Compound USD Coin (cUSDC) is the token given to users who supply USDC for lending purposes on the Compound protocol. Compound enables individuals to earn cUSDC tokens by lending USD Coin, while also offering the option for users to borrow USDC from the platform. ^[1]

Overview

The cUSDC pool provides incentives to lenders who wish to leverage the benefits of the Compound platform. Lenders of USDC contribute liquidity for borrowers while also engaging in trading activities on the Compound platform. Compound is a protocol built on the Ethereum blockchain that facilitates the creation of asset pools with yield rates determined by algorithms, which are influenced by the supply and demand of the assets. Through the protocol, asset suppliers and borrowers can directly participate, earning or paying a fluctuating yield rate without the need for peer-to-peer negotiations or involving intermediaries. ^[1][2]

cUSDC represents a specific form of cToken, which serves as a fundamental tool for engaging with Compound protocols. When users wish to perform actions such as minting, redeeming, borrowing, or transferring a cToken, they must utilize the cToken contract. By obtaining a cToken, users gain the ability to utilize it as collateral and earn rewards through the cToken exchange rate, which carries significant value due to its association with the underlying asset. The cToken can be utilized as collateral within other liquidity pools or exchanged for various other cryptocurrencies. These types of transactions are not typically found in traditional consumer finance. It is important to note that the rewards are specific to the cUSDC asset itself and not directly conferred to the asset owner. ^[2]

Lenders receive rewards in the form of cUSDC tokens from the USDC pool. They have the option to either trade these tokens or continue participating in the protocol. Funds in the cUSDC pool are typically divided into two factors: the collateral factor, which accounts for 80%, and the reserve factor, which accounts for 7%. ^[1]