Compound’s price today stands at US$41.37, with a 24-hour trading volume of $54.62 million. Over the past day, COMP has seen no price change, recording a flat +0.00%. The token has a circulating supply of 9.39 million COMP and a maximum supply capped at 10 million, making it a deflationary asset as issuance nears completion.
What Is Compound?
Compound is an Ethereum-based decentralized finance (DeFi) platform that enables users to lend and borrow digital assets without intermediaries or permission. Unlike traditional financial systems, Compound operates through algorithmically determined interest rates that fluctuate based on supply and demand within each asset pool. This dynamic pricing model ensures efficient capital allocation across the ecosystem.
The platform's native utility token, COMP, is an ERC-20 token built on Ethereum. It serves primarily as a governance mechanism, allowing holders to vote on proposals, shape protocol upgrades, and influence the future direction of the network. This decentralized governance model empowers the community to maintain control over one of the most influential lending protocols in DeFi.
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A Brief History of Compound
Founded in San Francisco, Compound entered the crypto landscape in May 2018 with an initial seed funding round of $8.2 million. The project was spearheaded by Robert Leshner, a former economist and public finance expert who previously served on San Francisco’s Revenue Bond Oversight Committee. His deep understanding of centralized financial systems provided a strong foundation for transitioning those principles into decentralized frameworks.
In November 2019, Compound secured $25 million in Series A funding led by prominent venture capital firm Andreessen Horowitz, signaling strong institutional confidence in its vision. That same year, the protocol received a $1 million grant in USD Coin (USDC) from Coinbase’s USDC Bootstrap Fund—an early endorsement of its potential within the growing stablecoin economy.
A pivotal moment came on June 16, 2020, when Compound launched its COMP governance token. Distributed directly to users through liquidity mining, COMP rapidly gained traction and became the largest DeFi token by market capitalization within just 24 hours of trading. This marked the beginning of the "DeFi summer," a period of explosive growth and innovation across decentralized finance.
By May 13, 2021, Compound achieved a record total value locked (TVL) of $12.45 billion, showcasing widespread adoption among retail and institutional participants. As of mid-2022, the platform maintained over $4 billion in TVL, reflecting sustained trust and utility despite broader market volatility.
How Does Compound Work?
At its core, Compound leverages yield farming mechanisms to create passive income opportunities for users. Through automated smart contracts, it offers an accessible DeFi experience—even for those without advanced technical knowledge. All users need to do is deposit supported cryptocurrencies into liquidity pools to start earning interest instantly.
Lending and Borrowing Mechanics
Compound functions as an open lending market where anyone can supply assets or borrow against collateral. There are no credit checks or identity verifications—access is permissionless. When users lend their crypto (such as DAI, ETH, USDC, USDT, WBTC, BAT, REP, ZRX, or SAI), they earn variable interest rates determined by real-time market conditions.
Borrowers must provide collateral exceeding a minimum threshold defined by the protocol. The amount they can borrow depends on the value of their deposited assets. If the collateral value drops below a safe level due to market fluctuations, the system automatically triggers liquidations to protect lenders.
These processes are executed via audited smart contracts developed and maintained by Compound Labs. The protocol has undergone rigorous security reviews by leading blockchain auditing firms such as OpenZeppelin and Trail of Bits, ensuring robustness and resilience against exploits.
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Use Cases of the COMP Token
The COMP token plays a central role in maintaining the decentralization and long-term sustainability of the Compound ecosystem.
Governance Participation
As an ERC-20 governance token, COMP enables holders to submit, debate, and vote on proposals that affect the protocol’s operation—ranging from interest rate models to new asset listings. Each COMP token represents one vote, promoting a fair and distributed decision-making process.
This community-driven approach ensures that no single entity controls the protocol’s evolution. Instead, stakeholders collectively guide upgrades and risk parameters, enhancing transparency and user trust.
Incentivized Participation
To encourage active engagement, Compound distributes COMP tokens to users who supply or borrow assets on the platform. Approximately 1,139 COMP tokens are distributed daily across various markets. Half of these rewards go to lenders (suppliers), and half to borrowers.
This dual incentive model promotes balanced liquidity growth: suppliers are rewarded for providing capital, while borrowers help maintain healthy utilization rates in lending pools. Over time, this design fosters a self-sustaining economic loop that strengthens network effects.
Why Compound Matters in DeFi
Compound helped pioneer the concept of algorithmic money markets in blockchain finance. By removing gatekeepers and automating financial services through code, it laid the groundwork for a more inclusive and transparent financial system.
Its success inspired countless other DeFi protocols and demonstrated that decentralized lending could scale securely and efficiently. With strong backing from top investors, rigorous code audits, and continuous community governance, Compound remains a cornerstone of the Ethereum ecosystem.
As DeFi continues to mature, platforms like Compound will play an essential role in bridging traditional finance with blockchain innovation—offering faster settlements, global access, and programmable money tools for developers and end-users alike.
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Frequently Asked Questions (FAQ)
Q: What is the current price of COMP?
A: As of now, the price of COMP is $41.37. Prices may vary slightly depending on the exchange due to liquidity differences.
Q: How many COMP tokens are in circulation?
A: There are currently 9.39 million COMP tokens in circulation, with a maximum supply limited to 10 million.
Q: Can I earn passive income with Compound?
A: Yes. By supplying crypto assets like USDC or DAI to lending pools, you earn interest over time. Additionally, active users receive COMP token rewards daily.
Q: Is Compound safe to use?
A: Compound uses audited smart contracts and has undergone multiple security assessments by reputable firms like OpenZeppelin and Trail of Bits. While no system is risk-free, it is considered one of the more secure DeFi protocols.
Q: What blockchains does Compound support?
A: Originally built on Ethereum, Compound has expanded to other EVM-compatible chains through strategic deployments, increasing accessibility and reducing transaction costs for users.
Q: How do I participate in Compound governance?
A: To participate in governance, you need to hold COMP tokens or receive voting delegation from another holder. You can then propose changes or vote on existing proposals via the governance portal.
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