How does Compound work?
Compound allows you to gain interests on your crypto-assets by supplying them to the "protocol". Supplying your assets to the compound network will result in you gaining interest on your supplied asset without a fixed time limit. This means you could supply your assets to the network for 25 years or 15 minutes... as long as you wish.
Compund also allows users to borrow COMP with an interest fee that will be paid to the "lenders" of this asset.
In simple terms, you can both lend money to gain a small fraction for lending this or ask for money and get loans with a small free to pay.
Which cryptos can I lend/borrow?
Currently, compound allows the lending of various criptocurrencies: Dai (DAI), Ether (ETH), USD Coin (USDC), Ox (ZRX), Tether (USDT), Wrapped BTC (WBTC), Basic Attention Token (BAT), Augur (REP), and Sai (SAI). It is important to note that you will earn interest in the currency you lend. If you lend REP, you will receive your gained interest in REP.
How much can I borrow?
You van only borrow cryptos if you previously "lock" some cryptos to the Compound network. The compound network calculates how much crypto you can borrow depending on the asset you depositted/locked. For example let´s say you locked $100 of ZRX and Compound has set a borrowing limit of 75% for ZRX, this means you can borrow a maximum amount of $75 of any other supported crypto at any time (only from supported cryptos mentioned above).
This means you can only borrow a fraction of the amount you previously depositted, this way avoiding misspayments that could cause strong damage to lenders.
How are interest rates calculated?
Interest rates are calculated against the amount of crypto available (aka liquidity) in each market.
In very simple terms, if there is a lot of available currency in the "pool", the interests rates will be low, and viceversa, if there is shortage of liquidity (AKA availabe crypto´s) in the pool, the interest rates will grow. Both for lending and for borrowing.
Market cap for COMP
Compound currently has a circulating supply worth 44% of it´s maximum supply (this being 10,000,000).
Each COMP has a current market price of $170.
