Compound’s Ethereum Money Market Protocol Goes Live

Compound, a San Fransisco-based blockchain startup backed by cryptocurrency exchange Coinbase and venture capital group Andreessen Horowitz, launched on Thursday its money market protocol on the Ethereum blockchain.

In a Medium post,Compound said the new platform would allow individuals, institutions, and applications to earn interest or borrow crypto assets without having to negotiate terms such as maturity, interest rate, or collateral with a peer or a counterparty.

Initially, the Compound platform will support four tokens: Ethereum (ETH), 0x Protocol (ZRX), Basic Attention Token (BAT), and Augur (REP). Each asset will have a publicly stated interest rate for supplying and borrowing, set automatically on the basis of supply and demand.

According to the project’s white paper, Compund’s interest rates will fill the gap between crypto HODLers, as well as investors with surplus assets they do not use, and people without assets who wish to borrow with a productive or investment use.

“Blockchain assets are novel and exciting, but they lack the most fundamental financial infrastructure — efficient interest rates. Over time, hundreds of trillions of dollars of assets will be tokenized, but the institutions that deploy them will require the usefulness of traditional financial markets — today’s launch is just the first step,” Compound founder and CEO Robert Leshner said on Thursday.

The app software, audited by Trails of Bits and Certora, was built with $8.2 million of venture capital raised in May. The round was led by Andreessen Horowitz, Polychain Capital, and Bain Capital Ventures, with participation from Coinbase Ventures, Transmedia Capital, Abstract Ventures, South Park Commons, Compound VC, and Danhua Capital.

Commenting at the time, Leshner said:

“Today, the majority of assets sit idle on exchanges and in wallets, yielding no interest — when Compound launches its first money markets on the Ethereum blockchain, individuals, institutions and applications will earn interest on Ether, stablecoins and utility tokens, with complete liquidity — similar to the overnight rate for dollars and government currencies.”

Explaining the platform’s use cases, the white paper provides examples with stablecoin Dai (DAI) and utility token Golem (GNT), indicating a potential future inclusion of the assets on the new platform.