Compound Finance : is this the future ?
How I discovered Compound Finance ?
I first discovered Compound Finance when Coinbase stock was publicly trade on the Nasdaq Exchange. Then at that moment, I started to analyse the S1 form published by the SEC ( https://www.sec.gov/Archives/edgar/data/1679788/000162828021003168/coinbaseglobalincs-1.htm ) and I found that " Compound is an autonomous interest rate protocol that allows users to supply and borrow digital assets at interest rates derived purely based on supply and demand ".
I figure out that Coinbase has invested some money in this blockchain protocol throught Coinbase Ventures (https://ventures.coinbase.com/).
What is Compound Finance ?
It's what we call a Decentralized Finance system based on the blockchain. To be more precise, you can borrow or lend some crypto-asset without the help of a financial institution avoiding some banking fees, without any restriction (KYC) and also the process of lending or borrowing is very quick for both parts (it takes a few minutes lenght).
Let's have an example. If I have a crypto-wallet with some USD Coins, I can lend some dollars @ a rate of 7,7% a year...And it appears that there's almost 3,4 B$ of USD Coins that is lend throught this Decentralized Finance blockchain like Compound Finance. A USD Coin is a crypto currency that is backed by the dollars. In fact 1 USD Coin = 1 $. If you don't want to be long on one particular crypto currrency because it's very volatile, but you want to be a user of the DeFi protocol : the use of USD Coins is for you.
For example, I think it can be interesting if you have a portfolio with cash and cash equivalents in $, to invest in USD Coins and look for a return of 7,7% per year throught the Compound Finance protocol. On my opinion, it's very difficult to look after that kind of return with liquidity asset in traditionnal banks. And it's even more interesting for a european investor because it seems that the $ is very cheap today (1 euro trades at 1,20 $).
The Compound token : is it interesting ?
If you are interested by the functionality of this Decentralized Finance blockchain, you might be interested in investing in the Compound token.
To have a brief overview of the price and the market capitalization of the crypto currency Compound, I suggest to have a look @ https://coinmarketcap.com/currencies/compound/
The market capitalization of the Compound token is 2,3 B$ (04/20/21).
Within all the crypto assets currencies, the Compound token is ranked #53. While Bitcoin and Ethereum is ranked #1 and #2.
What is the major risk in investing in the compound token protocol ? Providers may choose to stop providing that liquidity at anytime.
All investors should do their own investigation before depositing tokens into a decentralized finance protocol
To conduct your own diligence, here below some links to dive more into the Compound protocol :
- https://research.binance.com/en/projects/compound
- https://app.intotheblock.com/coin/COMP?pid=binance&utm_source=binance_widget
WARNING
The opinions and content shared in this blog are for informational and educational purposes only and should not be interpreted as a recommendation to buy, sell or any other type of investment transaction, or request for transactions or clients.
Past performance of exposed strategies or assets may not continue or be inconsistent, and stocks or bonds, or crypto assets may not behave as described.
The information in this blog is believed to be adequate, but no one should act on the information it contains. It is not recommended that anyone act on any investment information without first consulting an investment adviser as to the suitability of such investments for their personal circumstances.
AVERTISSEMENT
Les opinions et le contenu partagés dans ce blog sont uniquement informatifs et éducatifs et ne doivent pas être interprétés comme une recommandation d'achat, de vente ou de tout autre type d'opération d'investissement, ou de demande de transactions ou de clients.
Les performances passées des stratégies ou des actifs exposés peuvent ne pas se poursuivre ou être incohérentes, et les actions ou obligations peuvent ne pas se comporter comme décrit.
Les informations contenues dans ce blog sont considérées comme adéquates, mais personne ne doit agir sur les informations qu'il contient. Il n'est pas recommandé à quiconque d'agir sur des informations d'investissement sans consulter au préalable un conseiller en investissement quant à l'adéquation de ces investissements à sa situation personnelle.
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