DeFI Diaries#2- COMPOUND Finance: What makes it so special?

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Written by

Crypto Enthusiast

3 years ago

In community: Crypto Mindset(9c1c)

These days DeFI is the buzzword in crypto space and new DeFi projects seem to be popping up each day. In this series called “DeFI Diaries” I will be reviewing the more popular options in DeFI as per my experience using them.

I recently made a post on AAVE which seems to be growing at a rapid post over the last few months. In case you missed that article you can access it here - https://www.publish0x.com/crypto-projects-sams-reviews/defi-diaries1-aave-why-is-it-getting-so-popular-xnlydve

In this post I will be covering COMPOUND Finance which is an older and bigger competitor of AAVE in terms of crypto asset deposits. I will also be sharing my views on what I think COMPOUND is doing better than AAVE and in which areas it could improve.

Advantages of COMPOUND

#1 Simple and Intuitive User Interface

COMPOUND has a very basic and easy to understand interface. Some people may find it old fashioned and boring compared to the colorful and stylish interface of AAVE but I think for people who are new to DeFI COMPOUND is a much easier platform to use. There is a main landing page with the dashboard which shows the assets you have lent out and the interest earned and the set of available crypto that you can lend or borrow and the rates applicable for each coin.

There is another tab which shows the Voting options. Here you can see the changes being proposed on the platform and which ones got passed and which were rejected.

#2 Reward in COMP Token

Just like all DeFI platforms you earn interest on the coins that you lend out eg. if you deposit DAI you will receive about 3-4% APY of DAI. What makes COMPOUND different from it’s competitors is that it offers COMP tokens depending on how many assets you have deposited on the platform. Considering how COMP token is appreciating in value this is a very lucrative feature for long term investors. The COMP you earn also allows you to participate in the voting process for all future changes on the platform. The more COMP you hold the more voting power you have.

Drawbacks of COMPOUND

#1 Support for very Limited Tokens

Currently COMPOUND supports very few tokens for lending as compared to it’s competitors. It does accept deposits of DeFI coins like DAI, ETH, USDC, BAT and USDT but it does not support the newer options like SNX, LINK, KNC and ENJ which are supported by AAVE.

#2 Lower Interest Rates

Compared to it’s key competitors like AAVE and dYdX it offers much lower interest rates. Eg. If we consider DAI which is the most popular lending option on DeFI sites COMPUND offers about 3% whereas it’s competitors offer 4-5%.

In case you want to see how the interface looks like and how easy it is to navigate the platform I am including a video below.