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C Tokens, often referred to as CTokens, are tokens used in the Compound protocol, a decentralized finance (DeFi) platform built on the Ethereum blockchain. In the Compound ecosystem, users can supply assets to the protocol and receive CTokens in exchange. These CTokens represent the user’s share of the liquidity pool and earn interest over time.
When a user supplies an asset (like ETH or DAI), they receive an equivalent amount of CTokens, which accrue interest based on the supply and demand of the asset. The value of CTokens increases as users earn interest, and they can later redeem these tokens for the underlying asset plus any accumulated interest.
CTokens serve several purposes:
1. Representation of Assets: They act as a receipt for the assets supplied to the protocol.
2. Earning Interest: Holders can accumulate interest based on their CToken holdings.
3. Liquidity: CTokens can be traded or used in other DeFi applications, providing liquidity to the ecosystem.
Overall, they are an integral part of how Compound operates, enabling users to earn passive income from their crypto assets.