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Compound: A Leading Lending Protocol in the DeFi Pulse Index

Compound Finance (COMP) is an ERC-20 token released in 2020 as the governance token for Compound Finance, a lending and borrowing protocol.

Compound Finance (COMP) is an ERC-20 token released in 2020 as the governance token for Compound Finance, a lending and borrowing protocol. It is one of several tokens currently held within the Index Coop’s DeFi Pulse Index (DPI).

  • What is Compound?
  • Who created Compound?
  • Compound Governance & Tokenomics
  • Why is COMP included in DPI?
  • How can I buy COMP?

What is Compound?

Compound is a protocol that allows users to lend and borrow cryptocurrencies. It was launched in 2018, and has quickly become one of the leading defi borrowing and lending protocols, with over $13 billion in assets on the platform. The top three markets on Compound include ETH, USDC and DAI.

Compound works by allocating platform-specific tokens called cTokens (cETH, cUSDC and cUNI, for example) to an investor when they lend. These cTokens represent your deposit as well as the interest you earn. The available interest rate of each cToken fluctuates based on demand for the underlying asset.

Additionally, investors who lend or borrow assets on Compound automatically accrue COMP, the governance token of the Compound, proportional to their balance.

Who created Compound?

Compound was founded by Robert Leshner and Geoffrey Hayes in 2017. Leshner is currently the CEO and Hayes the CTO of Compound Labs, Inc., the open-source software development company that built the Compound protocol.

Leshner and Hayes previously founded the startup Safe Shepherd, which proactively removes personal data from online databases. The company sold in 2015. Leshner and Hayes both went on to work for the online delivery service Postmates—Leshner as Product Lead and Hayes as Engineering Manager—until 2017.  

In addition to Leshner and Hayes leadership, Compound is currently managed by a decentralized community of COMP token-holders and their delegates, who propose and vote on upgrades to the protocol.

Compound Governance and Tokenomics

Compound was initially launched without a governance token, which hindered the Compound community’s ability to be involved in key decisions in making. But in 2020, COMP was released as a way to grant the community more agency through the ability to debate, propose, and vote on changes made to Compound. The goal was to decentralize the protocol, moving to a community-controlled model.

COMP holders can vote on proposals that include listing new cToken markets, updating market interest rates, choosing administrators for the protocol, for example.

Governance proposals can be created by any address that has been delegated over 65,000 COMP. And any address can create an “Autonomous Proposal” by locking 100 COMP. The “Autonomous Proposal” can become a governance proposal if its delegated over 65,000 COMP.

Why was COMP included in DPI?

DPI is designed to capture the performance of the most significant tokens in the defi ecosystem. As an earlier player in the defi lending and borrowing space, Compound is an essential DeFi protocol.

With over $13 billion in assets on the platform and a market capitalization of $1.08 billion, Compound is one of the top three largest DeFi lending protocols. As of January 19, 2022, there are 299,186 suppliers and 9228 borrowers utilizing Compound.

Compound has also demonstrated a commitment to security and transparency. The protocol has undergone four security audits with OpenZepplin and Trail of Bits. In December of 2021, the Compound DAO utilized a public bidding process to hire a security auditor.

How can I buy COMP?

You can exposure to Compound Finance and other leading DeFi assets by buying DPI which includes COMP tokens. You can buy DPI directly from the Index Coop by connecting your wallet to the Index Coop app.  

If you’re looking to exchange a fiat currency, like the U.S. dollar, directly for DPI, then you’ll want an Ethereum wallet like Gemini, Argent, Metamask, or Rainbow. With each of these wallets, you can connect to your bank account or debit card, which allows you to exchange fiat currencies directly for Index Coop products like DPI.

What is DPI?

The DeFi Pulse Index ($DPI) is a digital asset index that tracks the performance of “blue chip” decentralized financial (DeFi) assets across Ethereum. It combines the features of an ERC-20 token and a traditional structured product to create a 21st-century digital upgrade to traditional structured products.  DPI is capitalization-weighted based on the value of each token’s circulating supply and aims to track projects that have significant usage and show a commitment to ongoing maintenance and development.

As a bundled crypto asset, you effectively own all of the underlying tokens and can redeem your units of $TOKEN for the underlying tokens, a feature of traditional structured products that is typically reserved for large, institutional investors.

As an Ethereum-based crypto-asset, $DPI can be used productively throughout DeFi with opportunities for liquidity provision (LP), borrowing and lending, yield farming, and collateral debt position (CDP)

DPI was launched jointly by Set Protocol and Scalara (formerly known as DeFi Pulse Inc.), and was the first product to be managed by the Index Coop.

$DPI Defi Pulse Index (DPI) Token Logo on Black Background.

About Index Coop

Index Coop is a decentralized autonomous organization (DAO) that powers structured decentralized finance (DeFi) products and strategy tokens using smart contracts on the blockchain. We offer a suite of sector structured products, leverage and inverse products, and yield-generating products. We aim to create products that are simple to use, accessible to everyone and secure. Our products are built on Set Protocol, a twice-audited, self-custodial DeFi tool that allows for the creation and management of Ethereum-based (or ERC-20) tokens. Among users, partner protocols, and our composable products, Index Coop maintains one of the largest partnership networks in the DeFi ecosystem.

How to buy Index Coop products with fiat currencies:

  • First, you’ll need to create an Ethereum wallet like Argent, Metamask, Gemini, or Rainbow.
  • Next, you’ll set up your new wallet and connect your bank account.

You can also earn or buy DPI tokens directly via your favorite decentralized exchange.

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