governance of the Compound protocol. Holders of COMP and their delegates can debate, propose, and vote for changes to the protocol.

The Compound protocol operates mainly as a lending and borrowing platform of Ethereum tokens through a decentralized market with lenders earning interest on their crypto and borrowers paying interest to borrow. The compound protocol will operate without any intermediaries in, seamlessly connecting lenders on the platform with interested parties. Users can borrow crypto assets, using any other supported asset as collateral allowing the trader a number of options on which token is best suited for his repayment. He's able to achieve this flexibility cause the protocol supports the repayment of browned funds with virtually any ERC20 supported token. Borrowers and lenders do not have to negotiate interest rates as in the traditional markets, Both sides interact directly with the protocol, which handles the collateral and interest rates. No counterparties hold funds, as the assets are held in smart contracts called liquidity pools, the internet rate of supplying and borrowing assets are adjusted and algorithmically according to market supply and demand.

Any user can connect to Compound and earn interest using a Web 3.0 wallet, such as Metamask. This is why Compound is a permissionless protocol. It means that anyone with a crypto wallet and an Internet connection can freely interact with it.

Borrowers can only participate in the compound protocol if there are liquidity providers. These stake their tokens or assets on the network and acclimate steady interests from his staked asset. When users and applications supply an asset to the Compound protocol, they begin earning a variable interest income instantly. Interest accrues every Ethereum block which is created approximately every 15 seconds and users can withdraw their principal plus interest anytime. Alternatively, users could merge their assets to form a large pool of liquidity providers they collectively stake the merged assets that are available for other users to borrow, and they share in the interest that borrowers payback to the pool.

Compound Ctokens

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cTokens represents your balance every time you choose to interact with the Compound liquidity pool, in compound supplied assets are tracked using ctokens which reflect the value of the underlying asset deposited or supplied.

For instance, if Lender A deposits ETH into Compound, it converted to cETH, the same thing serves for a stable coin like USDT. So let say Lender A deposits 10 ETH and 500 USDT, he will receive 10cETH and 500 cUSDT which will yield interest based on individual interest rate.

When users supply assets, they receive cTokens(COMP token) from Compound in exchange. cTokens are ERC20 tokens that can be redeemed for their underlying assets at any time. As interest accrues to the assets supplied, cTokens are redeemable at an exchange rate (relative to the underlying asset) that constantly increases over time, based on the rate of interest earned by the underlying asset.

Some features of cTokens are as follows:

• You can borrow up to 50-75% of their cTokens’ value, depending on the quality of the underlying asset.

• You can add or remove tokens anytime.

• If your debt becomes undercollateralized, anyone can liquidate.

• Liquidators receive 5% on liquidated assets as an incentive.

• Coinbase Wallet and MetaMask integrate cToken balances.

• cTokens are visible on Etherscan.

The protocol currently supports lending and borrowing of Ox (ZRX), Augur (REP), Basic Attention Token (BAT), DAI, Ethereum (ETH), USD Coin (USDC), Tether (USDT), and Wrapped Bitcoin (WBTC).

Compound's Governance

Just like every defi project on the Etherum blockchain, Compound consensus mechanism is decentralized, token holders have the right to decision-making on the platform. Token holders can make changes to the protocol through improvement proposals and on-chain voting. Each token represents one vote, and holders can vote on proposals with their token holdings. In the future, the protocol may be completely governed by COMP token holders.

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In this a few steps, this is how Compound governance system works with reference to the image above:

• A Comp holder with 1% Comp delegated can propose a governance action.

• Every proposal made is subjected to a 3-day voting period.

• Comp holders with voting power can vote for or against the proposal raised.

• If the proposal receives at least 400,000 votes, it’s queued in the Timelock and implemented after two days.
  However, if it doesn’t receive the appropriate amount of votes, it gets dropped.

Team

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• Robert Leshner is the CEO. He is a Chartered Financial Analyst and former economist. He was also a Product Lead at Postmates, a popular delivery app.

• Geoffrey Hayes, the CTO, and Torrey Atcitty, the Application Lead, also used to work at Postmates.

• Jake Chervinsky, the General Counsel, is an adjunct professor at Georgetown University Law Center. His work has landed him on several prestigious lists, like The Cointelegraph Top 100.

Investors

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• Andreessen Horowitz: Marc Andreessen, the co-founder of this firm, was the co-author of Mosaic – the first widely used web browser. Furthermore, he was also the co-founder of Netscape.

• Polychain Capital: One of the biggest crypto investment funds in the world.

• Bain Capital: The investment arm of Bain & Company. Incidentally, it’s one of the “Big Three” management consulting firms.

• Coinbase is one of the largest cryptocurrency exchanges globally. In addition to having offices all over the world, it has more than 20 million customers worldwide.

Thanks for reading up to this point guys and I hope you enjoyed my #cryptoprofessor homework.

This post is made in response to the #cryptoacademy program and the #cryptoprofessor homework by @gbenga.