FAQ
Compound is a decentralized lending protocol that allows people to lend and/or borrow crypto assets. It allows users to deposit certain tokens into liquidity pools that they can borrow from. Lenders then earn interest and rewards from the assets they deposit.
cToken is an interest-bearing token minted and burnt upon supply and withdrawal of assets on Compound market. It denotes the amount of crypto assets supplied and the yield earned on those assets. For example, when you deposit Dai, you will receive a certain amount of cDai from Compound. When you redeem it, these cDai will be disposed correspondingly.
COMP is the governance token for the Compound protocol. By supplying certain tokens, you can earn COMP from the protocols as extra rewards on top of base interest. COMP token holders can also propose and vote on changes to the Compound protocol.
Your yield basically includes two parts:
1. Interest paid by the borrowers
2. COMP rewards distributed by protocol
Normally, a higher asset utilization rate can lead to a higher lending APY. COMP rewards are variable for each token based on community governance.
Here's one main risk Compound may have:
Contract risk: Compound smart contracts could be hacked, or bugs in contracts could be exploited. In such cases, your assets may be lost.
