Compound, an Ethereum-based open-source lending platform has raised $8.2 million in seed funding by Transmedia Capital, Compound Ventures, Abstract Ventures and Danhua Capital to launch a money market. This market will allow all types of investors–major corporations or individual investors–to earn interest by lending cryptocurrency. It has an ability to algorithmically work out interest rates based on asset-specific supply and demand. So, investors will not have to worry about negotiating terms, rates, or complex flows.
How can you earn an interest on your cryptocurrencies?
In the Compound platform, user’s tokens are matched and lent to another user after it calculates the supply of each users. When you lend your cryptocurrencies, you will earn interest overnight and when you borrow, you will have to put 100% of the value you borrowed in an asset that Compound supports.
The interest rate is set by analyzing supply and demand for a particular crypto asset. The interest rate set by Compound is fluctuating which gets adjusted as the market condition changes.
Who created Compound?
Compound is created by CEO Robert Leshner and CTO Geoffrey Hayes, a San Francisco-based development team. They worked together as a team for 11 years since going to college together at the University of Pennsylvania.
Compound is their third company. Leshner is an economics nerd and chairman of San Francisco’s Bond Oversight Committee.
Leshner wondered, “Why can’t I realize the time value of the cryptocurrency I possess?” and thus Compound was created in mid-2017 and came into light in January 2018.
He thinks the concept is a game changer as around 90% of the assets are sitting idle in people’s wallets or exchanges and Compound could let people interact and trade with cryptocurrencies in a whole new way.
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