The "compound" protocol is a lending platform created on the Atrium blockchain. When users and apps deposit an asset into the "Compound" Protocol Lending Pool, they begin to receive variable profits. Profits are calculated with each Atrium block (approximately 13 seconds) and users can withdraw their assets along with the profits at any time. ERC20 ethers and tokens on the compound platform become cToken and actually represent your core assets. But what is cToken? how it works? What is their perception? How to make money with c tokens? In this article, you will get acquainted with these topics.
?What is cToken?
In order to benefit from the compound, users must lock their assets in a smart contract; Instead, smart contracts with a predetermined exchange rate generate new tokens called cToken. These tokens allow the user to make a profit over time and use them as collateral to borrow from the platform.
c Tokens do not consistently provide benefits to holders; Instead, they represent the share of users in the lending pool, and the value of these assets increases based on interest payments by borrowers. Profit is generated when the value of cToken increases based on the amount of assets locked in the pool, and this profit is also collected when the original locked assets are withdrawn. The exact amount of this profit depends on the compound profits calculated by the protocol, and based on market variables such as supply and demand.
In addition to compound interest, lenders also receive COMP tokens. These tokens allow holders to submit suggestions and votes for protocol changes and are actively traded in exchange offices. These compound benefits are only possible with COMP tokens.
cToken are tokens in the compound protocol that are supported by another asset. When a user deposits his digital currency on the platform, c tokens represent his assets. Each time a user deposits their assets into the lending pool, the same amount of cToken is generated. This C-token balance represents the direct equivalent of the amount of assets that the user's lending pool and receives interest on each Atrium block. When you generate c tokens (of any kind), you are recognized as a lender in the compound protocol, and the interest accrued to you per block is in the form of a COMP token. Each asset has its own c tokens; For example, if a user lends a DAI token to the protocol, he or she will receive the same amount of cDAI.
cToken are built to ERC20 standard; This means that they can be seen on ether scans and can be stored in Atrium wallets such as Metamsk. The assets supported by the compound protocol are collected through a cToken contract. This contract is in accordance with the Atrium EIP-20 proposal, which represents the inventories offered in the protocol. By generating c tokens, user number 1 will receive a profit according to the desired cToken interest rate (which increases the value of the main asset) and user number 2 will be able to use these c tokens as collateral.
Equivalent tokens in the compound essentially mean interacting with the Compound protocol; Users produce them, repurchase them, repay their loans, liquidate the loan, or transfer c tokens.
There are a total of two types of cToken: CERC20 and CEther. Both types use EIP-20; CERC20 represents the core ERC20 assets, and CEther represents ether. Thus, the main functions involved in transferring an asset in the compound protocol are different for each asset.
?How do c tokens work?
Profit is calculated annually for each block. Users earn these benefits by increasing the price of the token; So the value of their c tokens also increases. Let's take an example:
Suppose you deposit 1,000 dai into the compound protocol when the interest rate is 0.020070; You will receive 49825.61 cDAI tokens (1000 divided by 0.020070). A few months later, you decide to withdraw your DAI from the platform; The interest rate has now reached 0.021591.
- 49825.61 Your cDAI token is now equivalent to 1075.78 dai (49825.61 multiplied by 0.021591)
- You can withdaw 1075.78 dai by redeeming 49825.61 cDAI tokens.
- Or you can take some of it and keep the rest of your cToken in your wallet.
The longer the user holds their c tokens, the greater their value. Each token has its own interest rate and their value varies over time.
Assets supported by the Compound Platform include:
- Ether
WBTC (Atrium Blockchain Based Bitcoin)
DAI
USDC
Agur (REP)
0X
tether
BAT
If you deposit any of these tokens into the compound lending pool, you will receive the equivalent of a cToken. In the following, we will introduce cUSDC.
?cUSDC token
cUSDC represents the USDC token in the compound protocol. When you deposit USDC in the compound lending pool, you receive the equivalent of cUSDC. Whoever holds these c tokens with any other cToken receives the current market profit based on the increase in the exchange rate.
?What is the use of cUSDC token?
cUSDC can be transferred to anyone, just like any other asset. cToken are essentially tokenized assets and can be used as collateral in other liquidity pools or exchanged for other digital assets.
