Compound.finance

[shaw1]

So I've been researching different decentralized lending sites lately.

The one that has caught my eye the most is https://app.compound.finance/

It seems to be a fairly well established setup, but I'm always cautious of trying out new platforms willy nilly.

So if anyone has used compound for investing your Eth based tokens, please speak up!
I'd love to know what you guys think of it, and if you think it is worth investing on.

Basically:

How much do the gas fees eat into your profits?
How is the volatility on the interest rate?
Has anyone heard of any security issues or concerns with them?

Please share your experience. Keeping investments in a smart contract seems much less risky than investing in centralized investment sites.

[Rodeo02]

 Check this link https://medium.com/datadriveninvestor/first-look-into-compound-finance-1ff089532
This one explain all good things about compound.finance and also explain risk involve when you invest.

I dont try this site before so i cannot give my own opinion.

[Kyraishi]

This is just another one of those ETH-based lending projects, isn't it?

This one looks pretty unique, from looking at it, your interest goes up every 15 seconds, which is unlike what we've seen before, but the downside is that there is less interest compared to other options.

For borrowers, it's the same thing, you'll need collateral to cover the loan, etc, regular stuff.

Take a look at the medium article, it's a pretty good read and explains a lot.

[joniboini]

How much do the gas fees eat into your profits?

Around $1 to $2 per contract interaction. It eats a lot of gas, depending on how busy the network is.

How is the volatility on the interest rate?

It fluctuates daily. It can go straight from 6% to 5% each day. That's understandable because their APR depends on supply and demand. The higher the supply and the lower the borrowed amount, it will go lower, and vice versa.

Has anyone heard of any security issues or concerns with them?

Not yet that I know of. But there are some important potential hacks that you should know of. You can read here: https://medium.com/@ameensol/what-you-should-know-before-putting-half-a-million-dai-in-compound-fafdb2645f77

[badykvik]

There is no much review about Compound.finance and its seems to be a very new project released by compound however it sounds legit https://defirate.com/compound-finance
The general rules of investment should be applied - Never invest what you can not afford to loose.

[Kyraishi]

There is no much review about Compound.finance and its seems to be a very new project released by compound however it sounds legit https://defirate.com/compound-finance
The general rules of investment should be applied - Never invest what you can not afford to loose.

There are quite a lot of reviews about Compound Finance actually, you can find hundreds of reviews, or other people showing their experience with the project, I actually think it's probably one of the biggest lending projects out there. I've linked a few down below.

https://hackernoon.com/which-crypto-lending-platform-to-use-for-passive-income-8af869ab6ca6
https://medium.com/datadriveninvestor/first-look-into-compound-finance-1ff089532
https://defirate.com/compound-finance/
https://techcrunch.com/2018/05/16/cryptocurrency-compound-interest/

As for OP, there have been no security problems with the project, they are very safe with collateral and giving out loans, the only real problem I can think of happening would be if one of their wallets got hacked, but that's the problem with a lot of projects.

Also, try using this calculator to see how much you can make off the project, it works well, haven't used it myself, but I don't think you need to enter any of your details.

https://www.comproi.com/

[joniboini]

As for OP, there have been no security problems with the project, they are very safe with collateral and giving out loans, the only real problem I can think of happening would be if one of their wallets got hacked, but that's the problem with a lot of projects.

I would not say they are safe with collateral and giving out loans because it depends on the liquidity of the market. Compound utilization ratio usually lingers around 50% or so, but there has been a case where it went straight up to 70%-80%, which might decrease the pool for withdrawal. If you withdraw at that point, especially if you withdraw a lot of money, you'll get a headache.

Also, try using this calculator to see how much you can make off the project, it works well, haven't used it myself, but I don't think you need to enter any of your details.

You don't need such tools imo. Just visit Compound and see their current interest as it changes daily or even minutes.

[Kyraishi]

As for OP, there have been no security problems with the project, they are very safe with collateral and giving out loans, the only real problem I can think of happening would be if one of their wallets got hacked, but that's the problem with a lot of projects.

