Review on Compound by Fanuel PORPORTY
Discover Compound, a decentralized cryptocurrency lending system.
Compound is a major player in decentralized finance and is present in the Ethereum ecosystem with a fairly simple principle: allow users to lend their ether for interest. Note that Compound is not a peer-to-peer loan protocol, rather it works like a liquidity pool. These pools have different parameters depending on the type of token that is made available on them. These parameters are in particular the different interests of the loans of these funds, which are determined algorithmically. The loan is made by depositing a guarantee. The collateral funds must be greater than the borrowed funds, with a factor that differs depending on each token.
The use of DeFi protocol as a compound entails risks, in particular that of liquidation, if the borrowed funds exceed the borrowing capacity on the protocol. But other risks may exist such as flaws in the smart-contracts that make up the protocol as well as the oracles that provide information to the latter, but rest assured the compound project has proven itself and its code very often audited.
Pros
- Compound users can decide the future of the Compound protocol
- A delay system for modifications by a Compound's smart-contracts administrator.
Cons
- The DéFi ecosystem is not very mature and there is still relatively little use of cryptocurrencies in everyday life.
