You should have heard of DeFi tokens, no worries if you haven't.
DeFi Tokens: DeFi has created a set of highly demanded tokens within the larger cryptocurrency ecosystem. With DeFi tokens outperforming BTC in 2020, the ecosystem is quickly turning towards popular protocol tokens as a way useful capture for DeFi's growth.
I'm getting to mention of 1 of DeFi token called compound or cTokens.
These token are simply ERC20 tokens representing a user's funds deposited in Compound. By putting ETH or another ERC20 like USDC within the protocol, users get the same amount of cTokens. for instance , locking up USDC within the protocol generates cUSD, it is a tokens which automatically earn interest for you.
Users can borrow crypto from Compound by putting up collateral above a threshold defined by the project. The project is a component of Ethereum and more broadly, DeFi.
The idea of DeFi is to be ready to solve the difficulty of users not having the ability to spend money from their savings earned a bit like it happens within the regular/traditional banks.
The idea is for users to be ready to spend money their savings earned while still saving.
Robert Leshner, a former economist, is that the founder and CEO of Compound.
Where Compound stands out is that the tokenization of the assets locked in their system through the utilization of cTokens.
Each asset has its own market and therefore the amount of supply or demand therein market determines the interest rates–how much money your cTokens will accumulate over time.
Besides earning interest on your crypto assets, which may be a fairly straightforward process of depositing crypto assets on the platform and receiving cTokens, you'll also borrow crypto on Compound. Borrowing crypto assets has the added step of creating sure the worth of your collateral stays above a minimum amount relative to your loan. If the worth of your collateral drops too far, you risk getting liquidated – having your collateral automatically sold to repay your loan.