Compound

Compound is a decentralized lending and borrowing protocol on Ethereum that allows users to supply crypto assets to earn interest or borrow against their holdings. Founded by Robert Leshner and Geoffrey Hayes in 2018, Compound became one of the foundational building blocks of decentralized finance. In June 2020, Compound launched the COMP governance token with a revolutionary liquidity mining program that rewarded users with COMP tokens for both lending and borrowing — a mechanism that ignited what became known as 'DeFi Summer' and popularized the concept of yield farming across the entire crypto industry.

The protocol operates through algorithmically determined interest rates based on supply and demand for each asset. When more users want to borrow an asset, interest rates rise to incentivize lending; when borrowing demand drops, rates decrease. This creates efficient, transparent money markets without intermediaries. Each asset supplied to Compound generates cTokens (like cETH or cUSDC) that represent the user's share of the lending pool and automatically accrue interest over time.

Compound has evolved significantly since its DeFi Summer heyday. Compound III (Comet) launched in 2022 with a simplified architecture focused on capital efficiency, allowing users to borrow a single base asset (USDC) against multiple collateral types. By 2026, Compound has expanded across multiple chains and continues to serve as critical DeFi infrastructure, though it faces intense competition from Aave and newer lending protocols. The COMP token governs all protocol parameters and upgrades through on-chain voting.