Compound is a decentralized lending protocol built on Ethereum smart contracts. It enables users to deposit crypto assets (e.g., ETH, USDC) to earn variable interest, or collateralize assets to borrow others. Its core mechanism is cToken: users receive cTokens upon deposit, whose exchange rate rises with accrued interest, representing principal plus yield. Interest rates are dynamically determined by pool utilization, not fixed. Borrowing requires over-collateralization; positions with health factor below 1 are subject to liquidation. The protocol is governed by COMP token holders via on-chain voting.