Deep Dive into Compound: Exploring the Ecosystem Layout and Value of the DeFi Lending Giant

A New Model for Decentralized Lending

Compound was launched in August 2017 as a lending protocol built on the Ethereum blockchain. Compared to traditional banking models, it introduces a completely new way of capital allocation—an ecosystem of lending that is fully automated and requires no intermediaries. In Compound’s operational logic, asset providers deposit cryptocurrencies into the protocol, while borrowers can utilize these assets and pay interest to liquidity providers.

This model breaks through the limitations of traditional finance. Unlike centralized banks, Compound relies on smart contracts to automatically execute all transaction logic, eliminating the need for manual intervention. This results in transaction transparency and higher efficiency. Especially regarding asset control, users always retain their keys and assets, unlike banks which do not offer such guarantees.

COMP Token Issuance Mechanism and Distribution Structure

To incentivize user participation, Compound launched an innovative “lending mining” mechanism in 2020. Whether users deposit, borrow, or repay loans, they can earn rewards in the native token COMP. The larger the lending activity, the greater the incentives.

COMP is an ERC-20 standard token with a total supply set at 10 million. The specific distribution structure is as follows:

• User incentives account for 50.05%, of which 42.3% is generated through mining, with an estimated annual output of about 850,000 tokens, to be mined over 4 years.
• Shareholders and the team hold 23.96% and 25.99%, respectively.
• Currently, the circulating supply has reached 9.686 million (circulation rate 96.68%), indicating most tokens are already in market circulation, with relatively manageable selling pressure in the future.

Team and Capital Strength

The founders of Compound are alumni of the University of Pennsylvania—Robert Leshner and Geoffrey Hayes. Leshner graduated with a degree in economics and has experience in web design and financial services, having founded Robot Ventures; Hayes was previously an engineer at Postmates and also founded Safe Shepherd.

The core team includes senior developers like Antonina Norair, design director Jayson Hobby, strategic advisor Calvin Liu, and legal expert Jake Chervinsky.

In terms of funding, Compound has completed three rounds, attracting over 31 investors, with a total of $70 million raised. The seed round in May 2018 raised $8.2 million from leading institutions such as a16z, Coinbase, Bain Capital, and Danhua Capital; Series A in November 2019 raised $25 million; Series B in November 2022 raised $37.6 million. These substantial funds support the protocol’s long-term development.

The protocol has also established about 26 key ecological partners, including high-frequency traders, market makers, centralized exchanges, OTC traders, and hedge funds, such as Altonomy, Magnet Capital, Amber AI, Formosa Financial, Genesis Global Capital, among others.

Ecosystem Status and Development Potential

As of the latest data, COMP is priced at $27.08, with a market cap of $261 million. Among global crypto assets, COMP ranks outside the top 100, and its position within the DeFi sector is relatively lower.

However, from the perspective of lending protocols, Compound’s position is significant. Its total value locked (TVL) exceeds $1.14 billion, accounting for nearly 20% of all DeFi applications, ranking second only to Uniswap. This indicates that Compound has accumulated a large user base and capital foundation within the DeFi ecosystem.

It is worth noting that Compound is not confined to the Ethereum ecosystem. The protocol has expanded to deploy on multiple chains such as Arbitrum and Polygon, broadening its service scope. Considering DeFi as a major direction for future financial innovation, such infrastructure protocols will directly benefit from the overall growth of the sector. The continued attention from large investment institutions also reflects their recognition of the project’s long-term value.

Price Evolution and Market Cycle Analysis

COMP was first listed in June 2020 at $58, then quickly surged to $280. During the 2021 bull market cycle, COMP rose from around $80 at the start of the year to a peak of $900 in May 2021, with a total increase of 1050%.

Since then, COMP entered a prolonged downtrend. In June 2022, it fell below its initial opening price, with a low of $26. By mid-2023, COMP has been oscillating within the $30–$80 range, down 97% from its all-time high of $900.

From a technical perspective, the $30–$80 zone is likely a support area in the bear market phase, with further downward momentum clearly diminishing. Future trend predictions suggest that in the second half of the year, the price may continue to bottom out, with a higher probability of breaking out of the range in the first half of 2024, potentially entering a bull market in the latter half.

Basic Investment and Purchase Strategy

For investors interested in participating in the Compound ecosystem, the usual method to buy COMP is through mainstream trading platforms. Before entering, complete identity verification and security settings. Decide on a bullish or bearish outlook, then determine position size and leverage according to personal risk tolerance. Most platforms offer stop-loss and take-profit functions, aiding risk management.

Given that COMP is a foundational DeFi infrastructure token, its long-term investment value is worth attention. For investors optimistic about the future of decentralized finance, Compound’s ecosystem position and financing background provide relatively solid fundamental support.