Compound

Compound is an onchain lending protocol with two materially different product generations. In v2, each asset has a cToken market: suppliers receive transferable cTokens whose exchange rate reflects accrued interest, while the Comptroller combines entered markets for collateral and liquidation checks. Compound III, also called Comet or v3, gives each deployment one borrowable base asset and a list of collateral assets. Only a positive base-asset balance earns protocol interest; collateral does not.

COMP is the fixed-supply Ethereum governance token at 0xc00e94…6888. Its contract records balances, delegation and vote checkpoints. It is not cCOMP, not a lender receipt, and not the asset that borrowers owe. Holding COMP alone does not supply capital, earn interest, redeem protocol reserves or create a contractual share of fees.

The original problem was coordination: lenders wanted variable interest without negotiating a maturity or counterparty, and borrowers wanted collateralized liquidity from a pool. Compound's first market launched in September 2018; v2 made each supplied position portable through cTokens and used utilization-based rates.

Pooled risk also linked many borrowable assets through one account. V3 narrowed that surface. A Comet market chooses one base asset to borrow, while other approved assets serve only as collateral. That sacrifices the v2 “borrow many assets” model in exchange for isolated configurations, collateral caps and a different liquidation engine.

In v2, a cToken contract holds a market's cash and accounting. Its interest-rate model responds to utilization; interest accrues into borrow balances and the cToken exchange rate. The Unitroller proxy delegates risk checks to an upgradeable Comptroller implementation. When an account falls short, another address repays part of a debt and receives collateral, with protocol reserves potentially receiving a seize share.

In v3, one signed base balance represents either supplied base or debt. Separate supply and borrow indices accrue per second. Collateral expands borrowing capacity but earns no Comet interest. An underwater account is absorbed: protocol reserves retire its base debt and the protocol takes its collateral; buyers can later purchase that collateral with the base asset while reserves are below their target. This is not the same liquidation flow as v2.

Administration travels through contracts, not through every holder acting directly. The 2025 CompoundGovernor uses delegated COMP checkpoints, proposal rules and fractional voting, then sends passed actions to the Compound Timelock. The Timelock can change v2 parameters and implementations and, for v3, controls market proxies, the Configurator, factory and Comet implementations; non-Ethereum deployments receive governance messages through bridge receivers and local timelocks. Pause Guardians have narrower emergency powers. In v2 the guardian can stop mint, borrow, transfer and seize but cannot unpause or block redeem/repay. Each Comet names a pause guardian able to pause its supply, transfer, withdraw, absorb and buy paths; the governor can also set pause flags.