Four new proposals have passed through Compound’s governance system since the public COMP distribution went live on June 15th. Most of the proposals are a reaction to the user behavior surrounding the initial mechanics of the COMP distribution, and seek to both ensure the safety of the protocol and its users and ensure fair distribution of governance rights. Below, we highlight each proposal, from oldest to newest, and the broader significance for users and stakeholders of the protocol.
Status: Executed June 22nd, 2020
Voting Results: 1,413,016 For and 15,001 Against
Summary: With the rapid growth of USDT volumes on Compound, this proposal was introduced so that the liquidation mechanism accumulates USDT reserves to defend against any possibility of undercollateralized borrows.
Proposal 9: Set reserve factor for cUSDT to 20.0% (009)
Status: Executed June 25th, 2020
Voting Results: 758,651 For and 311,570 Against
Summary: Taking blck’s 10% USDT reserve factor increase even further, Dharma made the case for bumping up USDT’s reserve factor yet again to 20% to disincentivize a new trend called yield-farming.
Status: Executed June 27th, 2020
Voting Results: 1,198,438 For and 189,177 Against
Summary: This proposal has 2 parts: reducing the speed of COMP distribution to match the 13.1 second Ethereum block time vs the expected 15 second block time; and increasing the reserve factor for illiquid assets like BAT, REP, and ZRX to 50%, in order to mitigate inorganic yield-farming.
Proposal 11: COMP Distribution Patch (011)
Status: Queued June 30th, 2020 (Executable July 2)
Proposer: Geoffrey Hayes
Voting Results: 771,804 For and 1 Against
Summary: This proposal from Compound Labs CTO Geoffrey Hayes removes interest rates as a factor in COMP distribution by adjusting the allocation formula from: totalBorrows * borrowingRatePerBlock * USD Value to: totalBorrows * USD Value, so that every $1 supplied/borrowed will accrue the same amount of COMP in each market.
The launch of COMP has spurred the development of new tools, integrations, and methods of accessing the protocol and participating in governance.
17 exchanges so far have listed COMP with FTX and Poloniex also listing cUSDT so users can earn interest and COMP just by holding the asset. Alongside listing COMP on Pro and Consumer, Coinbase has created an educational series on COMP for their Earn product, where users can learn about the protocol and get rewarded with $9 of COMP.
Opyn and UMA have both released innovative financial instruments for COMP that allows COMP holders to hedge their exposure. Opyn has created a Protective COMP Put Option with a strike price of 150 USDC and Expiry date of July 3rd, 2020. The platform also offers the ability to earn premiums on USDC by selling these protective put options. UMA has launched yCOMP, which allows users to permissionlessly gain tokenized exposure to the price of COMP.
A community member ported the Compound Dashboard to Arweave, which is a derivative blockchain that enables permanent on-chain data storage.
Current supply on Compound is at $1.02B from ~30k unique addresses, marking the first time in the protocol’s existence that volumes have risen above the billion-dollar threshold. $1.7B (gross) supply was added to Compound in the last seven days in roughly 34k transactions, marking a 10x increase in the weekly transaction count from the last newsletter publication. 32% of this supply was from BAT, 23% was ETH, 13% was USDC, and 10% was USDT.
Open borrowing is at $390mm from 4.2k unique addresses. $1.2B (gross) of borrows were originated on Compound in the last week in 8.6k transactions. Of the current borrows outstanding, 74% are from BAT, 10% are from DAI, 8% are from USDT, and 4% are from USDC.
We’ve seen a dramatic shift in volumes moving away from stablecoins to assets like BAT, which is now the largest market on Compound with $307mm of gross supply and $272mm of gross borrow. Traders who seek to maximize their COMP earnings have begun to yield-farm the BAT market, recursively supplying and borrowing the asset, which pushes up the APY and resulting COMP earned. Leveraged yield farming is an extremely risky strategy, and has prompted the community to pass both a 50% reserve factor for illiquid assets like BAT, and a change to the COMP distribution model that removes APY from the equation.
For live figures please refer to our Markets page.
Links & Discussions
Binance published a COMP project information page
Coindesk reports on Compound passing Maker as the largest DeFi protocol by value locked
Coinbase customers can now earn COMP using their education platform, Coinbase Earn
CoinMarketCap explains the “Why?” and “How?” for earning COMP
Forbes provides a quick overview of DeFi yield-farming and community member’s thoughts
Forbes writer details COMP, DeFi, and its relation to Bitcoin
Yield-farming thoughts and numbers from CoinDesk
Analyst Joel John’s opinion of yield-farming and Compound
Compound Governance proposals and stats on Compound’s TLV from DeFi Rate