Home Blockchain DeFi Lending Protocol Compound launched its Compound III version

DeFi Lending Protocol Compound launched its Compound III version

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DeFi Lending Protocol Compound launched its Compound III version

Decentralized finance (Challenge) Compound loan protocol announced to have officially launched its Compound III (V3) on the Ethereum mainnet.

Compound III is an EVM-compatible protocol that allows crypto assets to be provided as collateral to borrow the base asset.

Unlike in the past, this new version only supports one “underlying asset” for lending. It provides other crypto assets as collateral, eliminating the “mixed risk model where users can borrow any asset”.

Currently, ETH, WBTC, LINK, UNI, and COMP have been used as collateral to lend the underlying asset USDC.

Since Compound V2 uses the pool risk model as tmost loan agreements like Aave are currently workingusers can borrow any digital asset, but poorly performing assets can threaten other assets in the compound loan protocol, causing investor funds to be insecure.

Therefore, this upgrade allows users to limit the size of individual collateral assets in the market to limit risk.

This improved security comes at a price. The collateral provided will no longer earn interest.

Compound founder Robert Leshner said that although users can no longer earn interest from collateral, they can borrow more, improve capital utilization, reduce liquidation risk and spend less on gas.

Users can earn interest by providing low-risk underlying assets. With this update, Compound III’s main competitor was no longer Aave, but MakerDAO.

Official data shows that Compound III has amassed around $1.03 million in assets and loaned out 56,000 USDC within 24 hours of its launch.

Image source: Shutterstock

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