Is Compound an up and coming Crypto asset?

What is Compound?

So first of all it's important to understand what Compound Coin is, or more importantly what the project is attempting to achieve. Which is basically interest for lending currency a.k.a Yield Farming.

At current the crypto market has a net worth globally of $US1.06Trillion with much of this net wealth locked up in secure wallets not doing anything. Similar to if you had fiat currency under your mattress. In today's day and age you wouldn't do that as you want to earn a passive income. Most of this is done via interest or borrowing against your money and purchasing more stocks.

This is where Compound comes in to provide a bridge and the ability for people with assets to be able to earn.

Compound will allow you to link your wallet to their protocol and provide you the ability to both borrow and lend your assets earning you interest which is inturn provided to you in the currency you have lent.

Sounds great right? Pop your assets in the Compound protocol, kick back and watch your account boom. They're also providing some really awesome APY returns, some as high as 20%. I gave it a crack with my small supply of Dai today. Unfortunately my APY was less than the GAS fees I was being charged to transfer my assets. A significant problem I think ETH needs to overcome in the coming years if they wish for Defi to remain at it's peak.

How does it work?

It's a really good system, no assessments or applications. Say you have 1 Wrapped Bitcoin trading at $45,000. You enter your asset into the Compound Protocol and Compound will lend you (estimate) 50% of the coins value in their native currency called CASH. Your Wbitcoin is then locked into a smart contract and you can than use your CASH to purchase another Cryptocurrancy. If the value of the coin crashes Compound will sell your asset to cover the debt. So be sure to monitor prices and don't over capitalise.

Why Should you use it?

The answer is quite simple really and there are two aspects to this.

1. As a lender it is a great way to put your stagnant crypto to work ensuring you are constantly adding to your net position.

2. A great way if a new start up emerges and you want to invest in them as you believe in their cause. You can quickly lock in a smart contract and purchase their coins without having to sell your assets or provide further cash. If the project takes off and the coin booms than you have increased your stake. If it starts to fail you can limit your losses.

Current assets on offer

The current supply and borrow markets are quite limited as the protocol is still relatively new and I'd anticipate the coins on offer for borrowing and lending will continue to grow as does the Compound protocol.

Current rates

The current returns for lending your asset aren't too bad, the interest though is another topic. However, with all things interest is inevitable. Also, if you want a say in how the protocol operates including setting rates then I'd recommend investing in the Compound coin as people who hold Compound get a say in its governance and set rates.

Your feedback and thoughts is appreciated

As always, I'd like to get a feel of the Leo community and their thoughts and opinions on Compound. Do you think this is a future coin that will provide great opportunities for Defi and also further increase the utilisation and adoption of cryptocurrancy.

I'm going to add a few more Dai to my collection and give the interest earning a go. Unfortunately small amounts of crypto get swallowed up in fees. I really do feel that GAS should be reflective of the amount of currency being sent. I understand miners need to mine and many small transactions will not get processed if the mining is of lesser value. However, there needs to be a solution to this problem as it will limit the growth and adoption of new users if fees and chargers are too high.

images sourced canva pro subscription. This is not financial advice and readers are advised to seek professional advice or do their own

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