Compound Introduces Ethereum Money Market
Finding it difficult to see returns in the cryptocurrency market these days? One San Fransisco startup is offering a different way to put your crypto investments to works, launching money markets for Ethereum. As MarketWatch reports, Compound’s new platform allows coinholders to earn interest by lending out their assets.
In a blog post by Compound founder CEO Robert Leshner, he explained that his company is “launching its money market protocol on the Ethereum blockchain — allowing individuals, institutions, and applications to frictionlessly earn interest on or borrow cryptographic assets without having to negotiate with a counterparty or peer. Each market has a dynamic borrowing interest rate, which floats in real-time as market conditions adjust.” Like Etherum itself, Compound’s money market will rely on blockchain technology. Leshner writes, “Blockchain assets are novel and exciting, but they lack the most fundamental financial infrastructure—efficient interest rates. Over time, hundreds of trillions of dollars of assets will be tokenized, but the institutions that deploy them will require the usefulness of traditional financial markets—today’s launch is just the first step.”
Because Compound’s money market will match lenders to interest rates, Compound notes that users will have great flexibility when borrowing or lending coins. They explain, “You can borrow for six hours, and pay six hours of interest. You can lend for two hours and earn two hours of interest.” Additionally, while algorithms will be employed to determine rates, the company anticipates annualized rates to come in between 5% and 10%.
While Ether is the headlining token supported on the protocol, Compound will also support 0x, Basic Attention Token, and Augur at launch. Additionally, the company has plans to introduce a stablecoin offering, which will be pegged to the U.S. dollar.
Currently the Compound protocol can be accessed through their app using a Web3 browser. However the company warns this initial release “should be considered extremely experimental technology.” As a result they encourage potential users to review the source code for themselves and evaluate the protocol’s safety before proceeding.
Although this warning will likely serve to keep less adventurous crypto investors at bay for now, surely those attentive to the cryptocurrencies space will take an interest (no pun intended) in what Compound is building. Moreover, with Etherum and other altcoins slumping as of late, introducing a different way for investors to cash in on crypto could help get things moving in the right direction once again. With that, hopefully Compound can pull off their big Ethereum money market idea and bring the protocol to a wider audience in the coming months.