Compound (COMP)

Overview

Compound is a decentralized lending and borrowing protocol that runs on Ethereum and other EVM networks. Often called the “Compound blockchain” by newcomers, it’s actually a set of smart contracts that anyone can use to supply crypto assets, earn interest, or borrow against their holdings. The COMP token is the governance token for the protocol. Holders can propose and vote on upgrades, risk parameters, and incentive programs. Because COMP is widely listed and transferable, many users also follow the COMP price on their preferred exchange or portfolio app, even though governance — not payments — is its core role. Compound’s latest architecture, commonly referred to as Compound III or “Comet,” focuses on simple, efficient borrowing markets with stronger risk controls across multiple chains. (docs.compound.finance)

What makes Compound different

• Algorithmic interest rates change automatically with supply and demand for each market.
• On Compound III, each market has a single base asset to borrow (for example, USDC or WETH), and users can supply multiple tokens as collateral. This isolates risk between markets and simplifies liquidations. (docs.compound.finance)

History & Team

Compound was founded in 2017 by Robert Leshner and Geoffrey Hayes, two University of Pennsylvania alumni who previously built software products together and worked at Postmates before turning to decentralized finance. The protocol’s first mainnet release went live in September 2018, with a major v2 upgrade in 2019 and the launch of the COMP token and community governance in 2020. Compound III (Comet) began rolling out in August 2022, followed by deployments on Polygon, Arbitrum, and Base in 2023. (messari.io)

Backing for the company that incubated the protocol, Compound Labs, came from well-known venture firms. A 2018 seed round raised $8.2 million from Andreessen Horowitz (a16z), Bain Capital Ventures, Polychain Capital, and others, with Coinbase participating. Later rounds further expanded resources for development. (medium.com)

Key milestones

• 2018: Protocol launch on Ethereum mainnet.
• 2019: v2 introduced separate markets with interest-bearing cTokens.
• 2020: COMP token deployed; governance transferred to the community.
• 2022–2023: Compound III launched on Ethereum and expanded to Polygon, Arbitrum, and Base. (messari.io)

Technology & How It Works

Compound is built from audited, open-source smart contracts. Users interact directly with these contracts or through interfaces built by wallets and apps.

Compound v2 and cTokens

Compound v2 popularized “cTokens,” ERC‑20 tokens users receive when they supply assets. cTokens automatically accrue interest and can be used in other DeFi apps as collateral or building blocks. While v2 is still referenced across DeFi, governance is guiding users toward Compound III for new activity due to its simpler, safer model. (messari.io)

Compound III (Comet) design

Comet simplifies markets around a single asset to borrow per deployment (the “base asset,” such as USDC or WETH). Users can supply multiple tokens as collateral to increase borrowing capacity. Collateral earns no interest; only the base asset supply side earns interest. Markets enforce supply caps, collateral factors, and a minimum borrow size to keep risk in check. Because each market is isolated, a problem with one collateral asset does not spill over to other base-asset markets. (docs.compound.finance)

Interest accrues continuously through global supply and borrow indices. When users supply or withdraw, balances are recomputed using these indices, keeping accounting precise and gas-efficient for on-chain execution. (docs.compound.finance)

Oracles and pricing

Compound uses an “Open Price Feed” that relies on Chainlink price feeds, with a Uniswap time-weighted average price (TWAP) as an anchor/failover check. This approach verifies reported prices against decentralized on-chain liquidity to reduce the chance of manipulation. (stage.compound.finance)

Governance mechanics

Governance is handled by the COMP token with a battle-tested Governor Bravo module and a time delay (Timelock) before changes go live. Today, creating a proposal requires at least 25,000 COMP delegated to the proposer, votes run for roughly three days, quorum is defined in the contracts, and successful proposals queue for a two-day Timelock before execution. These parameters can evolve through governance. (stage.compound.finance)

Tokenomics & Utility

The COMP token gives holders a say in the protocol’s future. Compound tokenomics were designed to decentralize control and align incentives with active users.

Supply and allocation

COMP has a fixed maximum supply of 10,000,000 tokens. The initial allocation included tokens for users, for founders and the team (subject to multi‑year vesting), and for shareholders. A portion was set aside for community governance initiatives. Over multiple years, a large user allocation was streamed to the protocol and distributed to suppliers and borrowers based on activity. (comp.xyz)

A defining feature of early Compound tokenomics was the “Reservoir” contract that released COMP to markets each Ethereum block, with distribution split 50/50 between suppliers and borrowers and allocated across markets in proportion to interest accrued. This user-first distribution helped jumpstart governance participation and made the protocol a core building block in DeFi. (blog.openzeppelin.com)

What COMP does

• Governance: propose and vote on upgrades, risk parameters (like collateral factors and caps), and market deployments.
• Incentives: historically, COMP rewards have been used to seed new markets and migrations as decided by governance.
• Signaling: because governance is open, COMP holders can coordinate to evolve incentives or add utility in the future. At launch, COMP did not capture protocol fees; governance retains the power to revisit token economics over time. (dev.coindesk.com)

Ecosystem & Use Cases

Compound sits at the center of “money legos” in decentralized finance. Its markets connect to wallets, dashboards, treasuries, and developer tools across chains.

