Compound III, commonly called Compound v3 or Comet, is a version of the Compound lending protocol built around a single base asset in each market. Users may supply the base asset or borrow it against supported collateral. Other supported assets are collateral only; they do not earn the protocol’s base-asset supply interest. Market assets and settings vary by deployment, so USDC or any other asset should not be assumed to be the base asset everywhere.
Key Features
| Feature | Description |
|---|---|
| Also known as | Compound III, Compound v3, Comet |
| Market design | One base asset and supported collateral assets |
| Interest | Variable supply/borrow rates on base-asset balances |
| Collateral | Does not earn the protocol’s base-asset supply rate |
| Liquidation | Protocol absorption followed by possible collateral sales |
How a Comet Market Works
Each Compound III deployment is a separate market with one base asset. A user can supply that asset to earn the market’s variable supply rate, or borrow it if the account has enough eligible collateral. Supported collateral assets increase borrowing capacity according to market-specific collateral factors. Supplying collateral does not itself earn the base-asset supply rate.
Before interacting, users generally need to approve the market’s smart contract to use the relevant token. Exact steps depend on the asset, network, and interface. Interest rates and available assets vary by market and can change; rewards, when offered, are separate from the underlying interest rules.
Liquidation and Risks
An eligible underwater Comet position can be absorbed by the protocol: reserves cover its debt and collateral transfers to the protocol. A separate collateral purchase can replenish reserves. This differs from the direct repay-and-seize process used in v2. Liquidation thresholds remain market-specific.
Compound III’s simpler one-base-asset structure is different from Compound v2’s separate cToken markets, but it is not risk-free. Users still face smart-contract, oracle, governance, liquidity, collateral, stablecoin, and network risks. A displayed supply rate is variable and is not a promised return. Check the specific deployment, supported collateral, borrowing and liquidation rules, liquidity, and exit path before using it.
How It Differs from Compound v2
Compound v2 represents supplied balances with cTokens and supports separate markets for different assets. Compound III instead organizes each deployment around one base asset plus a set of collateral assets. A user comparing the two should check the specific markets and position mechanics rather than assume that v2 balances, collateral rules, rates, or integrations carry over to Comet. See the broader Compound entry for the protocol overview.
Supported Assets, Rates and Costs
Each market defines its supported assets, collateral factors, interest-rate models and available liquidity. Check the exact version, network and contract address in the current documentation. Borrowing interest, network gas and any interface or integration costs affect a position; a headline supply rate is variable and is not a guarantee of the net result. Withdrawing also depends on the market’s available liquidity.
Security and Audits
OpenZeppelin’s 2022 Compound III audit reviewed a specified Comet code revision. It is useful evidence about that reviewed implementation, rather than a certification of every later deployment or of Compound v2. Check the current contracts and the scope of applicable reviews. Smart-contract, governance, oracle, asset and liquidity risks remain even when code has been audited.
History
The Compound Digest announced the launch of Compound III in August 2022 after a governance proposal initialized an Ethereum USDC market. The initial market is a historical example, not a universal list of today’s supported assets. Current deployment documentation identifies the relevant networks and contracts. The Compound III technical-reference analysis provides document-specific context.
Social Media Sentiment
A r/defi discussion reviewed in October 2026 asked whether Aave and Compound were appropriate places to hold stablecoins and compared DeFi lending with cash-like products. Replies focused on contract, oracle, governance, liquidation, stablecoin, and withdrawal-liquidity risks. The thread discusses Compound broadly, not Compound III specifically; it is a small example of user concerns, not a product review or representative survey.
Last updated: 2026-10
Related Terms
See Also
- Swap crypto with ChangeNOW (affiliate link).
Sources
- Compound Docs. Compound III — Defines Compound III as a system for supplying crypto assets as collateral to borrow a base asset, with base-asset supply also supported.
- Compound Docs. Collateral & Borrowing — Explains how collateral factors determine borrowing capacity, how base-asset supply differs from collateral supply, and how accounts can add collateral or repay debt.
- Compound Docs. Liquidation — Describes liquidation thresholds and the liquidation process for Compound III markets.
- Compound Docs. Interest Rates — Explains that base-asset supply and borrow rates depend on utilization, and that collateral assets do not earn or pay interest in the protocol’s model.
- r/defi (reviewed 2026-10-17). Are AAVE and Compound at risk right now? — A small discussion about Aave and Compound lending risk. It is not specifically about Compound III and is used only to show a limited user question about DeFi lending risk.
- The Compound Digest: Compound III Is Live — records the August 2022 launch and the first Ethereum USDC market.
- OpenZeppelin: Compound III Audit (2022) — reports the scope and findings of a specific Comet code review.
- DeFiLlama: Compound V3 — tracks activity and liquidity for this protocol version.