Compound (COMP) Tausch

Compound (COMP) is a decentralised, Ethereum-based lending platform that supports multiple cryptocurrencies. As long as one holds crypto the protocol supports, they can deposit it into a compound smart contract and earn interest by lending.

However, this system is a little different from a bank. When someone deposits crypto into a smart contract, it's changed to native assets called COMP or cTokens. For instance, if one puts in Ethereum, it is automatically converted into an equal amount of cETH.

The cETH is then used as collateral when one wants to borrow and earns interest when lending. Forces of demand and supply determine the interest rates for borrowing and credit on the protocol. Conversely, if there are a high number of people looking to lend, the smart contract lowers the rates, which brings in more borrowers.