Lending and borrowing

Users supply supported tokens to earn interest or post them as collateral to borrow the market’s base asset. The protocol adjusts interest rates algorithmically so markets clear without order books or centralized intermediaries. On Compound III, markets on Ethereum, Polygon, Arbitrum, and Base bring these features to lower-cost networks. (messari.io)

Builders and integrations

Developers integrate Compound in a few ways:

• Smart contracts that programmatically supply, borrow, or manage treasury positions.
• Wallets and interfaces that make it easy to monitor health factors and positions.
• Cross‑protocol strategies that use collateral or interest-bearing positions in other DeFi apps.

Because Compound assets and interfaces are EVM‑standard, they play well with the wider DeFi stack — from yield optimizers to DAO treasuries and on-chain funds.

Compound DeFi, NFTs, gaming

While Compound isn’t an NFT or gaming protocol, its liquidity is often part of broader DeFi, NFTs, and gaming flows. For example, game studios and NFT projects can use Compound’s base‑asset markets to access working capital or to park treasury assets in liquid, transparent markets, while keeping governance in their own tokens. Composable design means positions can be tokenized and referenced by other apps, extending utility across Web3.

Advantages & Challenges

Advantages

• Proven architecture and audits from early DeFi days, with a strong track record as a lending primitive.
• Clear governance with COMP token voting, Governor Bravo, and a Timelock that adds transparency to changes. (stage.compound.finance)
• Compound III’s isolated markets simplify risk, make liquidation logic cleaner, and reduce cross‑market contagion. (docs.compound.finance)
• Deep ecosystem support: standard ERC‑20 integrations, developer libraries, and multi‑chain deployments. (docs.compound.finance)

Challenges

• On Ethereum mainnet, gas costs can be higher than on L2s, so many users prefer Polygon, Arbitrum, or Base deployments for routine transactions. (messari.io)
• Supported assets are curated for risk; this can feel more limited than some platforms that list many long‑tail tokens.
• Governance participation requires delegation and, for proposing, a sizable threshold of COMP, which concentrates proposal power among large delegates by design. (stage.compound.finance)

Where to Buy & Wallets

If you’re researching where to buy COMP, you’ll find it on many major centralized exchanges and on decentralized exchanges on Ethereum. On DEXs, you typically swap ETH or a stablecoin for COMP using a Web3 wallet. On centralized platforms, you can place a market or limit order and then withdraw to self‑custody if you choose. Always verify you’re interacting with the correct COMP token contract on the intended network.

For storage, COMP is an ERC‑20 token compatible with popular wallets:

• Browser wallets like MetaMask for everyday governance and DEX use.
• Mobile wallets that support Ethereum and EVM chains.
• Hardware wallets such as Ledger or Trezor for long‑term cold storage.

Because Compound III has deployments on multiple chains, some users bridge funds to an L2, then interact with the Comet market for that network to reduce fees. Your wallet must be set to the same chain as the market you’re using.

Regulatory & Compliance

Compound is open-source software governed by token holders. The protocol itself does not onboard customers or custody funds; users interact with smart contracts directly. In practice, most compliance obligations in the U.S. and other jurisdictions tend to apply to centralized on‑ramps, custodians, and front‑end operators rather than to immutable on‑chain code. Compound’s governance, parameters, and deployments are public, with upgrades delayed by a Timelock to increase transparency around changes. The broader regulatory conversation about decentralized finance remains active, and frameworks can vary by country. (stage.compound.finance)

Halal/Shariah considerations

Readers often ask, “Is Compound halal?” From an Islamic finance perspective, many scholars answer no. That’s because Compound’s core model involves lending and borrowing with interest‑like returns, which resembles riba. As a result, COMP shariah compliant status is generally considered negative, even though COMP is a governance token. If religious compliance is a priority, individuals typically consult a qualified scholar for personal guidance.

“Compound regulatory status” at a glance

• Compound is a decentralized protocol; the COMP token is used for governance.
• Exchanges that list COMP handle their own KYC/AML obligations and may have geo‑specific access.
• Governance discussions and parameter changes are transparent and executed via on‑chain votes with a two‑day Timelock. (stage.compound.finance)

Future Outlook

Compound’s roadmap is driven by its community. Several trends shape where it goes next:

• Multi‑chain growth: Compound III deployments across EVM networks lower costs and open the protocol to more users and developers. As new chains mature, the DAO can choose additional deployments and tune parameters market by market. (messari.io)
• Risk tooling: Expect continued refinement of collateral factors, supply caps, and oracles. The Open Price Feed approach — Chainlink prices anchored against Uniswap TWAPs — is designed to evolve with market structure and liquidity. (stage.compound.finance)
• Composability: As more Web3 apps emerge, especially in DeFi, NFTs, and gaming, simple base‑asset markets can serve as a reliable back end for treasuries, creators, and DAOs to access transparent, programmable liquidity.
• Governance utility: “Compound tokenomics” can adapt through proposals. While COMP’s core role is governance, delegates can experiment with incentives around new markets or deployments as the ecosystem changes. (stage.compound.finance)

Summary

Compound is one of the original DeFi lending protocols, with a focus on clean, modular design and community‑led governance. The COMP token gives holders control over upgrades and risk settings, and the Comet architecture makes markets simpler and more isolated than earlier versions. Whether you are a developer building on EVM chains, a DAO managing a treasury, or a user comparing platforms, Compound offers a transparent way to access on‑chain credit markets. If you’re exploring where to buy COMP, many exchanges and DEXs list it; and you can track COMP price on your preferred platform while using a compatible wallet for governance. For those seeking religious guidance, the common view is that Compound halal criteria are not met due to interest‑based lending. Overall, Compound remains a foundational piece of the Ethereum‑centric DeFi stack, and its community continues to guide its evolution across networks. (docs.compound.finance)