Compound is a decentralized finance (DeFi) protocol built on Ethereum. It lets users lend and borrow crypto without banks. Instead, everything runs on automated smart contracts. If you deposit crypto, Compound gives you cTokens. These represent your balance in the pool. In fact, they earn interest every time a new Ethereum block is created.
Now, if you want to borrow crypto, you must provide collateral. It must be worth more than what you borrow. This keeps the system safe. If your collateral drops in value, your position may be liquidated. Moreover, every user interaction earns COMP tokens. These tokens act as both rewards and governance tools. You can vote on changes to the protocol or delegate your vote to someone else.
See, COMP has value because it gives users a voice. It also distributes power to the community—not just the developers. Consequently, Compound is more than just a lending app. It’s a decentralized financial marketplace with global access. Founded in 2018 by Robert Leshner and Geoffrey Hayes, Compound has grown fast. In fact, it raised millions from major investors like Andreessen Horowitz and Coinbase Ventures.
How Does The Compound Protocol Work?
Compound runs on smart contracts that manage lending and borrowing automatically. Users deposit supported crypto into liquidity pools. In return, they receive cTokens, which grow in value as interest accrues.
Borrowers lock in more crypto than they borrow. This over-collateralization protects the protocol. If collateral drops below the safe level, it gets liquidated to repay the loan. Interest rates adjust in real time. They depend on how much of each asset is available. More supply means lower rates. Less supply pushes rates up.
Everything—deposits, loans, interest—is handled by code. No approvals, no paperwork. Just your wallet and the protocol.
Ethereum Foundation Adopts DeFi Strategy, Sends 45,000 ETH to Aave, Spark, and Compound
On February 13, 2025, the Ethereum Foundation shifted its treasury management approach by allocating 45,000 ETH, worth approximately $120 million, to leading DeFi lending platforms—Aave, Spark, and Compound. Specifically, Compound received 4,200 ETH (around $11.24 million) as part of this move. This marks a strategic shift from periodically selling ETH to instead earning passive yield through decentralized lending protocols. According to estimates, this new approach could generate up to $1.5 million annually at an average 1.5% supply rate.
The move follows community criticism over ETH sell-offs used to fund operations. In response, the Foundation confirmed it would explore DeFi and staking as alternatives to liquidating core assets. The community largely welcomed the update, seeing it as a more sustainable and decentralized treasury model.
In short, the Ethereum Foundation’s decision signals institutional confidence in Compound and validates its use as a secure, yield-generating platform within Ethereum’s own ecosystem.
Compound (COMP) at Risk of 11% Price Drop
- On January 24, 2025, analyst Ali Martinez warned that Compound (COMP) may drop by 11% to $69. He observed that COMP is trading in a parallel channel, forming lower highs and lower lows.
- At the time, COMP was priced at $77.89, up 3.6% in 24 hours, but still down 13% in a week. The token is 91.42% below its all-time high of $911.20.
- Technical signals support the bearish view. The Relative Strength Index (RSI) sits at 47.62, showing weakness. Trading volume rose 57.79%, indicating rising bearish pressure.
- The MACD indicator also shows a near-crossover. A break below $77 could trigger a sharper decline. The MACD histogram is turning red, which confirms downward momentum.
- In short, Compound may face more losses if it fails to hold key support levels.
Benefits of Using Compound
According (Kraken, Earn Passive Income Users supply crypto to lending pools and automatically earn interest. Rates are algorithmically adjusted based on supply and demand.
- Instant Access to Liquidity
Borrowers can lock crypto as collateral and instantly borrow other supported assets. No credit checks or approvals needed (CoinMarketCap Academy, 2021). - Full Control of Funds
Compound is a non-custodial DeFi protocol. All interactions occur via Ethereum smart contracts, not third-party intermediaries (Ethereum.org, 2023). - COMP Token Incentives
Every lending or borrowing action earns users COMP tokens. These rewards boost overall returns. - Governance Participation
COMP holders can vote on protocol updates, rate changes, and asset listings. Delegation is also allowed, giving voice to non-technical users (Compound Docs, 2024). - No Lock-in Requirements
Users can withdraw their funds at any time. There are no maturity dates or early exit penalties.
In fact, these benefits have helped Compound grow into one of the top DeFi platforms, with billions in total value locked and thousands of active users.
Compound (COMP) Price Rallies 50% After Upbit Listing — What Next
The Compound (COMP) token surged 50% in 24 hours after being listed on Upbit, South Korea’s top crypto exchange. In fact, the token broke out of a bearish pattern, reaching $52.79, up from $38.83 intraday.
Trading volume rose sharply, jumping from $25 million to over $200 million, confirming strong investor interest. Moreover, the Relative Strength Index (RSI) climbed to 63.43, signaling rising bullish momentum. The Money Flow Index (MFI) and Bull Bear Power (BBP) also turned positive, suggesting buyers are now in control.
Now, if this momentum continues, COMP may test $67.42, with a higher target at $76.78 near the 0.618 Fibonacci level. However, if trading volume drops again, COMP could fall back below $59.82 or even toward $40.
| Price Level | Context / Meaning |
| $38.83 | Intraday price before Upbit listing |
| $52.79 | Post-listing price after 50% surge |
| $59.82 | Resistance level to hold for bullish continuation |
| $67.42 | Short-term price target if rally sustains |
| $76.78 | 0.618 Fibonacci level – potential higher target |
| $40 | Downside risk if volume drops significantly |
What’s Next for Compound? Future Upgrades and Trends
Compound is focusing on long-term sustainability through governance, integrations, and innovation. In fact, its community continues to vote on key proposals via the Compound Governance system. These proposals affect protocol parameters like interest rates, collateral factors, and supported assets. According to Compound Labs, such upgrades ensure decentralized control over future development.
Moreover, Compound III (v3), its latest upgrade, simplifies the protocol. It removes pooled collateral and focuses on single-asset borrowing. This change reduces liquidation risk and gas fees—two major user concerns. Now, integrations with platforms like Coinbase Wallet, MetaMask, and DeFi aggregators are boosting accessibility. Also, as more institutions enter DeFi, protocols like Compound are poised to benefit from increased Total Value Locked (TVL) and lending demand.
Consequently, trends show Compound may explore cross-chain lending, stablecoin expansion, or institutional-grade features. Analysts at Messari suggest that scalability, security, and governance will be Compound’s key priorities in 2025.
Final Thoughts—Is Compound Still a Strong DeFi Option?
Compound remains a relevant player in the DeFi space. In fact, it consistently ranks among the top lending protocols by total value locked (TVL), with over $2.9 billion as of June 2025—according to DefiLlama. Moreover, Compound’s shift to v3 reflects a focus on safer, gas-efficient borrowing. This aligns with user demands for simplicity and reduced risk. Now, despite price volatility, institutions like the Ethereum Foundation still trust Compound. Their recent deposit of 4,200 ETH proves ongoing credibility.
Consequently, its transparent governance, steady upgrades, and strong ecosystem ties make it a viable long-term option—especially for users seeking decentralized borrowing and passive income.
