Robert Leshner, the chief executive of Compound Finance, talked to LearnBonds.com about how cryptocurrencies are expected to revolutionise traditional fiat lending in the coming years. He also said the market is in its early days and that the business is working on LIBOR (London Inter-bank Offered Rate) interest rates for the crypto industry.
Compound Finance is an open-source and autonomous protocol that offers the latest financial applications for consumers.
1. Can you explain what Compound Finance does and how it benefits the cryptocurrency industry and users?
“Compound is an autonomous, transparent money market protocol for assets that run on the Ethereum blockchain. The protocol creates a floating, short-term interest rate for each asset, that adjusts in real-time based on supply and demand. The closest analogy would be the Secured Overnight Financing Rate (SOFR) or LIBOR, but for crypto.
Without Compound, the cryptocurrency industry would have a harder time gauging the time value of assets; the protocol amasses information and can serve as a benchmark for the broader industry and users.”
2. Compound Finance wants to bridge the gap between lenders and borrowers in the cryptocurrency market. How did you come up with this idea to be implemented using blockchain technology?
“Blockchain technology, and the Ethereum blockchain specifically, is great for creating financial applications that are designed to be transparent (anyone can inspect how they work, the health of the system, and behavior), autonomous (it runs and operates on its own, without manual processes), fair (there is no negotiation; everything is codified), and always-on (operating 24/7, without fail). It’s a preview of how most financial markets will operate in the future.”
3. Do you think cryptocurrencies will revolutionise the traditional fiat lending and loans industry? Should traditional companies feel threatened?
“Absolutely – cryptographic assets have the potential to reduce costs, increase speed, increase transparency, and open markets to a much larger audience. Traditional companies should feel incredible excitement, not threatened – this is an opportunity on par with the internet itself in terms of the scope of innovation.”
4. You are offering support to Basic Attention Token, Multi-collateral Dai, Augur, Ethereum and other cryptocurrencies in the market. Are you planning to add support to other crypto assets in the future?
“The protocol has started with some of the simplest crypto assets that exist on the Ethereum blockchain – over time, more assets will be supported.”
5. Regulators around the world are starting to place close attention to the cryptocurrency market. Considering you have recognized legal experts like Jake Chervinsky in the team, how is your project dealing with regulators and which is Compound’s general strategy?
“Regulators seek to create healthy markets. That means protecting users and customers, and reducing the risk of laundering or financing illicit activities.
Cryptocurrency and blockchain is a very wide market, with many different platforms, companies, and activities, and right now it gets painted with a broad brush. Certain protocols, like Compound, align very well with the goals of regulators–it’s the type of innovative platform that should be encouraged. Our strategy is to help educate the public about the advantages of something like, Compound versus unscrupulous actors.”
6. The decentralized finance market has expanded substantially since 2018. This week, the number of locked Ethereum in different decentralized finance platforms surpassed 2.4 million Ethereum. How much do you consider the industry can continue growing?
“By the scope of traditional financial markets, decentralized finance doesn’t matter yet. We are very, very early in the world’s exploration of decentralized financial applications. In a lot of ways, it seems like the internet in the mid 1990s.”
7. Why do you think Multi-collateral Dai supply Annual Percentage Rate on Compound Finance platform declined from 14 per cent in July this year to 3.94 per cent on 6 November?
“Decentralized finance markets are still very small – and becoming more efficient. Rates will decline as markets grow and become more well known, understood, and efficient.”
8. There are several decentralized finance solutions in the market besides Maker, Compound, InstaDapp and dYdX. Do you think there’s a place for all these market competitors or just a few of them would eventually survive?
“The use-cases and market for decentralized financial applications has massive room to grow.”
9. What do you think about the effect Central Bank digital currencies could eventually have in the decentralized finance and crypto markets?
“Central Bank Digital Currencies could help build a massive bridge to decentralized financial applications. Working together, we can envision a financial system that is significantly better than what exists today. I’m personally very excited to see central banks become more involved in the space, and recognize the benefits of cryptographic assets.”
Thank you, Robert, for the conversation!
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