You’re missing out on Compound and DeFi, here’s why in 5 minutes

Welcome to another quick 5 minute guide to understand the compound protocol. If you’re into crypto, chances are you’ve heard about it. That’s great! if not here’s your opportunity to learn what compound is all about.

Note that your collateral will be sold if the price of that currency drops in value. Imagine ETH dropping a 50% in a few days. Your locked ETH will not be worth as much. So the protocol will detect that change in value way before the big drop in value and sell your assets automatically.

In reality someone else is doing the selling of your collateral because the smart contract can’t execute that many actions at once. People are rewarded for it. These are called liquidators.

  • The variable APY: it stands for Annual Percentage Yield. This provides you a variable APY which is constantly updated on every block based on the supply and demand of the protocol. You may want this if you believe the annual yield will increase because the currency is in high demand.
  • You can choose between a stable and a variable APY depending on your risk tolerance.
  • You get cTokens in exchange for your locked assets that can be moved elsewhere.

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