cETH (CETH)
In the rapidly evolving world of decentralized finance (DeFi), cETH stands out as a tokenized representation of Ethereum (ETH) within the Compound protocol. This innovative token allows users to engage with the Compound ecosystem, facilitating both lending and borrowing activities while maintaining liquidity and earning potential. As a pivotal component of the Compound network, cETH enables users to seamlessly manage their cryptocurrency assets.
Understanding the Compound protocol
Compound is a leading DeFi lending protocol designed to offer users the ability to earn interest on their cryptocurrency holdings by depositing them into specialized pools. These pools are supported by the Compound platform and provide a structured environment for both lenders and borrowers. By participating in these pools, users can maximize their returns while maintaining control over their assets.
| Ticker | CETH |
| Category | Finance / Banking |
| Website | https://compound.finance/ |
| @compoundfinance | |
| https://www.reddit.com/r/compound/ | |
| Contract Addresses | |
|---|---|
| ethereum | 0x4d...d5 Copied! |
Lending and borrowing with Compound
Within the Compound protocol, users can deposit their cryptocurrency assets into one of the available pools, receiving cTokens in return. These cTokens, such as cETH for Ethereum deposits, signify the user's stake in the pool. They serve as a record of the deposited amount and enable users to redeem their original cryptocurrency, along with any accrued interest, at any point in time.
For borrowers, the Compound platform offers the ability to take out secured loans by depositing collateral. The protocol supports a range of loan-to-value (LTV) ratios, typically varying from 50 to 75%, depending on the collateral asset. Borrowers must maintain their collateral above a specific threshold to avoid automatic liquidation, ensuring the stability and security of the lending process.
How cETH works
cETH functions as a tokenized version of ETH, provided to users who contribute ETH to the Compound protocol as collateral. This system allows users to continue earning interest on their ETH holdings while maintaining liquidity. When users deposit ETH into the Compound platform, they receive cETH in return, representing their share of the pool's value.
Redeeming ETH with cETH
One of the key features of cETH is the ability to redeem it for the original ETH deposit. As the user holds cETH, the exchange rate between cETH and ETH increases over time, reflecting the interest earned. This mechanism allows users to potentially receive more ETH than initially deposited, incentivizing long-term participation in the Compound ecosystem.