Compound is a decentralized finance (DeFi) lending protocol that allows users to earn interest on their cryptocurrency holdings by depositing them into various pools supported by the platform. Users who deposit assets receive cTokens in return, which represent their stake in the pool. Over time, the exchange rate of these cTokens increases, allowing users to redeem them for more of the underlying asset and earn interest.
The protocol also allows borrowers to take out secured loans by depositing collateral. The maximum loan-to-value ratio varies based on the collateral asset, but can range from 50% to 75%. Borrowers are subject to automatic liquidation if their collateral falls below a specific maintenance threshold.
A unique feature of Compound is its community governance model, where holders of the COMP governance token can propose and vote on changes to the protocol, such as which cryptocurrencies to support or how to adjust collateralization factors.