Compound Protocol is a decentralized finance application that enables users to lend and borrow cryptocurrencies. It operates on the Ethereum blockchain and utilizes smart contracts to automate lending processes without intermediaries.In this system, users can supply various cryptocurrencies to liquidity pools, earning interest based on supply and demand dynamics. Lenders provide their assets to borrowers, who pay interest for the use of these assets. The interest rates fluctuate in real-time, reflecting the current market conditions.When users borrow assets, they must provide collateral, typically in the form of another cryptocurrency. This reduces the risk for lenders, as collateral helps ensure borrowed funds can be recouped if necessary.The protocol fosters a transparent environment where all activities are recorded on the blockchain, allowing for easier access to data and transactions. Compound’s focus on user-friendly experience and automated processes makes it popular among those looking to earn passive income or access liquidity without traditional banking services.