Whitepapers Compound COMP White Paper Explained Summary

Compound COMP White Paper Explained Summary

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Compound COMP White Paper

Summary:

-Compound is a decentralized system for the frictionless borrowing of Ethereum tokens without the flaws of existing approaches, enabling proper money markets to function, and creating a safe positive-yield approach to storing assets.

-The market for cryptocurrencies and digital blockchain assets has developed into a vibrant ecosystem of investors, speculators, and traders, exchanging thousands of blockchain assets.

-Unfortunately, the sophistication of financial markets hasnt followed: participants have little capability of trading the time value of assets.

-Interest rates fill the gap between people with surplus assets they cant use, and people without assets (that have a productive or investment use); trading the time value of assets benefits both parties, and creates non-zero-sum wealth.

-For blockchain assets, two major flaws exist today:

● Borrowing mechanisms are extremely limited, which contributes to mispriced assets (e.g. scamcoins” with unfathomable valuations, because theres no way to short them).

● Blockchain assets have negative yield, resulting from significant storage costs and risks (both on-exchange and off-exchange), without natural interest rates to offset those costs. This contributes to volatility, as holding is disincentive.

-Centralized exchanges (including Bitfinex, Poloniex…) allow customers to trade blockchain assets on margin, with borrowing markets” built into the exchange.

-These are trust-based systems (you have to trust that the exchange wont get hacked, abscond with your assets, or incorrectly close out your position), are limited to certain customer groups, and limited to a small number of (the most mainstream) assets.

-Finally, balances and positions are virtual; you cant move a position on-chain, for example to use borrowed Ether or tokens in a smart contract or ICO, making these facilities inaccessible to dApps.

-Peer to peer protocols facilitate collateralized and uncollateralized loans between market participants directly.

-Unfortunately, decentralization forces significant costs and frictions onto users; in every protocol reviewed, lenders are required to post, manage, and (in the event of collateralized loans) supervise loan offers and active loans, and loan fulfillment is often slow & asynchronous (loans have to be funded, which takes time).

Explained – Compound COMP White Paper. Learn in depth about differnet coins on the blockchain by understanding whitepapers.

There is a lot to learn about this futuristic tech, lets get started to dive into the Compound COMP white paper and start to leverage it to build a more secure and trusted ecosystem for Industry 4.0 applications.

We will deep dive into how the coin works by understanding the whitepaper and its summary. Compound (COMP).

Lets understand Compound (COMP) after going through the Compound COMP white paper.

Without wasting any further time lets get started to dive right in and lets understand white paper first.

What is white paper?

A white paper is an informational, influential, well-structured document, usually published by an organization, to provide in-depth information about a specific solution.

A white paper is used to provide a good insight into the challenges for a specific problem and a proposed solution for the same.

Compound COMP White Paper

Compound COMP white paper will be going to provide you, all the information that is needed to get started with Compound (COMP), including the inspiration for creating, the problem it is trying to solve and the solution proposed by Compound (COMP).

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Introduction

The market for cryptocurrencies and digital blockchain assets has developed into a vibrant ecosystem of investors, speculators, and traders, exchanging thousands [1] of blockchain assets. Unfortunately, the sophistication of financial markets hasnt followed: participants have little capability of trading the time value of assets.

Interest rates fill the gap between people with surplus assets they cant use, and people without assets (that have a productive or investment use); trading the time value of assets benefits both parties, and creates non-zero-sum wealth. For blockchain assets, two major flaws exist today:

● Borrowing mechanisms are extremely limited, which contributes to mispriced assets (e.g. scamcoins” with unfathomable valuations, because theres no way to short them).

● Blockchain assets have negative yield, resulting from significant storage costs and risks (both on-exchange and off-exchange), without natural interest rates to offset those costs. This contributes to volatility, as holding is disincentive.

Centralized exchanges (including Bitfinex, Poloniex…) allow customers to trade blockchain assets on margin, with borrowing markets” built into the exchange. These are trust-based systems (you have to trust that the exchange wont get hacked, abscond with your assets, or incorrectly close out your position), are limited to certain customer groups, and limited to a small number of (the most mainstream) assets. Finally, balances and positions are virtual; you cant move a position on-chain, for example to use borrowed Ether or tokens in a smart contract or ICO, making these facilities inaccessible to dApps [2].

Peer to peer protocols facilitate collateralized and uncollateralized loans between market participants directly. Unfortunately, decentralization forces significant costs and frictions onto users; in every protocol reviewed, lenders are required to post, manage, and (in the event of collateralized loans) supervise loan offers and active loans, and loan fulfillment is often slow & asynchronous (loans have to be funded, which takes time) [3-6].

In this paper, we introduce a decentralized system for the frictionless borrowing of Ethereum tokens without the flaws of existing approaches, enabling proper money markets to function, and creating a safe positive-yield approach to storing assets.”

White Paper Link: Compound (COMP) White Paper

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