I would not say they are safe with collateral and giving out loans because it depends on the liquidity of the market. Compound utilization ratio usually lingers around 50% or so, but there has been a case where it went straight up to 70%-80%, which might decrease the pool for withdrawal. If you withdraw at that point, especially if you withdraw a lot of money, you'll get a headache.

I mean the way it works, is that you give them your crypto for a fiat line of credit, isn't it? I'm not extremely knowledgable with these lending protocols, but I'm assuming it works on a simple profit method which is, borrow investor funds for a low-interest rate, and lend it out for a higher interest rate - one would assume the crypto collateral they are taking is over 105%, right? Extra 5% should help cover liquidity and other issues.

I'm not exactly sure how this works actually, I'm going to do some more research, it's pretty different to what I envisioned.

[joniboini]

I mean the way it works, is that you give them your crypto for a fiat line of credit, isn't it? I'm not extremely knowledgable with these lending protocols, but I'm assuming it works on a simple profit method which is, borrow investor funds for a low-interest rate, and lend it out for a higher interest rate - one would assume the crypto collateral they are taking is over 105%, right? Extra 5% should help cover liquidity and other issues.

I'm not exactly sure how this works actually, I'm going to do some more research, it's pretty different to what I envisioned.

There is no investor on Compound. They only act as a pool for lenders and borrowers.

Let's say there are two groups, group A (borrowers) and group B (lenders). Compound and other pooled defi act as a 'medium' between these two with their smart contracts so they can do their business. So, in short, it's A > Compound (smart contract) > B. The interest is calculated based on the supply and demand of the current liquidity pool, and not centrally decided by Compound unless they changed the smart contracts.

If you have trouble imagining it, you can think Compound as a basket where everyone can supply or take some money with rigid rules. So, Compound itself does not borrow any investors funds but act as an intermediary to connect borrowers & lenders.

[Kyraishi]

I mean the way it works, is that you give them your crypto for a fiat line of credit, isn't it? I'm not extremely knowledgable with these lending protocols, but I'm assuming it works on a simple profit method which is, borrow investor funds for a low-interest rate, and lend it out for a higher interest rate - one would assume the crypto collateral they are taking is over 105%, right? Extra 5% should help cover liquidity and other issues.

I'm not exactly sure how this works actually, I'm going to do some more research, it's pretty different to what I envisioned.

There is no investor on Compound. They only act as a pool for lenders and borrowers.

Let's say there are two groups, group A (borrowers) and group B (lenders). Compound and other pooled defi act as a 'medium' between these two with their smart contracts so they can do their business. So, in short, it's A > Compound (smart contract) > B. The interest is calculated based on the supply and demand of the current liquidity pool, and not centrally decided by Compound unless they changed the smart contracts.

If you have trouble imagining it, you can think Compound as a basket where everyone can supply or take some money with rigid rules. So, Compound itself does not borrow any investors funds but act as an intermediary to connect borrowers & lenders.

Ah. That's actually much different from what I thought it was (a company just lending out investor funds for higher interest rates), and this model does make a bit more sense then the one I had in my mind. I look a better look into their smart contracts and saw a glimpse of how they worked.

So, in short, it seems like it's much more of a decentralized platform that just works as a middle man to handle borrowers and lender transactions, right?

[elda34b]

So, in short, it seems like it's much more of a decentralized platform that just works as a middle man to handle borrowers and lender transactions, right?

Correct. DeFi works like that. What you assume before is most likely a centralized lending platform.

However, some self-claimed DeFi like Blockfi also claims to do the same thing as Compound while they have quite a different mechanism. So, make sure to re-read and understand what they do.

[Daltonik]

The members of the Compound community unanimously approved the activation of Proposal 064. It is intended to correct an error in the process of distributing COMP management tokens that occurred during the previous update of the landing protocol. https://compound.finance/governance/proposals/64

[messaricryto]

For those wanting to keep up with Compound's quarterly progress (from Q3 2021), Messari has released the "State of Compound Q3 2021" report.

Or tune in today at 2 pm EDT for the live Crowdcast "Compound Q3 Analyst Call" with Messari's Ryan Selkis, Ryan Watkins, and Compound's Robert Leshner to listen, ask questions, and more.