A comparison of protocols Timeswap and Compound.
Thanks to the development of the digital industry and marketplace tools in DeFi, protocols are emerging that allow users to lend or borrow money for a certain % from the comfort of their homes. Of course, competition among such protocols is growing and the quality of the product is improving.
Let’s look at two DeFi protocols — Timeswap and Compound, and compare their pros and cons.
Unlike banks, these protocols do not store deposits: funds are placed in smart contracts with which the user interacts directly.
Lenders and borrowers do not need to negotiate terms. The parties interact directly within a protocol that controls the amount of interest rate and collateral. There are no counterparties withholding funds.
Anyone who owns a Web3 Wallet, such as MetaMask, can access the platforms.
User Interface. Brief overview
COMPOUND Protocol
In the Compound working window there is only one tab, immediately you see the list of possible assets for Supply and Borrow Markets and their APY. There is no search by instrument, although there are not so many of them. The user has only a few options — to borrow or lend money, and also there is an opportunity to Enable as Collateral. Everything is simple and accessible.
TIMESWAP Protocol
The user of Timeswap protocol has the ability to select a network, to lend or borrow funds, as well as there is a tab info with information about the available pools.
In the tabs Lend/Borrow you can select Asset and Collateral from the list or using search, as well as for this pair select the recommended parameters (Recommended) or adjust your APR (Advanced) using the slider.
It may be a little more difficult for a beginner to understand this platform, but in my opinion it is more informative and flexible.
On the previous screenshot you can see that you also select Maturity for your pool, with APR and CDP displayed.
This concludes the introduction and now let’s move on to describing the differences of these protocols.
Price determination
COMPOUND Protocol
A Price Oracle maintains the current exchange rate of each supported asset; the Compound protocol delegates the ability to set the value of assets to a committee which pools prices from the top 10 exchanges. These exchange rates are used to determine borrowing capacity and collateral requirements, and for all functions which require calculating the value equivalent of an account.
TIMESWAP Protocol
Timeswap works without the need of oracles as lending and borrowing of assets is determined by the unique constant 3 product equation XYZ = K the APR & collateral factor are dynamically derived by user interaction with the AMM. Whereas in Compound & AAVE, collateral factor is a fixed number and is centrally decided through governance.
What it means
When using the oracle, there is a risk of liquidating your position, firstly because the oracle may malfunction and a sharp change in price will lead to the liquidation of your position, secondly because the oracle is vulnerable to hacking attacks. In the case of Timeswap you are not exposed to such a risk.
Interest rates
COMPOUND Protocol
Suppliers (and borrowers) of an asset interact directly with the Compound protocol, earning (and paying) a floating interest rate.
TIMESWAP Protocol
Timeswap offers flexibility for lenders and borrowers to decide their risk profile through flexible interest rates & collateral factors.
What it means
In the case of Compund with a floating interest rate the user cannot choose the yield based on his preferences. His return directly depends on the amount of funds in the pool. With the Timeswap protocol, the user has the ability to choose a personal interest rate.
Debt Financing
COMPOUND Protocol
Borrowing from Compound requires a user to specify a desired asset from the list.
TIMESWAP Protocol
Timeswap enables projects to borrow debt with their native tokens as collateral.
What it means
In the case of Compound, the user must exchange his assets for those available on the platform. This creates a number of inconveniences, including a partial loss of ownership. For Timeswap users there are no such problems, you can get funding without selling your native tokens.
COMPOUND Protocol
The Compound protocol allows users to borrow and repay loans at any time.
TIMESWAP Protocol
The Timeswap protocol allows users to take loans with a fixed maturity date. The user has a list of pools with a specific repayment date to choose from.
What it means
In the case of Compound, the user can withdraw their assets at any time, without waiting for a specific loan to mature. The user is not locked into dates and can return loan at any time, unlike the Timeswap protocol.
Conclusions
Technically both protocols have many similarities and serve the same purpose — they fill the gap between people with surplus assets they can’t use, and people without assets. However, Timeswap gives the user more freedom of choice with less risk. What will you choose?
