Compound protocol, an interest rate pool integrated with Linen App, started COMP governance token distribution to its users, including the members of Linen App. Compound is owned by its users now. Yes, by you!
COMP allows you to participate in the governance of the Compound liquidity pool, either directly or by the delegation of your COMP tokens. Linen App is one of the delegates. Voting can be related to things like the interest rate formula adjustment, new assets addition/removal of existing assets, collateral ratio, distribution of COMP or number of other things that impact the work of the protocol. If members delegate COMP, they continue to retain ownership of tokens and can undelegate them at any time. More on the delegation topic in the future.
How does the distribution work? Distribution of COMP is according to a predetermined algorithm. Each day, approximately 2,880 COMP will be distributed to Compound users over the next 4 years. Anyone who deposits or borrows from the Compound pool will automatically receive COMP in their Ethereum address when they interact with Compound, if at least 0.001 COMP is accrued. Linen App community members depositing to Compound and using Linen App, COMP tokens will be available for you to claim once 0.001 COMP is accrued and when we implement this functionality in the app. Currently, we have no estimation for when this will be implemented. No action is required by those who deposit to Compound using Linen App. The only way to earn COMP tokens is to deposit to Compound, borrow from Compound, or buy on an exchange. Coinbase listed COMP tokens on June 23rd, 2020. In the future, we will add the ability to buy and sell COMP within Linen App.
Because of the COMP token distribution, users are incentivized to deposit assets to and borrow from the Compound protocol to earn COMP tokens. As a result, there is an oversupply of assets now in certain pools, meaning more people are depositing than those borrowing. In DeFi, this is called “yield farming.” Users earn interest from the interest rate and even more from COMP token distributions. Some users are implementing advanced strategies to farm as much yield as they can ;). This caused interest rates in the USDC pool, which Linen App uses, to go down.