Compound
📘 Yield Farming Name: Compound
🔗 Official Site: https://compound.finance
🎥 AIC Contributor: https://www.tiktok.com/@lifeofatechceo
🧩 Quick Look
Compound is a DeFi protocol where you can lend, borrow, and yield farm with crypto assets, earning interest on your deposits!
🌟 Compound 101
Compound, launched in 2018, is a decentralized finance (DeFi) protocol on Ethereum that enables users to lend, borrow, and yield farm with cryptocurrencies like ETH, USDC, and WBTC. It operates as a lending market, where you deposit assets to earn interest or borrow against your collateral, with rates determined algorithmically.
The platform offers APYs averaging 4–7% for stablecoins in April 2025, per recent DeFi Llama data, and it distributes COMP tokens to users as additional rewards, with $10 million in COMP distributed in 2025, per X posts. It also expanded to Polygon in 2024 for lower fees, making it more accessible. Compound is a reliable choice for DeFi yield farming!
Compound features a governance system through its COMP token, allowing users to vote on protocol upgrades, such as a fee reduction proposal in March 2025. Its interface is clean but requires some DeFi knowledge to use, especially for borrowing and managing collateral. This makes it suitable for users comfortable with DeFi basics!
Beyond lending, Compound provides a dashboard to track your earnings and loan health, helping you avoid liquidation, and it supports a wide range of assets, including wrapped tokens. It’s a foundational DeFi protocol, though Ethereum gas fees and liquidation risks are challenges. Compound helps you earn steady returns through lending!
🎯 Imagine This
Think of Compound as your DeFi piggy bank—you deposit crypto to earn interest, borrow when needed, and yield farm for extra rewards!
✅ Pros
Offers lending and borrowing with competitive APYs!
Distributes COMP tokens as additional rewards!
Supports governance through community voting!
❌ Cons
High Ethereum gas fees can reduce profits.
Risk of liquidation if collateral value drops.
Interface may feel less intuitive than newer platforms.
💻 Hacks/Exploits
Compound has not been directly hacked, but in 2021, a bug in its COMP reward distribution system led to $90 million being mistakenly distributed to users. Due to the decentralized nature of the protocol, the team couldn’t reverse the transactions, though most users voluntarily returned the funds. The incident exposed vulnerabilities in reward mechanisms, but no further major exploits have been reported since, and Compound has since enhanced its audits.
🕴️ Potential Founder Vulnerabilities
Compound’s founder, Robert Leshner, faced criticism during the 2021 $90 million reward bug incident for his handling of the situation. He suggested that users who didn’t return the mistakenly distributed funds could face tax reporting consequences, which some in the community perceived as a threat, leading to backlash. While the situation was resolved, Leshner’s response highlighted potential governance risks tied to his leadership style, which could impact community trust in future crises.
🧪 Use Cases
Deposit USDC to earn interest through lending.
Borrow ETH against your WBTC collateral.
Vote on protocol upgrades using COMP tokens.
⚠️ Initial Warnings
Don’t over-borrow—liquidation can wipe out your collateral!
Be cautious of high gas fees on Ethereum during peak times.
Always monitor your loan health to avoid risks!
🚀 Getting Started
Visit the Compound website and connect a wallet like MetaMask.
Deposit a token like USDC to start earning interest.
Explore borrowing options or claim COMP rewards!
🎯 Difficulty Score: 5.5/10
This platform is moderately challenging to use due to its DeFi mechanics. Beginners might need to learn about lending risks and liquidation, but it’s manageable!
⭐ Official AI-Driven Rating: 8.4/10
Compound earns a solid rating for its reliability and role as a DeFi pioneer. Its competitive APYs and governance system are strengths, though its interface feels dated compared to newer platforms. Its best feature is the algorithmic interest rates, ensuring fair returns for lenders!
Potential Risks Impacting Score: The 2021 $90 million reward bug (-0.3) exposed vulnerabilities in reward distribution, impacting trust, though subsequent improvements mitigate some concern. Robert Leshner’s controversial response to the incident (-0.2) raises governance concerns, as his leadership style could affect community confidence in future issues. High Ethereum gas fees (-0.2) and liquidation risks (-0.2) are significant for users. The slightly dated interface (-0.1) adds a usability risk for new users. These risks lower the score compared to more modern platforms like Aave, but Compound’s long-standing reputation keeps it competitive.
📈 Pro Tips
Use Polygon for lower gas fees when lending or borrowing.
Monitor your loan health to avoid liquidation risks.
Claim and stake COMP tokens to participate in governance.
⚖️ Stay Safe
We’re here to show you cool platforms, but we’re not giving advice on spending money. Be extra careful—always keep your wallet secure, never borrow more than you can repay, and do your own research before yield farming!
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