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What is Compound DAI?

Compound is a protocol that allows people to lend and borrow cryptocurrency. Like most DeFi protocols, Compound is a system of openly accessible smart contracts built on Ethereum. The platform allows borrowers to take out loans and lenders to provide loans by locking their crypto assets into the protocol. Unlike in traditional finance, however, the interest rates paid and received by borrowers and lenders on Compound are determined algorithmically by the supply and demand of each crypto asset. Interest rates are generated with every block mined, and locked assets can be withdrawn at any time. Compound DAI (cDAI) is one of the networks that the Compound Protocol currently deploys on.

What is Compound DAI & cToken?

Compound DAI (cDAI) is a USDC token minted by the Compound protocol. cDAI is one of cTokens in Compound Protocol. cTokens are the primary means of interacting with the Compound Protocol; when users mint, redeem, borrow, repay a borrow, liquidate a borrow, or transfer cTokens, they will do so using the cToken contract. Each asset supported by the Compound Protocol is integrated through a cToken contract, which is an EIP-20 compliant representation of balances supplied to the protocol. By minting cTokens, users earn interest through the cToken's exchange rate, which increases in value relative to the underlying asset and gains the ability to use cTokens as collateral.