Deep Dive into Compound Lending and Borrowing Mining Mechanism: Analysis of COMP Token Value and Investment Prospects

Current Status of COMP: From Highs to Bottom Consolidation

The current trading price of COMP is $27.21, with a total market capitalization of approximately $263 million, ranking 99th globally and 25th in the DeFi sector. Compared to the all-time high of $910.54 reached in May 2021, this token has fallen over 97%. Notably, the circulating supply is as high as 9.68 million tokens, with a circulation rate of 96.68%, approaching full release.

From price fluctuations, COMP has experienced typical bull and bear cycles: opening at $58 in June 2020, soaring to $280 within the same month; during the 2021 bull market, rising from $80 to a peak of $900; followed by a continuous decline, breaking below the initial price in June 2022, with a low of $22.89. Currently, COMP oscillates between $20 and $80, with the market having largely fully priced in the risk.

What is Compound? The Disruptor of Decentralized Lending

Founded in August 2017, Compound is a decentralized lending protocol built on the Ethereum blockchain. Its core logic is simple yet effective: users deposit crypto assets into liquidity pools, borrowers can collateralize assets to borrow funds, and interest is paid to depositors. This mechanism is similar to traditional banking loans but differs in that—Compound is fully automated by smart contracts, requiring no intermediaries, offering higher transparency, and less regulatory pressure.

Compared to traditional financial institutions, Compound’s advantages lie in three dimensions: first, asset control belongs to users rather than the platform; second, all lending contracts are open, transparent, and auditable; third, execution is fast, with settlement in seconds rather than manual review. This is also why DeFi ecosystems have expanded rapidly over the past few years.

COMP Token Design: Incentive Mechanisms and Supply Analysis

In 2020, Compound launched the “Lending Mining” strategy—each user operation (deposit, borrow, repay) could earn COMP rewards, fundamentally changing the growth curve of DeFi lending platforms. The total supply of COMP is 10 million tokens, distributed as follows: 50.05% to users (5.005 million), 23.96% to shareholders (2.396 million), and 25.99% to the team (2.599 million).

Of the 50.05% allocated to users, 42.3% is released through mining, at a rate of 850,000 tokens per year, with an estimated mining cycle of four years. This design avoids sudden token supply crashes, reduces selling pressure in later stages, and allows early users to benefit from higher mining efficiency.

Team and Funding: Top-tier Capital Continues to Show Confidence

Compound was founded in 2017 by University of Pennsylvania alumni Robert Leshner and Geoffrey Hayes. Robert has a background in financial services and web design, while Geoffrey was a former engineer at Postmates. The team has since expanded to over 25 members, including experienced developers, product designers, and legal advisors.

In terms of funding, Compound has completed three rounds, totaling $70 million, with investors including a16z, Coinbase, Bain Capital, and other well-known institutions. Additionally, the platform has 26 heavyweight partners spanning high-frequency trading, market makers, exchanges, and hedge funds. The continuous support from these capital sources and institutions indicates market recognition of Compound’s long-term value.

Leading Position in DeFi: TVL Ranks Among the Top

As a pioneer in DeFi lending, the Compound platform’s total value locked (TVL) reaches $1.14 billion, accounting for 19.9% of the entire DeFi ecosystem, ranking second only to Uniswap. This data reflects market trust in the security and returns of the Compound protocol.

More importantly, COMP is no longer limited to Ethereum’s single chain; it has expanded to Layer 2 networks such as Arbitrum and Polygon. This multi-chain deployment strategy reduces single-chain risks and broadens the user base, laying a foundation for long-term growth. Considering DeFi’s development as the future infrastructure of finance, COMP’s role as a lending leader will continue to strengthen.

Investment Outlook: Bottom Opportunities for Mid- to Long-term Accumulation

From a technical perspective, COMP has repeatedly confirmed a bottom within the $20-80 range, with a very low probability of further decline. According to historical cycle patterns, after a bear market bottom is confirmed, a consolidation period of 2-3 quarters is usually needed. It is expected that in the second half of the year, COMP will continue to consolidate at the bottom, with a potential upward breakout along with the broader market in the first half of 2024, and a gradual emergence of a bull market in the second half.

Fundamentally, with its leading position in lending, solid financing background, multi-chain ecosystem expansion, and other advantages, COMP has medium- to long-term investment value. Compared to short-term volatility, long-term holders should pay more attention to protocol TVL growth, new chain deployments, and ecosystem application expansion. This is also why many large investment funds continue to focus on COMP—they mostly adopt long-term allocation strategies rather than short-term arbitrage.

For ordinary investors, the current price can serve as a reference point for long-term allocation, but it is recommended to build positions gradually rather than all at once, to lower costs and reduce risks.