Decentralized Finance (DeFi) loan platform Compound (COMP), It appears to be trying to grab a share of the institutional crypto lending business that has shaken central rivals from Genesis to BlockFi.
Long-running crypto loan protocol, bitcoin and Ethereum It incorporates a borrowing service for institutions that will accept cryptocurrencies such as cryptocurrencies as collateral against stablecoin loans.
Institutions Receiving Credit from DeFi Platform Compound Will Pay Interest to Users
Institutions will pay interest on their loans and generate returns for DeFi users who lend their stablecoins to Compound. A 6% interest rate will be applied to borrowings made through the platform.
These details may bring to mind loans to Three Arrows Capital and other bankrupt companies. However, such thinking cryptocurrency It ignores an important point about credit markets.
The Compound Treasury’s debits and credits are included and subtracted into smart contracts, meaning all positions are transparently open to everyone (a key difference from central lenders).
Additionally, positions on decentralized finance are over-collateralized to protect against asset price breaks and fluctuations.
In over-collateralized loans, people who want to get a loan have to deposit more than they want to get as collateral.
Reid Cumming, Compound’s vice president of treasury, said in a statement:
“It makes a unique difference that we will be supplying liquidity from both institutions and the Compound protocol to deliver this service. This now means a new hybrid DeFi.”
*Not investment advice.
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