# Compound https://compound.finance Links: [[DeFi|Decentralized Finance]] - [[GitHub]]: https://github.com/compound-finance/compound-protocol - Protocol specification "explaining in plain English how the protocol operates ([link to pdf](https://github.com/compound-finance/compound-protocol/blob/master/docs/CompoundProtocol.pdf)) ## Website https://compound.finance ### Markets Page https://compound.finance/markets ![[Screen Shot 2022-01-02 at 3.48.31 AM.png]] - In line with expectations, lending USD or USD stablecoins generates the highest yield ## Whitepaper (2019) https://compound.finance/documents/Compound.Whitepaper.pdf 8 pages, by [[Robert Leshner]], [[Geoffrey Hayes]] ### The [[Compound]] Protocol Compound is a protocol on the [[Ethereum]] blockchain that establishes money markets, which are pools of assets with algorithmically derived interest rates, based on the supply and demand for the asset. Suppliers (and borrowers) of an asset interact directly with the protocol, earning (and paying) a floating interest rate, without having to negotiate terms such as maturity, interest rate, or collateral with a peer or counterparty Each money market is unique to an Ethereum asset (such as Ether, an ERC-20 stablecoin such as Dai, or an ERC-20 utility token such as Augur), and contains a transparent and publicly-inspectable ledger, with a record of all transactions and historical interest rates. #### 2.1 Supplying Assets Unlike an exchange or peer-to-peer platform, where a user’s assets are matched and lent to another user, the Compound protocol aggregates the supply of each user; when a user supplies an asset, it becomes a fungible resource. This approach offers significantly more liquidity than direct lending; unless every asset in a market is borrowed (see below: the protocol incentivizes liquidity), users can withdraw their assets at any time, without waiting for a specific loan to mature. Assets supplied to a market are represented by an ERC-20 token balance (“cToken”), which entitles the owner to an increasing quantity of the underlying asset. As the money market accrues interest, which is a function of borrowing demand, [[Compound|cTokens]] become convertible into an increasing amount of the underlying asset. In this way, earning interest is as simple as holding a ERC-20 cToken