Core Mechanism of Compound and COMP
Compound is a decentralized lending platform based on the Ethereum blockchain, launched in August 2017. Its business model is similar to that of a bank but operates through smart contracts for automatic execution. Users deposit crypto assets into the protocol to earn interest, and borrowers pledge assets to borrow the required tokens. This decentralized finance (DeFi) model offers higher transparency and lower barriers to entry compared to traditional banks.
To incentivize user participation in the lending ecosystem, Compound introduced the innovative "lending and mining" mechanism in 2020. Whether borrowing, lending, or repaying, users can earn the native token COMP as a reward. The larger the mining amount, the greater the reward. COMP is an ERC-20 standard token with a total supply of 10 million tokens, of which 50.05% are allocated to platform users, 23.96% to shareholders, and 25.99%