Neosify - Buy, Stake & Earn Crypto
Neosify - Buy, Stake & Earn Crypto
Neosify - Buy, Stake & Earn Crypto

How Compound Works: Loans And Interest (DeFi)

In addition to MakerDAO, one of the most interesting projects of DeFi (decentralized finance) is Compound. It is based on the Ethereum protocol and is well integrated with Coinbase.
The Compound protocol provides a loan service, giving users the opportunity:

1) Lend ETH and DAI
2) Borrow ETH and DAI

Obviously in exchange for a fee.
The DAI crypto can be purchased on an exchange or obtained through CDP (Collateralized Debt Position) which performs the function of collateralization of our ETH. Basically I will have to lend the Ether.
To do these operations I can use Eidoo Wallet (through the Swap function).
I can also buy DAI with fiat currency.
Once I get the DAI, through the swap function I will get cDAI and this will automatically add the DAI to the liquidity pool.
In fact, with the Compound protocol, instead of lending the assets directly to other users, you contribute to the market with your own quantity of tokens put into stake, which other users can therefore borrow.
Compound interest rates are based on supply / demand algorithms (if there is a lot of liquidity, they are low).
Each crypto has its own version of "cToken", such as cDAI in the case of the DAI token, which represent the assets lent and on which interest is being earned.
There are no theoretical limits to the figures that can be requested on loan from the market, but the protocol provides for collateral which prevents the requesting of figures higher than the funds held.
In fact, cTokens are used as collateral to apply for loans, thus determining the maximum obtainable ceiling.


What is the big advantage of this? Users can get loans and also earn interest. Compound in this way becomes a "liquidity pool", which allows you to go beyond simple direct loans to individual users.
Interest accrues with each new Ethereum block approximately every 15 seconds.

How do you rate this article?


☑️Arͬcͨaͣ🅽🅶eͤl̜̝̖̼͔̞̃ͮ͑̐̉͌🅾➏➏➏ Verified Member

I discovered Bitcoin in 2012. I also love NFT. #BTC #ETH #Atom #SNX #Polis #WeAreStarAtlas #MLBSorare⠀⠀⠀⠀⠀⠀


The topics will be 🅒🅡🅨🅟🅣🅞, of course. I discovered Bitcoin back in 2012.⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀⠀

Send a $0.01 microtip in crypto to the author, and earn yourself as you read!

20% to author / 80% to me.
We pay the tips from our rewards pool.