Compound Crypto: What It Is, How It Works, and Where It Fits in DeFi
When you hear Compound, a decentralized finance protocol that lets users lend and borrow crypto without banks. Also known as Compound Finance, it was one of the first platforms to prove you could earn real interest on your crypto just by leaving it in a smart contract. Unlike traditional banks, Compound doesn’t hold your money—it uses code to match lenders with borrowers on the Ethereum blockchain. Your crypto doesn’t sit idle. It’s lent out to others, and you get paid in real time, in crypto, with no paperwork or credit checks.
Compound isn’t just a lending tool. It’s part of a bigger system called DeFi protocols, blockchain-based financial services that replace middlemen like banks and brokers. These protocols—like Aave, MakerDAO, and Curve—form the backbone of crypto finance. Compound stands out because it’s transparent, open-source, and lets anyone participate, no matter where they live. Its native token, COMP, gives users a say in how the protocol evolves. That’s governance in action: if you hold COMP, you vote on changes like interest rates or new assets.
But Compound isn’t magic. It runs on crypto lending, the practice of supplying digital assets to a protocol so others can borrow them, usually by putting up collateral. If you lend ETH, someone else borrows it to trade or leverage their position. If they default, the protocol automatically liquidates their collateral. That’s why you need to understand risk. Rates change every few seconds based on supply and demand. A high APY today could drop tomorrow if too many people start lending the same coin.
You’ll find posts here that dig into real cases: who earned from Compound, who got burned by sudden rate drops, and how it compares to staking or yield farming. Some users treat it like a savings account. Others use it as a lever to amplify trades. The truth? It works best when you know what you’re doing—and when you’re not chasing the highest rate without checking the risks.
Compound isn’t the only player, but it’s one of the oldest and most tested. It helped build the DeFi world we have today. Whether you’re earning interest on USDC, borrowing DAI, or just trying to understand how crypto finance actually works, Compound is where you start. Below, you’ll find guides that cut through the noise—no hype, no fluff—just what you need to know to use it safely and smartly.
How Interest Rate Models Work in DeFi Lending Protocols
DeFi lending uses algorithmic interest rate models based on utilization rates to balance supply and demand. Learn how Aave, Compound, and MakerDAO calculate rates, why they spike, and how to use them safely.
- August 27 2025
- Terri DeLange
- 11 Comments