Why Compound Is Going To Explode In 2021
Thanks to DeFi and its increasing popularity, decentralized finance apps are making significant gains recently. One such app is Compound, which is basically an algorithm market protocol that lives on the Ethereum blockchain.
COMP, the governance token for the Compound Decentralized Finance protocol, has been surging high over the past few months. With the crypto reaching record heights, investors and crypto enthusiasts are theorizing around Compound price predictions. But, what will drive Compound to explode in 2021? Let us see.
Looking At 2021: Is Compound All Set For A Massive Rally?
Compound Coin is the latest entry into the DeFi world. This DeFi lending protocol allows users to earn interest on their cryptocurrencies by just depositing them into one of the pools supported by the platform. Since it is built on the Ethereum blockchain, it helps Compound to create a new Ethereum asset-based money market on its decentralized nodes.
2021 has been a prolific year for COMP, hitting a record high of $911.20 on May 12. Here are some of the significant factors that back up the prediction that Compound is going to explode in 2021.
#1: Reason For Its Unstoppable Growth
There was a definite lack of utility in traditional bank interest building. Whenever a person deposits their money into a savings account, it compounds the interest. That money gets locked into a place where it is not recoverable while also building up the interest. This is what decentralized Compound aims to tackle.
Its blockchain-based protocol allows you to lend and borrow crypto easily and have a say in the governance with its native token COMP. The token offers its holders the right to vote on essential protocol decisions like new collateral types, borrowing power, and interest rate models.
COMP has seen a significant rise in its value since the beginning of 2021. As of writing, it trades at $426.41 with a market cap of $2,226,428,941.
#2: Unique Features
The significant factor that drives Compound coin’s value is that it introduces a genuinely open lending environment to the blockchain sector. Any person can borrow funds from the Compound farming pools. Without any credit checks, the funds are issued immediately with collateral.
The majority of cryptocurrencies sit idle on exchange platforms, doing nothing for their holders. With its open lending platform, Compound aims to disrupt this. It allows everyone who deposits supported Ethereum tokens to easily earn interest on their balance or receive a secured loan, all in a trustless manner.
It leverages audited smart contracts to fulfill these tasks in an autonomous manner. This contract takes care of all the principal functions on the network like storage, management, and the facilitation of all pooled capitals.
#3: Yield Farming Pool
Compound holds the title as the first platform to bring the process of yield farming into the crypto space in mid-summer 2020. It is somewhat similar to staking in crypto.
Compound’s yield farming allows users to lock up their digital assets in lending pools. This enables them to receive interest from borrowers who want to take out loans.
Users receive rewards depending on the amount of crypto they lock in and for how long they have participated in the pool. But unlike staking pools, yield farming pools have much shorter lock-up periods.
However, Compound’s yield farming protocol operates as a decentralized lending system. When users provide liquidity to large lending pools, they receive rewards in the form of tokens. These tokens are readily convertible to any supported asset in the network.
Later other users can seamlessly take out short-term loans from the lending pools. These loans are always issued with interest which is then split between the lender and the lending pool.
Currently, Compound supports the lending and borrowing of some of the selected cryptocurrencies. These include Dai (DAI), Ether (ETH), USD Coin (USDC), Ox (ZRX), Tether (USDT), Wrapped BTC (WBTC), Basic Attention Token (BAT), Augur (REP), and Sai (SAI).
Why COMPOUND Is Going To Explode In 2021 - Experts Speak Up
The COMP token has had a successful rally over the past few months. Several investors predict that as the DeFi platform continues its bull run, Compound is expected to explode by the end of 2021.
Experts from the Economy Forecast Agency predicted that COMP would continue its upward trend and breach the value of $1000 before the end of the year.
While DigitalCoinPrice has a slightly lower prediction, they say that the price would hit $919 if it keeps its momentum ahead.
Significant Benefits Of Compound DeFi Platform
Apart from opening up a genuinely open lending environment to the blockchain sector, Compound brings many benefits to the market.
One significant advantage is its interoperability which is mostly the general consensus of DeFi platforms. The Compound network is open and allows the integration of third-party assets and platforms.
Additionally, it also supports the use of API protocols, enhancing and simplifying the UX. This interoperability allows COMP holders to leverage third-party market management tools effortlessly.
The Decentralized Governance Model
Decentralized governance is a common protocol in the DeFi sector. Compound also holds the title of being the pioneer of this unique strategy. Anyone who owns COMP can make a proposal in this network. Users should at least have more than 1% of the supply to create new proposals.
Why Is Compound Coin Going To Explode In 2021?
The Compound coin is one of the biggest DeFi projects listed on several trading platforms like Coinbase. Along with offering all allowance, the Compound network also maintains a highly secured network by undergoing multiple security audits by reputable agencies like Open Zeppelin and Trail of Bits.
The platform thus implements a risk-free exchange protocol. This autonomous interest rate protocol creates an upgradable financial infrastructure, specifically for developers to boost financial applications development.
With the fast-growing interest in DeFi platforms and considering all the unique factors of the Compound network, crypto enthusiasts and investors expect that Compound will likely explode in 2021.
Therefore, Compound holds a uniquely advantageous position as a pioneering force within the DeFi sector. Thanks to the strong development team behind this crypto token, it has garnered much support and popularity from investors and businesses alike.
DeFi is a sustainable trend that is becoming a viable alternative to traditional finance and has seen a continuous surge since the beginning of 2020. There’s no sign of this momentum slowing down any time soon, which will most likely drive cryptos like Compound to explode remarkably in 2021.
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