Within our compound tax fraud alerts interest calculator results section, you will see either a Rate of Return (RoR) or Time-Weighted Return (TWR) figure for your calculation. You can include regular withdrawals within your compound interest calculation as either a monetary withdrawal or as a percentage of interest/earnings. Let’s cover some frequently asked questions about our compound interest calculator. Note that you can include regular weekly, bi-weekly (fortnightly), monthly, quarterly or yearly deposits in your calculations with our compound interest calculator at the top of the page.

The Compound protocol contracts use a system of exponential math, Exponential.sol, in order to represent fractional quantities with sufficient precision. We believe that size, visibility, and time are the true test for the security of a smart contract; please exercise caution, and make your own determination of security and suitability. All contract code and balances are publicly verifiable, and security researchers are eligible for a bug bounty for reporting undiscovered vulnerabilities.

Looking back at our example from above, if we were to contribute an additional $100 per month into our investment, our balance after 20 years would hit the heights of $67,121, with interest of $33,121 on total deposits of $34,000. $10,000 invested at a fixed 5% yearly interest rate, compounded yearly, will grow to $26,532.98 after 20 years. We’ll say you have $10,000 in a savings account earning 5% interest per year, with annual compounding. This generates additional interest in the periods that follow, which accelerates your investment growth. There are also some excellent articles from renowned financial websites that list common types of investment for compound interest. The question about where to invest to benefit the most from compound interest has become a feature of our email inbox, with people considering mutual funds, ETFs, MMFs and high-yield savings accounts, and wanting to know the advantages and risks.

Protocol Contracts

This function sets the minimum amount of base token that is allowed to be borrowed. This function sets the fraction of the liquidation penalty that goes to buyers of collateral instead of the protocol. This function sets the supply interest rate slope high bound in the approximate amount of seconds in one year. This function sets the supply interest rate slope low bound in the approximate amount of seconds in one year. This function sets the borrow interest rate slope high bound in the approximate amount of seconds in one year. This function sets the borrow interest rate slope low bound in the approximate amount of seconds in one year.

Governance allows the community to propose, vote, and implement changes through the administrative smart contract functions how do you record a return deposit item on a bank statement of the Compound III protocol. This is an extension of the market logic contract which supports some auxiliary/independent interfaces for the protocol. The initial deployment of Compound III is on Ethereum and the base asset is USDC. Interest compounds only during blocks in which the cToken contract has one of the aforementioned methods invoked. Prices and exchange rates are scaled by the decimals unique to each asset; cTokens are ERC-20 tokens with 8 decimals, while their underlying tokens vary, and have a public member named decimals. The Compound protocol is based on the Compound Whitepaper (2019); the codebase is open-source, and maintained by the community.

The network deployment artifacts with contract addresses are available in the Comet repository deployments/ folder. Interest accrues for the current block, as well as each prior block in which the accrueInterest method was not triggered (no user interacted with the cToken contract). See the interest rate data visualization notebook on Observable to visualize which interest rate model is currently applied to each market.

All Markets

The only addresses that are allowed to call this function are the Governor and the Pause Guardian. This function pauses the specified protocol functionality in the event of an unforeseen vulnerability. COMP token-holders designate the Pause Guardian address, which is held by the Community Multi-Sig. Each deployment outside of Mainnet needs to have a Bridge Receiver and Local Timelock contract on its chain. The Timelock on Mainnet is the administrator of all community sanctioned instances of Compound III. The deployment must have access to on-chain asset prices and governance messages passed from Ethereum Mainnet.

To find the number of underlying tokens that can be redeemed for cTokens, multiply the number of cTokens by the above value oneCTokenInUnderlying. Please join the #development room in the Compound community Discord server; Compound Labs and members of the community look forward to helping you build an application on top of Compound.

