Compound Launches Money Market Protocol on Ethereum, Enabling Lending and Borrowing on the Ethereum Blockchain
San Francisco-based Compound launched its Ethereum-based lending platform earlier today. The money market protocol allows individuals, institutions, and applications to frictionlessly earn interest on or borrow cryptographic assets without having to negotiate with a counterparty or peer.
Compound announced the news in a blog post earlier today.
The money market protocol is built on the Ethereum blockchain. With Compound, each market has a dynamic borrowing rate that floats in real-time as market conditions adjust. Compound currently has four different crypto money markets available, including ETH, BAT, REP, and ZRX.
Compound allows users to utilize their crypto holdings in new and innovative ways. You can make money when crypto prices fall, for example, by shorting cryptocurrencies using the Compound protocol.
Of course, you don’t have to short tokens on Compound to utilize the protocol. Compound also allows hodlers to make money from their crypto stash. If you want to generate interest from your coins instead of watching them gather dust in an exchange or wallet, then you can deposit them into Coinbase. Compound has already announced a partnership with 26 hedge funds who plan on trading with Compound, offering liquidity to independent investors who want to be matched with borrowers or lenders.
Compound released the protocol on the Ethereum blockchain only after “significant testing, and external audits” led by Trail of Bits and Certora. Testing and auditing took place all summer until Compound was finally comfortable with launching the Ethereum protocol earlier today.
You can view the Compound protocol at this Ethereum address: 0x3FDA67f7583380E67ef93072294a7fAc882FD7E7
Initially, the protocol supports four different markets, including:
- Ether (Wrapped via WETH-9)
- 0x Protocol (ZRX)
- Basic Attention Token (BAT)
- Augur (REP)
You can borrow and short all four of the tokens listed above using the Compound protocol today.
“Blockchain assets are novel and exciting, but they lack the most fundamental financial infrastructure – efficient interest rates,” said Compound founder and CEO Robert Leshner, CFA, in a statement.
“Over time, hundreds of trillions of dollars of assets will be tokenized, but the institutions that deploy them will require the usefulness of traditional financial markets — today’s launch is just the first step.”
You can download the Compound app and access the protocol today. The Compound app is accessible through a Web3 browser like Metamask or Coinbase Wallet and an Ethereum address.
After launching the Compound protocol, Compound also released a “transparency dashboard” where users can view real-time market rates. You can view the transparency dashboard here: https://app.compound.finance/#Markets. It shows the current rates for all four crypto money markets available on the Compound protocol.
Compound is cautioning users that its protocol is still “extremely experimental technology” and that users should only use Compound “after reading the source code” themselves. Nevertheless, Compound is usable today for users interested in lending or borrowing money in one of the four money markets above.
Compound is one of the better-supported blockchain companies in the industry. Earlier this year, the company made headlines for announcing $8.2 million in seed funding in a funding round led by Andreesen Horowitz, Polychain Capital, and Bain Capital Ventures. Coinbase Ventures, Transmedia Capital, and other major names also participated in the round. These institutions were attracted by Compound’s promise to establish frictionless money markets for cryptographic assets, allowing investors to access lending and borrowing through efficient, trustless markets.
In addition to attracting big name investors, Compound spent the summer adding 26 hedge fund partners who have announced plans to trade with Compound.
The San Francisco-headquartered company will continue developing the protocol over the coming months. The goal is to create an effective way for users to earn a return on their cryptocurrency holdings. Instead of leaving cryptocurrencies in a centralized exchange like Coinbase or Robinhood, for example, users might choose to leave their crypto in Compound to earn interest.
Compound has also announced plans to launch a stablecoin on its protocol.