Compound Ether (cETH) is a token released by the Compound protocol. The token was created to make the process of earning interest from the cryptocurrency lending market easier.
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Read on to learn everything you need to know about the Compound protocol and the cETH cryptocurrency.
What Is Compound ETH
Compound is a decentralized software protocol running on the Ethereum network. Its native ERC-20 token, COMP, acts as a governance and incentive token, while several cTokens, including cETH, denote investment ownership rights.
Compound (COMP) can collateralize multiple crypto assets to provide various financial services, such as decentralized and autonomous borrowing and lending. In other words, the Compound protocol allows users to deposit cryptocurrency they own into lending pools designed for other users to borrow from them. Lenders earn interest on their deposits.
Once a user deposits their Ethereum tokens to Compound's Ether-based lending pool, users are awarded Compound Ether.
COMP has a max supply of 10 million tokens, while the supply of Compound Ether changes, depending on activities in the Ether pool. The protocol issues new tokens when users add funds and destroys cETH in the case of withdrawal.
Compound Founders
The software company Compound Labs was founded in 2017 by Robert Leshner and Geoffrey Hayes. The protocol officially launched on Ethereum took place in 2018.
Robert Leshner is the current CEO of the company. He's a venture partner at Robot Ventures, a pre-seed investor in fintech and blockchain companies. Leshner's experience also includes management roles in different financial companies. In 2011 he founded Safe Shepherd, a personal information protecting company.
Geoffrey Hayes, an experienced software engineer, is Compound's current CTO.
In 2018, Compound raised $8.2 million in funding from distinguished venture capital firms Andreessen Horowitz and Bain Capital Ventures.
The following year, Compound raised an additional $25 million from the same investors and Paradigm Capital, a VC fund with ties to Coinbase.
A share of the total supply of COMP cryptocurrency was initially distributed to the investors and the team.
How Does cETH Work
Compound (COMP) connects lenders with borrowers through smart contracts running directly on the Ethereum blockchain.
Borrowers are users who post cryptocurrency collateral on Compound and are then allowed to borrow other cryptocurrencies supported by Compound at a percentage of the published value.
Lenders are users who deposit their cryptocurrency to the lending pools and earn interest on the cryptocurrency they deposit.
The Compound protocol rewards lenders with its ERC-20 COMP tokens. The rewards are based on the number of cTokens held in their wallet and a varying interest rate depending on the available supply of that asset. The more liquidity a particular token has, the lower the interest rate generated.
Users who lend assets to the protocol can also take out a loan in any other cryptocurrency supported by the Compound protocol. So, borrowers get liquidated if the asset they borrow increases in value and becomes more valuable than the deposited collateral.
When users add tokens on Compound's Ether-based pool, their funds are locked in the smart contract. The protocol keeps original investments in Ether. Instead, users get Compound Ether. Liquidity providers can take out their tokens at any time.
The Compound Ether pool is currently the largest on the protocol by the volume of lending funds.
How to Buy cETH
To purchase cETH, users need to buy Ether or Bitcoin first. It's possible to do that via various exchanges like Binance, Coinbase, Huobi, and others.
Follow these easy steps to buy cETH:
Step 1: Register on Fiat-to-Crypto Exchange.
Step 2: Buy ETH with fiat money. Once you finish the KYC process, you will need to add a payment method. You can provide a credit/debit card or use a bank transfer. Depending on the country of your residence, some countries will offer instant cash deposits with low fees. Now you can buy Ethereum.
Step 3: Transfer ETH to an Altcoin Exchange. Since cETH is an altcoin, you must transfer your coins to an exchange that offers to trade cETH in various market pairs. Deposit ETH to the exchange, and you're all set to purchase cETH.
Step 4: Acquire a hardware wallet: If you plan to keep your cETH for a considerable long time, you may want to securely store them in a wallet. Hardware wallets like Ledger Nano S and Ledger Nano X are the most popular options in this category.
cETH's price is volatile. The token was traded at $6 at the time of launch. As of October 21, 2021, the all-time high of cETH was $108.07, reached on October 4, 2021.
