Is Compound Finance A Scam Project?

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Mrcoin

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Nowadays, most cryptocurrency traders are confused about the choice to make because there are too many cryptocurrency brokers, lenders, and exchanges keep springing up. Compound Finance is not an exception, it is One of the most famous decentralized financial lending protocols, which involves lending and earning interest on digital loans. The question arises: Is Compound Finance Safe or Scam? Don’t worry! Let's us help you to find the answer now.

Firstly, you need to know overall about the project. What is it? How it works?

Compound Finance was founded by a Californian company Compound Labs Inc. in 2018 that aims to allow you to lend and borrow crypto assets without any middlemen.

Both lenders and borrowers get even more value from their crypto. Lenders earn interest, while borrowers deposit crypto to gain access to credit without the banking headaches or provide any ID, passing through the KYC process.

There are some key features about Compound Finance:


Compound Finance claims to provide users many advantages while using their platform. However, we have found some negative facts about their platform that can be considered as red flags!!

According to the news on ZDNET on Dec 3 2020, Compound Finance is accused of performing an exit scam allegedly that stole a total $11 million from investors.
At the time the scandal happened, the project's website, Twitter, Medium, and Discord pages appear to have been deleted. Furthermore, one investor had lost $1 million from investment, he offered $100,000 or any information leading to the identity of the threat actor, or any means to return stolen funds to victims.

Besides, a report of Solidity Finance said that “The Compounder team swapped the safe/audited Strategy contracts and replaced them with malicious 'Evil Strategy' contracts that allowed them to steal user funds. They did this through a public, though clearly unmonitored, 24-hour timelock. The team had the power to update strategy pools and they did so maliciously here.”

Even worse than the old problem left unresolved, another problem occurred in October 2021 that CNBC published that about $90 million has mistakenly gone out to users of Compound and the founder is begging users to voluntarily return the tokens.

The price of Compound’s native token, comp, initially plunged nearly 13% in a day on news of the bug.

Things go wrong after Compound presents an upgrade on Wednesday 2021 as the new Comptroller contract contains a bug, causing some users to receive far too much COMP.

Compounded founder claimed that “ There are no admin controls or community tools to disable the COMP distribution; any changes to the protocol require a 7-day governance process to make their way into production”

Notably, a highly volatile algorithm-based smart contract system leads to technical errors in the DeFi system. This disadvantage causes high risk for both Compound’s lenders and borrowers because it is a potential for hackers to exploit or hack the smart contracts that make Compound work. By doing so, they could steal crypto locked up in Compound’s smart contracts. It can be explained for the problem happening in 2020.

Even Compound is a very popular project which brings many benefits for their users to earn passive incomes. But some bad news about it makes us think about “ Is Compound a Scam?”. If you have any essential information about Compound, don't hesitate to tell us by leaving the comment below.
 

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