COMPUSD
Compound / United States dollar
crypto Bitfinex

Compound is a lending platform built on Ethereum that enables users to permissionlessly borrow or lend from a pool of assets. Rather than interest rates being set by individuals, they are determined algorithmically based on the proportion of assets lent out. Compound pools are created by users supplying assets in return for ERC-20 "cTokens" which entitle holders to a fixed percentage of the overall pool. As borrowers withdraw funds and repay them with interest, the total pool size increases giving cToken holders the right to a growing balance meaning they are continuously earning interest. Borrowers can withdraw an amount up to their total capacity equaling the sum of the token balance multiplied by the collateral factor which is a number 0-1 representing the portion that can be borrowed. An asset with a high collateral factor means it is a better form of collateral and typically a relatively liquid, large market capitalization asset. In the event the collateral decreases in value past the close factor, then third parties can purchase the underlying collateral minus a liquidation discount (currently 5%) in order to repay the debt. The interest rate paid on the debt is determined by market forces. As the ratio of borrowed assets to total pool size increases, the interest rate will increase accordingly to incentivize more lenders to come in and ensure the pool doesn't run out.