How to mine Compound (COMP)? All in 5 minutes

¿Cómo minar Compound (COMP)? Todo en 5 minutos

Previously, we talked about the great promise and huge potential of Compound’s project for lending your cryptocurrencies and decentralized financial markets. 

Certainly, we can briefly define it as a decentralized protocol, based on blockchain technology, that allows you to lend and borrow cryptocurrencies through smart contracts.

It was founded by Robert leshner and Geoff Hayes’ Compound Labs Inc. project in 2017.

Of all this, one interesting element is its COMP governance token, which revolutionizes the way crypto exchanges reward their users. This is because to earn COMP, you must provide liquidity.

Therefore, we can deduce that the Compound protocol fits into one category: Yield Farming, a way in which you can make money with your investment.

This is precisely what led to Compound becoming one of the largest DeFi protocols in the world.

Without further delay, let’s take a look at how we can increase our income and earn COMP with Compound by following simple steps. 

How to mine Compound?

First of all, it is important to clarify that COMP is not mined, so the process we know for mining bitcoins, for example, does not apply in this case. This is mainly due to the way Compound works.

Therefore, to multiply your tokens and receive rewards, you must borrow and lend cryptocurrencies through the Compound protocol.

In itself, it is all about earning interest and getting as many COMP rewards as possible in the shortest possible time. 

Now, what does this have to do with the category you mentioned at the beginning?

To understand this, let’s review what yield farming is.

What is Yield Farming or Liquidity Mining? 

In a previous article, we talked about it, but let’s summarize it in a simple way to put it in context.

Yield Farming is a mechanism in which you bet or lend cryptos to produce high yields or rewards in the form of additional cryptos.

Consequently, Yield Farming enables you to have remuneration for your investment. Therefore, your monetary participation results in profits in the form of tokens that are distributed among the community.

The more cryptocurrencies you deposit and invest in the liquidity funds, the value of the returns or rewards will increase.

Its main difference with the usual mining we know is that users must not have a platform or software to mine. On the contrary, they must have an inventory of cryptocurrencies or blocked tokens.

¿Cómo minar Compound (COMP)? Todo en 5 minutos

How does liquidity mining work for Compound?

In general, liquidity mining starts with a lender or liquidity provider (LP) lending its own cryptoassets to a group of individuals.

By virtue of this, liquidity funds are generated which are smart contracts programmed to:

  • Storing money for loan purposes.
  • Generate income for liquidity providers.

From here, users can lend, exchange or borrow cryptos through lenders. Of course, loans carry interest, just like a bank loan.

However, when you deposit a cryptocurrency with Compound to lend or exchange it, Compound offers you cToken versions of the same coin in exchange, as a guarantee and an incentive.

Undoubtedly, these rewards in COMP (the Compound governance token) are provided in a form equivalent to the value deposited or “borrowed”.

Now, the Compound protocol itself functions as a money market that works within the Ethereum blockchain. These money markets are funds that allow you to invest without long-term risk.

Consequently, different operations such as loans can be performed using some of the main cryptocurrencies used within the Ethereum blockchain.

For each of these loans you make, you receive an interest rate. Likewise, in Compound, participants can apply for loans by placing their assets to receive other cryptocurrencies or tokens.

How can I “cultivate”? Step by step

One of the platforms that you can use to grow COMP is, for example, InstaDapp. What you should do within it, is simple: 

  • Create an account and connect the application with your wallet (either Metamask, Fortmatic or WalletConnect). 
  • In the Defi Assets option, go to the Compound option. 
  • Then, from all the currencies you can deposit such as Ether (ETH), 0X (ZRK), COMP, Dai (DAI), Basic Attention Token (BAT), Augur (REP), among others. From these options, choose one and deposit it to start receiving know in which one is more viable, you can check on Compound’s website the market distribution (market distribution).in this way, you will be able to know how many tokens they are granting per DAI or USDT, for example, either if you lend or if you save. 
  • Finally, you just have to wait for the tokens to be provided automatically for your deposit. 

Of course, if you want to maximize the use of the platform and its distribution, you can deposit in a savings account and at the same time borrow through the Compound website.

However, this process is a bit more difficult, so take it slow and experiment using the Compound platform.

¿Cómo minar Compound (COMP)? Todo en 5 minutos

How is Compound “mining” at present?

Currently, the total “locked in” value of the Compound protocol is at $600 million.

Likewise, it is distributing around 2300 COMP per day for an incredible value of over 660 thousand dollars.

Of the 2,000 COMP, the most benefited are the 0x, Basic Attention Token and ChainLink Token projects.

In addition, a total of 918,604 COMPs have been distributed as of the date of publication and one of the projects that has received the largest distribution over time has been USD Coin.

Congratulations for making it to the end! You are an exemplary Bitnauta.

It has been an article full of information, but we hope it has been useful for you to understand a little more about the crypto ecosystem. 

But…oh…wait, you were left wanting more? Don’t worry! 

In the Bitnovo blog, we are working to have the best information at your fingertips and in less time than a rooster crows. 

We also have our own website where we bring you closer to the world of cryptos in an easy and safe way.

Are you ready to take action? Perfect, see you on Bitnovo and on the blog in a new post.