INSUBCONTINENT EXCLUSIVE:
Think Ethereum and other crypto coins are overvalued Now you can make money when their prices fall via Compound, which is launching its
money market protocol for shorting cryptocurrencies today
The Coinbase and Andreessen Horowitz-funded startuptoday opens its simple web interface allowing users to borrow and short Ethereum, 0x ZRX,
Brave BAT, and Augur REP token, or lend them through Compound to earn interest.Compound protocol isn&t just useful for crypto haters, or
HODLers who want to generate interest instead of just having their coins gathering dust in a wallet
&If/whenCompoundscales, this will lead to some really interesting improvements in market structure, namely, fairer prices& Compound CEO
Robert Leshner tells me.The startup spent the summer completing a security audit by Trail Of Bits and adding 26 hedge fund partners who will
trade with Compound, offering liquidity to independent investors looking to be matched with borrowers or lenders
Next, the startup wants to offer a stablecoin on its protocol, bring in big financial institutions to add even more liquidity, and partner
with a wallet provider to make signup faster.Coinbase first investment, Compound, earns you interest on cryptoCompound users visit its site
through a Web3 browser such as MetaMask or Coinbase Wallet and enter their Ethereum price
They can then view the interest rates for borrowing and shorting or lending and earning interest for each of the supported tokens
Compound secret sauce is that those interest rates are set algorithmically based on demand, though eventually it wants a community
governance body to oversee this process
&It ranges from 5 percent to 45 percent APR depending on how scarce liquidity is
in general, we expect supply to outnumber borrowing about 5-1, and borrowing rates to be about 10 percent&.To make sure no one thinks
they&re getting scammed, Compound is also releasing a transparency dashboard users can view to check up on all the assets moving through the
protocol and see what Compound is earning
It charges 10 percent of what borrowers pay in interest, with the rest going to the lender
That margin is what attracted the $8.2 seed round for Compound that also included Polychain Capital and Bain Capital Ventures.It could also
make crypto exchanges like Coinbase or Robinhood less attractive to users because leaving their coins there comes with the opportunity cost
of not lending them for profit
Meanwhile, shorts could pop the volatile crypto bubble and push prices to more sensible and stable levels
That market health is a critical precursor to big banks and traditional investors diving into crypto.[Disclosure: The author owns small
