![]() ![]() The two main users of the platform include: As of 2020, over $500 million in assets were locked in the Compound protocol, according to the data site DeFi Pulse.Ĭompound connects lenders and borrowers using a combination of smart contracts running on Ethereum and incentives paid in cryptocurrency. While complex, the model has so far proved adept at attracting users and encouraging other DeFi cryptocurrencies to adopt its model. Every time a user interacts with a Compound market (by borrowing, withdrawing or repaying the asset), they are rewarded with additional COMP tokens. To incentivize this activity, Compound uses another cryptocurrency native to its service, called COMP. This entire process is automatic and handled by the Compound code, meaning lenders can withdraw deposits at any time. Examples of cTokens include cETH, cBAT and cDAI.Įach cToken can be transferred or traded without restriction, but it is only redeemable for the cryptocurrency initially locked in the protocol. Once a deposit is made, Compound awards a new cryptocurrency called a cToken (which represents the deposit) to the lender. Lenders then earn interest on the assets they deposit. Put simply, Compound allows users to deposit cryptocurrency into lending pools for access by borrowers. One of an emerging number of decentralized finance ( DeFi) protocols, Compound uses multiple crypto assets to provide this service, enabling the lending and borrowing required without a financial intermediary like a bank. The exponent equals the value in the "Period" column.Compound is a software running on Ethereum that aims to incentivize a distributed network of computers to operate a traditional money market. In the formula in the "Present value" column, the rate is divided by 1, because there is one compounding period per year.The value in the "Period" column increases by 1 every 12 months (that is, annually), because each year is a new compounding interval.Lease 4: Annual compounding interval and annual payment frequency If the annuity type is changed to Annuity due, the payment will be in January and July instead of June and December. The exponent equals the value in the "Period" column. In the formula in the "Present value" column, the rate is divided by 2, because there are two compounding periods per year.The value in the "Period" column increases by 1 every six months (that is, semiannually), because each half-year is a new compounding interval.Lease 3: Semiannual compounding interval and semiannual payment frequency If the annuity type is changed to Annuity due, the payment will be at the beginning of the quarter instead of the end of the quarter. In the formula in the "Present value" column, the rate is divided by 4, because there are four compounding periods per year.The value in the "Period" column increases by 1 every three months (that is, every quarter), because each quarter is a new compounding interval.Lease 2: Quarterly compounding interval and quarterly payment frequency The exponent (that is, the superscript numeral) equals the value in the "Period" column. In the formula in the "Present value" column, the rate is divided by 12, because there are 12 compounding periods per year.The value in the "Period" column increases by 1 every month, because each month is a new compounding interval.The following table lists the first 12 months of the payment schedule. Lease 1: Monthly compounding interval and monthly payment frequency The following tables show the values that are set on the General and Payment schedule lines tabs for the four leases that are used in the examples. In all four examples in this article, the compounding interval matches the payment frequency. ![]() If you try to select a compounding interval that is less frequent than the lease's payment frequency, you receive an error message. For example, a quarterly compounding interval can't be used with a monthly payment frequency, and an annual compounding interval can't be used with a semiannual payment frequency. You can't select a compounding interval that is less frequent than the lease's payment frequency. Each of the four examples in this article shows what a lease's payment schedule will look like for a different interval. The compounding interval functionality is used to determine the number of compounding periods per year in a lease's payment schedule. This article provides information that will help you choose among monthly, quarterly, semiannual, and annual compounding intervals. For more information about preview releases, see Service update availability. The content and the functionality are subject to change. Some or all of the functionality noted in this article is available as part of a preview release. ![]()
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