HODLers looking for returns on their crypto now have more flexibility in the Compound app.
The decentralized finance (DeFi) pioneer’s latest version launched Thursday with a number of new features, including tokenization of user deposits.
“Version 2 allows the protocol to support every traded ethereum asset, as well as enable developers to more easily build applications on top of the protocol,” Compound founder Robert Leshner told CoinDesk.
Compound is a lending platform that gets its principal from people who want to earn money from their crypto holdings without selling. Rates are set algorithmically by supply and demand on the protocol. For borrowers, it’s a fast way to borrow crypto (typically for trading) at clear, publicly stated prices. This is especially useful, for example, for shorts.
In Version 1, users could deposit any of five tokens – ETH, BAT, DAI, REP and ZRX. With this new version, USDC will be immediately available and a total of 50 tokens will be available for depositing and lending by year’s end.
Institutional-friendly
Tokenizing deposits should make it more attractive for potential institutional depositors.
Leshner explained that Version 2 will create a token for each deposit someone makes. So depositing BAT will yield cBAT. Anyone who returned cBAT to Compound will get back their original BAT plus whatever interest those deposits had earned.
Additionally, Compound has managed to engineer the smart contract in such a way that all cBAT are fungible.
These tokens are tradeable, though Leshner does not expect many users to take advantage of that functionality early on. More likely, the chief use case will be cold storage.
“Institutions aren’t using web apps with MetaMask,” Leshner said, referring to the popular ethereum browser extension. Instead, Leshner says institutional dev teams can build ways to put their Compound tokens into cold storage, giving them much higher security.
Developer-ready
Compound wants to be wired into other apps.
Previewed on Medium in April, the vision for Compound has always been interoperability with third-party applications. This functionality has been enhanced with the new version, and it already has several partners who have built the new version into their applications.
- Coinbase Wallet will let users see their balance on Compound in the app.
- Zerion will make it easy to deposit and track interest gains.
- Opyn will connect Compound to Uniswap for easy margin trading.
As CoinDesk previously reported, even Compound’s first version worked with Staked, a staking-as-a-service provider.
With an initial backing of $8.2 million, Compound has notable investors including Bain Capital Ventures, Andreessen Horowitz, Polychain Capital and Coinbase Ventures.
Over $100 million moved through Version 1, Leshner told CoinDesk. He said that even he was surprised by the amount it was used.
Said Leshner of Version 2:
“This is the ‘real’ product.”
Compound founder Robert Leshner image via Vimeo