?How to get cUSDC?
When you deposit the USDC through the Linen application inside the compound, this protocol generates cUSDC tokens inside the application. The Linen? app acts as the Compound user interface. You can repurchase your c tokens with the USDC at any time if the compound platform has sufficient liquidity.
Questions about C tokens
In this section, we ask questions and answer them. These questions are about how to use these tokens, how to trade or trade them, how to make a profit, how to generate, repurchase, borrow, repay loans and liquidate users. As mentioned earlier, the longer you hold the c tokens, the higher your profit. But what about borrowing? What are the risks? In this section, we will answer these questions.
?How to withdraw thirty tokens?
When funds are withdrawn from the protocol, it means that behind the scenes, c tokens are redeemed for the value of the original asset.
After the lending period, each cToken will grow more than it did at the time of production, depending on the interest rate it receives. Holders of c tokens do not need to worry about interest rates; The protocol itself calculates it and performs the conversions automatically. Here are some questions about these tokens.
?Can cToken be exchanged outside the compound protocol?
Yes. c tokens can be exchanged with any other ERC20 token; But the important point is that if c tokens are exchanged, users are actually trading equivalent tokens in the compound platform lending pool.
?How do c tokens generate profits?
Each market has its own supply profit rate (APR). Profits are not distributed; Rather, you make a profit by holding C tokens. c tokens collect profits through their exchange rates. Over time, the value of your core assets increases; So although the value of c tokens is constant, its value also increases.
?Do we need to calculate the exchange rate of c tokens?
When a new market is launched, the cToken exchange rate starts at 0.02,000 and is calculated at the market interest rate. For example, after one year, the exchange rate may be 0.021591. This exchange rate is the same for all users. As mentioned earlier, this rate increases the value of your assets and is calculated automatically.
How can we view our cToken?
All C tokens are visible in Etherscan and you can see them in the list of tokens in your wallet address.
Can we transfer our C tokens?
Yes, but it requires skill. By transferring cToken, you are actually transferring your main asset to the compound platform. If you send a c tokens to your friend, your inventory amount (which can be seen in the compound protocol) will decrease and your friend inventory will increase.
CToken production function
The Mint function transfers the asset into the protocol and begins to accrue interest based on its current supply rate. The user receives the equivalent of c tokens of their principal asset, which is divided by the current exchange rate. Before depositing an asset, users must first validate cToken to access their original token.
C token redemption instructions
The Redeem function converts a certain amount of C tokens to the main asset and returns them to the user. The amount of the original tokens is received as the equivalent of the repurchased cToken? multiplied by the current exchange rate. The redemption amount must be less than the liquidity of the user account and the amount of liquidity available in the market.
Borrow function
The Borrow? function transfers an asset from the protocol to the user and generates a borrowing balance, which collects interest based on the asset's current borrowing rate. The amount borrowed should be less than the liquidity of the user account and the amount of liquidity available in the market.
Loan repayment function
The Repay instruction moves the asset into the protocol and deducts it from the user's Borrow balance. Before repaying an asset, the user must confirm c tokens to access their token balance.
Liquidation of the user
A user whose account liquidity is negative is liquidated by other users of the protocol (his balance is zero), so that his account balance is higher than the amount required for collateral, or so-called positive.
When Liquidation occurs, users who have liquidated him must pay the full amount of the unpaid account on his behalf and, in return, purchase the user's collateral at a discount; This discount is offered as an incentive to settle the account.
Conclusion
The Compound protocol is one of the best defi platforms that allows you to easily lend and borrow digital currency. If you deposit compound, ether and some ERC20 tokens in the lending pool, new tokens called cToken will be generated and you will be given the equivalent of the original asset. You can save c tokens and make a profit over time.
The profit of c tokens is not distributed directly; Rather, as the platform's interest rate increases, so does the asset price, and therefore the value of your C token, and you can withdraw it. You can also exchange these tokens with other ERC20 tokens; But you should note that by doing so, you are actually exchanging your core assets.
What do you think about cToken? Have you used them? Let us know what you think.
I hope this article is useful and helps you????
