COMP, a digital token, allows the governance of the Compound protocol. The Compound protocol operates algorithmically-backed money markets via the Ethereum blockchain. Currently, the Compound protocol has more than $4 billion worth of interest-earning assets across various markets. The Compound protocol is a decentralized interest rate market for Ethereum assets that allows transparent transactions. The interest rates of the Ethereum assets vary depending on their supply and demand.
The Compound platform has lenders (those willing to lend a digital token) and borrowers (those who want to borrow crypto assets) that interact with the Compound protocol and earn through interest-bearing assets. COMP is one of the two types of digital tokens on the Compound protocol. This article emphasizes nine things you must know when buying COMP.
What is COMP?
COMP is an ERC-20 token. COMP tokens provide voting rights to govern the Compound platform. Essentially, as a governance token, COMP holders can propose, vote on protocol changes, and oversee reserves on the protocol. Unlike cTokens, only Compound Labs can mint new COMP tokens. The lending and borrowing of cryptocurrencies have become streamlined with COMP governance tokens. Lenders can send their tokens to the Compound and earn interest.
Borrowers, on the contrary, can borrow cryptocurrencies at a percentage of the face value. The DeFi system, through COMP coins, has eliminated the need to negotiate maturity or interest rate. cTokens, on the other hand, are interest-bearing smart contracts that can mint, redeem, and liquidate borrowing on the protocol. cTokens are integrated within each asset on the Compound protocol.
Where to Buy COMP?
It is easy and safe to buy COMP and other cryptocurrencies through platforms like Currency. You can also store digital tokens in Currency’s ultrasafe hot wallet for easy access or connect it with your debit or credit card. When finding a platform, go through its customer support offerings, user reviews, accessibility of the interface, and whether you need a local regulator or broker.
Most cryptocurrency exchange platforms differ in registration fees, available currencies, and deposit and withdrawal methods. Thoroughly research the trading platforms you have picked out, and compare payment and hot storage options before you begin investing.
Ways of Buying COMP
There are many ways to buy COMP coins. Some of the methods are:
Buying COMP coins with PayPal
PayPal is a great way to finance crypto purchases due to its ease of accessibility and usage. PayPal fees may vary, and some crypto exchange platforms might charge an additional fee for facilitating payment through PayPal.
Buying COMP coins with Credit or Debit Card
Linking your bank account with the trading platform is often the best way to buy COMP coins or other cryptocurrencies. Most credible crypto exchange platforms accept credit and debit card payments, which is much easier than PayPal for some.
Price Fluctuations within the Compound Protocol
COMP is a high-value and volatile token. Though it is a couple of years old, it is one of the top 90 digital currencies in the market. Market speculations affect price fluctuations in the DeFi market. Since COMP operates within the DeFi market, it is prone to speculations and frequent price hikes and lows. Especially in security breaches, the value of COMP and other DeFi tokens is prone to price reductions.
The DeFi system is revamping every minute of the day as new protocols come to the fore. The market is more competitive than ever, increasing the risk for new investors. To sum it up, crypto investment is unique in itself. For the validity of COMP’s investment, you must do your research and weigh the pros and cons of investing.
How Much Can You Earn With a COMP Investment?
While it is difficult to assign a specific figure on return from COMP’s investment, know that you can earn a substantial passive income with COMP. The Compound protocol facilitates the borrowing and lending of cryptocurrencies. So, instead of gaining from your cryptocurrency’s price hikes, you can earn from lending it during periods of price stability.
Apart from monetary benefits, you can support a tech revolution that challenges the traditional banking structure with a COMP investment. Perhaps, it might change the future of investment and banking.
COMP Investment is Autonomous
The inherent benefit of operating in the DeFi system is the autonomous transactions. As mentioned before, the Compound protocol uses smart contracts to facilitate buying and selling interest-bearing assets; thus, all financial activity with COMP is autonomous.
The tokens you purchase, and assets you tokenize and gain interest on, take place on an unknown network. There are no financial intermediaries, thus no hidden fees or surveillance. Every transaction within the Compound protocol is autonomous and secure.
COMP Enables the Tokenization of Assets
COMP enables the tokenization of other financial assets within the DeFi system. While Compound is not the only DeFi protocol that facilitates lending, it is known for the tokenization of assets. Through the Compound protocol, you can issue cTokens (the smart contracts mentioned before) to represent funds deposited in the system.
For instance, you can tokenize ETH or a stablecoin like USDC for lending to a third party. In exchange, tokenized versions like cUSD or COMP are issued. You can redeem COMP or cUSD for the initial deposit like USDC and the interest from lending it. As a beginner, it may be suitable to accrue COMP tokens as interest rather than buying them in huge amounts.
COMP Coins in Circulation
Only Compound Labs can issue new COMP coins. 2800 new COMP coins are minted and issued every day. Of the newly issued, lenders and borrowers receive 50% each. The total supply is at 10 million. In contrast, more than 7 million are in circulation as of the day of this article’s publication. The COMP coins are available for exchange on numerous cryptocurrencies exchanged. Make sure to research the platform before investing.
Ways to Store COMP Coins
There are two methods to consider when storing cryptocurrencies: hot and cold storage. Hot storage lets you keep your digital currencies in an online, secure platform like a trading exchange. In contrast, cold storage stores the digital currency in a physical location like an external hard drive.
Both methods have their pros and cons. Currency stored in hot wallets is more accessible than in cold storage. However, cold storage tokens are less prone to cyber-attacks and threats. To store COMP coins, look for an Ethereum-supported wallet since the Ethereum blockchain backs the Compound protocol.
Conclusion
Cryptocurrency investment has been a hot topic for years, but making the right decision is totally up to you and your research. There are plenty of golden opportunities, like when the value of COMP coins decreases, and you can buy them at a cheaper rate. However, this also depicts the highly volatile nature of COMP and other cryptocurrencies. It is difficult to pinpoint whether COMP is a good investment. Still, its interest-bearing property makes it a good source of passive income.
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