---
description: Lend and Borrow assets using the Compound Protocol
---

# Compound Finance

![](https://3348288544-files.gitbook.io/~/files/v0/b/gitbook-legacy-files/o/assets%2F-M4oPRMR-ywIFveCDbPX%2F-MS4l2CeZlUewjyVSJEH%2F-MS70BFMRY468UqG9zYs%2Fcompound%20banner.png?alt=media\&token=5e08d2bb-cee2-47f4-bbe9-dd7b7534574e)

## 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.&#x20;

## 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.&#x20;
