Compound Yield Farming<\/span><\/h2>\nCompound yield farming is done in a network known as InstaDapp, which permits a user to interact together with a variety of other DeFi applications from one point of reference.<\/p>\n
InstaDapp provides a feature that can result in more than 40x profiting returns in COMP token\u2014this feature is called “Maximize $COMP”. To be concise, any amount of COMP token you have in your wallet, has a value, that has more value, than the value you owe to the fund you borrowed from the pool.<\/p>\n
A short example to illustrate, let’s assume you have 500 DAI, and you deposit that amount into Compound. Because users can utilize a fund even though they are “locked,” you use that 500 DAI through the “Flash Loan” feature in InstaDapp to get 1000 USDT by borrowing from Compound. Then convert the 1000 USDT to an estimated 1000 DAI and place back the 1000 DAI into Compound as a lender.<\/p>\n
Since you owe 500 DAI and you are lending 500 DAI. This makes it very possible for you to get an APY that can easily surpass 100%, added with the interest rate you pay for borrowing 1000 USDT.<\/p>\n
However, profitability is determined by the growth and activeness of the platform and the appreciation of the given asset.<\/p>\n
For instance, the stablecoin DAI can reduce in price at any given time, affecting an asset terribly. Normally, this occurs due to fluctuation in the other markets, and traders tend to use stablecoins for pegging their fiat currencies.<\/p>\n
Compound Finance vs. Marker DAO<\/span><\/h2>\nUntil just recently, when Compound came into the picture, MarkerDAO was the most known Ethereum-based DeFi project.<\/p>\n
MarkerDAO, like Compound, permits users to lend and borrow crypto using BAT, wBTC, or Ethereum. Added to that fact, one can borrow another ERC-20 stablecoin known as DAI.<\/p>\n
DAI is pegged as well to the US Dollar. It differentiates from USDC and USDT in that they are backed up by centralized assets, but DAI is decentralized and it’s a cryptocurrency.<\/p>\n
Similar to Compound, a borrower cannot borrow 100% of the Ethereum collateral amount he\/she put down in DAI, only up to 66.6% of the USD value.<\/p>\n
So to say, if one deposits $1000 equivalent of Ethereum, the person can withdraw 666 DAI for a loan not dissimilar to Compound, a user can borrow only DAI asset, and the reserve factor is fixed.<\/p>\n
Both platforms utilize yield farming, and interestingly, users borrow from MarkerDAO to invest or lend in Compound\u2014because, in Compound, users stand a higher chance of profitability. Amongst the numerous differences between the two most popular DeFi protocols, the most outlined differences hold as:<\/p>\n
\n- Compound protocol reward users more incentives, added to the interest rates to participate in it.<\/li>\n
- MarkerDAO has the sole goal of providing support to the DAI stablecoin.<\/li>\n<\/ol>\n
Compound also supports lending and borrowing more assets, whereas, in MarkerDAO, it’s only one. This grants Compound more advantage when it comes to the yielding factor\u2014which is the basic pushing force of these DeFi protocols.<\/p>\n
Additionally, Compound is more user-friendly than MarkerDAO.<\/p>\n