Crypto Money Market Compound Lets You HODL and Earn Interest

Revealed exclusively to CoinDesk, Compound's platform for allowing crypto enthusiasts to make their holdings available for short-term loans, in turn, earning interest on those loans in crypto, launched on the ethereum blockchain today.

Compound is creating what the traditional financial world refers to as a money market - a fund that provides short-term loans at a flat, publicly stated rate.

In this case, Compound is offering a smart contract-enabled money market for lending in five different coins: ether, Trust Token's trueUSD, 0x's ZRX, Brave's BAT and Augur's REP. Each asset will have a publicly stated interest rate for supplying and borrowing, set algorithmically based on demand for each asset.

While the software is built so that anyone with crypto holdings can supply capital to the money market, Compound founder Robert Leshner said, "In general, I think the majority of our users will be institutional."

It's important to note here that a trader can use Compound to borrow for a position in almost any currency, as long as it can be easily traded into one of the five currencies Compound holds.

"We invested in Compound because it is a proper - decentralized - money market for crypto."

Currently, as the white paper states, Compound will have centralized control of the protocol, which will allow them to choose the software model that sets interest rates for each asset.

In this, Compound aims for its interest rates to provide a standard to judge other crypto investments by.

Because the loans on Compound are collateralized, they are nearly risk free, so it establishes a floor for what each token should earn when it's put towork.

Until then Compound is looking for more tokens to offer loans in they have to have adequate liquidity and market confidence.