• It is for this reason that financial experts commonly suggest the risk management strategy of diversification.
• This is a proxy contract for the configurator, which is used to set and update parameters of a Comet proxy contract.
• This function returns a boolean indicating whether or not the protocol supply functionality is presently paused.
• This function sets the borrow interest rate slope base in the approximate amount of seconds in one year.
• The Compound protocol is based on the Compound Whitepaper (2019); the codebase is open-source, and maintained by the community.

Set Borrow Interest Rate Slope (High)

I hope you found this article helpful and that it has shown you how powerful compounding can be – and why Warren Buffett swears by it. The TWR gives you a clearer picture of how your investment might have performed if you hadn’t made extra deposits or withdrawn funds, allowing you to better assess its overall performance. We calculate it by taking the Initial investment figure away from the Final value and dividing the resulting figure by the Initial investment. The Rate of Return (RoR) reflects the percentage return on your investment over the entire investment term.

Now that you understand how powerful compound interest can be, let’s break down how it’s calculated. Instead, we advise you to speak to a qualified financial advisor for advice based upon your own circumstances. We can’t, however, advise you about where to invest your money to achieve the best returns for you. Three simple strategies to consider when doing your long-term financial planning.

Withdraw or Borrow

This function allows governance to withdraw base token reserves from the protocol and send them to a specified address. This function sets the Comet contract’s ERC-20 allowance of an asset for a manager address. This function sets the maximum amount of an asset that can be supplied to the protocol. This function updates the liquidation collateral factor for an asset in the protocol.

Compounding with additional deposits

The first is on behalf of the caller, the second is to a separate account, and the third is for a manager on behalf of an account. An account’s present balance can be calculated using the current index with the following formulas. When an account interacts with the protocol, the indices are updated and saved. The borrowing collateral factors are percentages that represent the portion of collateral value that can be borrowed. This function updates the liquidation factor for an asset in the protocol.

Setting up an Ethereum Development Environment

The TWR figure represents the cumulative growth rate of your investment. When interest compounding takes place, the effective annual rate becomes higher than the nominal annual interest rate. With savings and investments, interest can be compounded at either the start or the end of the compounding period.

Supplying Assets to the Compound Protocol

This is a rewards contract which can hold rewards tokens (e.g. COMP, WETH) and allows claiming rewards by users, according to the core protocol tracking indices. This is the implementation of the Configurator contract, which can also be upgraded to support unforeseen changes to the protocol. This is used to add additional functionality without requiring contract space in the main protocol contract.

This function returns the minimum borrow balance allowed in the base asset. This function returns the current balance of a collateral asset for a specified account in the protocol. This function can be used to supply collateral, supply the base asset, or repay an open borrow of the base asset. The base asset can be borrowed using the withdraw function; the resulting borrow balance must meet the borrowing collateral factor requirements. Collateral can only be added if the market is below its supplyCap, which limits the protocol’s risk exposure to collateral assets.

As you compare the compound interest line to those for standard interest and no interest at all, you can see how compounding boosts the investment value. We’ll use a 20 year investment term at a is interest on a home equity line of credit 10% annual interest rate (just for simplicity). An account’s initial borrow size must be equal to or greater than this value.

How is compound interest calculated?

So, let’s now break down interest compounding by year, using a more realistic example scenario. We’ve discussed what compound interest is and how it is calculated. If you’d prefer not to do the math manually, you can use the compound interest calculator at the top of our page.

• We’ll assume you intend to leave the investment untouched for 20 years.
• There is no underlying contract for ETH, so to do this with cETH, set underlyingDecimals to 18.
• It can be viewed at v3-additional-grants.compound-community-licenses.eth when the browser network is set to Ethereum Mainnet.
• This function returns true if the account passed to it has non-negative liquidity based on the borrow collateral factors.
• This generates additional interest in the periods that follow, which accelerates your investment growth.

To generate the proper Comet Interface ABI (CometInterface.sol), compile the Comet project using yarn compile. The v3 proxy is the only address to be used to interact with a Compound III instance. For documentation of the Compound v2 Protocol, see docs.compound.finance/v2. Historical interest rates can be retrieved from the MarketHistoryService API.