Compound Chain
Compound Chain is an independent distributed ledger that can transfer value and liquidity between different ledgers. Users can borrow and lend cross-chain assets between different blockchains based on Compound Chain, and can also use any supported The blockchain assets are used as collateral to borrow Compound Chain’s native token CASH.
Functional cross-chain seems to be a better way
In my previous article “Cosmos Polkadot Internet? ! “In “, there is a detailed analysis of the current cross-chain problems. In the 2017-2018 era of public chain + cross-chain, the entire ecology is against the barbaric growth of Ethereum. However, when the market returns to calm, it can really replace or Products beyond Ethereum have not appeared, at least not yet.
Why there are so many public chains or cross-chain products appearing mainly in two aspects. The first is to solve the high gas consumption of Ethereum, and the second is that most people believe that a single ecology is prone to value islands in the future. Therefore, it is necessary to realize value transfer and supplement through cross-chain.
So with the crazy growth of DeFi in the Ethereum ecology this year, the Ethereum economy has become more prosperous. Under this background, Compound has released its own loan-type cross-chain product Compound Chain, which is different from the previous “Big Mac” cross-chain product. Different chain products, Compound Chain does not want to break the existing ecosystem, but as a “borrowing tool” to improve the interoperability between ecosystems. According to the official white paper, Compound Chain mainly solves the following problems:
- Cross-chain lending business: Support cross-chain mortgage borrowing of assets of different blockchain protocols, and directly realize cross-chain transfer through Compound Chain.
- Reduce financial risk stacking: The Lego stacking feature of DeFi provides more composable financial products, but it also faces the problem of aggregating multiple products to stack risks.
- Reduce transaction fees: Compound Chain supports the use of native token CASH generated by borrowing to pay transaction fees.
How to borrow money across chains?
Users can upload assets on the supported blockchain to Compound Chain, borrow the native token CASH (similar to MakerDAO’s DAI) through the supported assets as collateral, and be able to download or redeem the assets and CASH To the supported blockchain.
Similar to most open ledgers, the compound chain also uses key pairs (public key and private key) to sign to store and transfer assets. Users will be able to interact with Compound Chain using key pairs on all supported blockchains. In other words, any balance on the Compound Chain can be sent to any other address.
For example, an Ethereum address can send Compound Chain ETH to a Tezos address, and a Tezos address can send Compound Chain WBTC to a Solana address.
On the other hand, when the user borrows, because the borrowing is done on the Compound Chain, all these mortgage assets do not need to be on the same blockchain as the account address.
For example, an Ethereum address can use Compound Chain XRP as collateral, of course, provided that XRP is supported by Compound Chain.
DAI’s upgraded version of CASH
The native token (or accounting unit) of Compound Chain is CASH, which is similar to DAI of MakerDAO . The use of CASH mainly includes payment of transaction fees on the Compound Chain. Users can borrow CASH and pay transaction fees by uploading supported mortgage assets.
At the same time, like DAI, CASH will begin to be anchored to the US dollar, but its anchoring can be changed through governance decisions. Unlike DAI, all CASH will receive continuous income from the interest generated by supported blockchain loans. The precise amount will be one of many parameters determined by the COMP holders participating in the governance vote.
It can be said that this is a cross-chain + compound interest + governable DAI.
The birth of CASH has completely highlighted Compound’s ambition to reshape the road to finance, bringing CASH into multiple blockchains through lending business. This is the most different place from ordinary cross-chain products in the past. Ordinary cross-chain products usually focus on Since multiple chains are “hardly” combined through technical means, and Compound’s lending in Ethereum has been large enough and mature enough, the strong trust endorsement and traffic will better facilitate the business expansion of cross-chain lending.
Perhaps, this is really the smartest way to cross-chain at present.
Next stop the king of lending
As the underlying financial structure of DeFi, the lending business is usually ignored by many people, but in fact all financial portfolio products, derivatives, etc. are inseparable from the support of lending business. Many people have such questions as to why lending platforms like Compound and Aave are not profitable, but the amount of lock-up is amazing. Let’s look at the current data.
MakerDAO, Compound, and Aave’s lending platforms account for half of the entire DeFi’s lock-up volume, and from the perspective of Compound’s 90-day lock-up volume trend, it is always on the rise. It is now close to 1.9 billion US dollars. Even though LP token mortgage mining is so prevalent, Uniswap’s lock-up volume still falls short of several lending platforms. This is because almost all financial portfolio products rely on the underlying lending business.
Nowadays, Compound is issuing cross-chain lending business. It is conceivable that the precipitation of its funds will further expand, so the possibility of the future of DeFi ecology is also worth looking forward to.
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