Compound FAQ

Robert Leshner
Dec 6, 2018 · 4 min read

Compound is an algorithmic, autonomous interest rate protocol— allowing users & applications to frictionlessly earn interest or borrow Ethereum assets.

If you have questions or to learn more, join the Compound Discord.

Getting Started

How do I use Compound?

Where else can I access the Compound protocol?

How does the Compound protocol work?

In each market, interest rates are determined algorithmically (based on supply and demand), and interest accrues every Ethereum block.

There are no pre-defined durations or terms (such as “90 days”) — you can use the Compound protocol for as short as one block, or as long as you’d like; you’re free to withdraw or repay at any time.

I’ve heard of cTokens, what are those?

Think a cToken like a receipt — it’s used to show who owns a balance inside Compound. Please be careful — if you transfer a cToken, your balance inside Compound will decrease.

Interest Rates

How are interest rates set?

You aren’t locked into an interest rate — expect it to change. On each market page, you can view the interest rate model, and graphs of interest rates (for suppliers, and borrowers) over the past two months.

Why is the supply rate lower than the borrow rate?

The interest paid by borrowers is earned by the suppliers of the asset. Because there are more suppliers, the interest rate they earn is proportionately lower; this measured by an asset’s Utilization Rate.

Second, a portion of the interest paid by borrowers is set aside as Reserves, which acts as insurance and is controlled by COMP token-holders.

On each market page, you can view the accumulated Reserves and Reserve Factor (the portion of interest set aside).

How is interest calculated?

Security

Is the Compound protocol safe? Has it been audited?

Our security page contains details on each security audit, and the formal verification of the protocol.

How does the protocol’s price feed work?

How can I view my balance, without trusting the interface?

To view your balance on the Ethereum blockchain, visit the Etherscan contract for the cToken, and scroll to 13. balanceOf. Enter your address, click Query, and your cToken balance (with 8 decimals) will be shown.

To calculate your balance in the underlying asset, multiply your cToken balance by 4. exchangeRateStored, and divide by 1e18.

Help! I can’t access Compound!

Governance

Who controls the Compound protocol?

How does Governance work?

Governance has complete control over the protocol, and all COMP tokens held by the protocol — the community manages the protocol as it sees fit.

How do I get involved in Compound Governance?

Compound

Compound is an algorithmic, autonomous interest rate protocol built for developers.

Compound

Compound is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.

Robert Leshner

Written by

Full-stack founder of Compound. Chartered Financial Analyst, previously a finance guy.

Compound

Compound is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.

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