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There are dozens of different platforms in the world of decentralized finance. The most popular DeFi platforms are decentralized cryptocurrency lending and borrowing services. These offer incredible benefits to both lenders and borrowers, primarily because there is no third party in the middle requiring elaborate paperwork and taking a cut of all transactions. Compound Finance is the first DeFi lending platform to become popular in the cryptocurrency space, mainly because of the incredibly high interest rates users could earn for lending their funds to the platform.
Who created Compound Finance?
Compound Finance was created by California-based Compound Labs. Compound Labs has been developing the platform since 2018. The goal of the platform is to allow users to put their idle cryptocurrency to use. This was and continues to be an attractive selling point since many investors in the cryptocurrency space simply hold on to their cryptocurrency until the market goes up before selling. Compound Finance wants lenders to be able to earn interest on this cryptocurrency which otherwise sits in their wallets and give easy access to cryptocurrency lending services to borrowers.
How does Compound Finance work?
Like most other DeFi platforms, Compound Finance is built on the Ethereum blockchain. As you may already know, Ethereum is a cryptocurrency which also lets you build custom platforms. Every platform built on Ethereum consists of smart contracts — programs which automatically execute a series of transactions. You can think of smart contracts like automated applications that cannot be modified once released. Every DeFi platform is fundamentally a collection of automated applications (smart contracts) working together.
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