> For the complete documentation index, see [llms.txt](https://instadapp-3.gitbook.io/instadapp-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://instadapp-3.gitbook.io/instadapp-docs/instadapp-gui/integrated-protocols/compound-finance.md). # Compound Finance ![](/files/-MS70BFMRY468UqG9zYs) ## What is Compound Finance Compound Finance is a decentralized protocol for lending and borrowing. Compound utilizes algorithmic formulas to determine rates. Compound Protocol is governed by COMP holders. ## How does lending work on Compound? Assets deposited into Compound Finance have a **Collateral Factor.** The Collateral factor is the percentage of value that can be borrowed against a particular asset. Collateral Factor Collateral Factor is the percentage a user can borrow against a particular asset. ## How do liquidations work on Compound? When a position becomes undercollateralized that position's collateral assets can be liquidated at a slight discount to pay back the debt. Positions on Compound can be partially liquidated, liquidation ends once the user's position becomes fully collateralized. --- # Agent Instructions This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com. ## Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://instadapp-3.gitbook.io/instadapp-docs/instadapp-gui/integrated-protocols/compound-finance.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.