Compound III flips Compound v2

Last week, Compound III surpassed Compound v2 in both total assets and borrowing. 

Since launching last August, Compound III has grown to over 1.7B in total assets and 500M in borrowing, across 7 markets on 4 networks.

View the markets here.

Base WETH market vulnerability patched, no funds at risk

The community discovered and patched a vulnerability in the Base WETH market - no funds were affected or at risk.

The vulnerability would have been highly unprofitable to exploit, requiring 5000-10000x in gas costs for an attacker to withdraw funds directly from the Base WETH market ($5-10+ billion in gas to steal $1 million). Due to the siloed design of Compound III, no other markets were affected.

The vulnerability is disclosed in the forums here.

Aera Pilot Update

The Aera pilot diversified $500K of reserves from Compound v2 ($400K in ZRX and $100K in BAT), launched at the end of October after passing governance. 

The vault is currently valued at ~$750K, up from an initial allocation of $500K - this is mostly due to a run up in price from ZRX.

View the vault dashboard here, and follow ongoing updates in the forum post.

Protocol Governance Updates

Highlighted governance proposals summarized below. View all of the latest governance proposals at https://compound.finance/governance/proposals. 

Proposal 201 - [Gauntlet] 2023-12-04: Ethereum v3 WETH Interest Rate Curve Recommendations

• Status: Executed December 11, 2023

• Proposer: Gauntlet

• Voting Results: 560,439 For and 0 Against

• Summary: A proposal from Gauntlet to adjust five Interest Rate (IR) Curve parameters in the Ethereum v3 WETH comet:

  • Decrease Annual Borrow Interest Rate Base from 0.0099 to 0.005

  • Decrease Annual Borrow Interest Rate Slope Low from 0.037 to 0.03

  • Increase Annual Borrow Interest Rate Slope High from 0.5172 to 1.0

  • Decrease Annual Supply Interest Rate Slope Low from 0.0284 to 0.023

  • Increase Annual Supply Interest Rate Slope High from 0.6067 to 1.0

• For more details, see the full forum post here.

Proposal 200 - [Gauntlet] 2023-12-04: Compound v2 Deprecation (Phase 5)

• Status: Executed December 11, 2023

• Proposer: Gauntlet

• Voting Results: 614,233 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 7 Compound v2 risk parameters for Phase 4 of the Compound v2 Deprecation.:

  • Decrease cAAVE Collateral Factor from 58% to 53%

  • Decrease cCOMP Collateral Factor from 45% to 40%

  • Decrease cLINK Collateral Factor from 64% to 59%

  • Decrease cMKR Collateral Factor from 58% to 53%

  • Decrease cSUSHI Collateral Factor from 52% to 47%

  • Decrease cYFI Collateral Factor from 60% to 55%

  • Decrease cZRX Collateral Factor from 50% to 45%

  • Decrease cWBTC2 Borrow Cap to 250

• For more details, see the full forum post here.

Proposal 199 - Compound Growth Program

• Status: Executed December 10, 2023

• Proposer: PGov (for Alpha Growth)

• Voting Results: 630,443 For and 0 Against

• Summary: AlphaGrowth proposes a Compound Growth Program dedicated to advancing the Compound Protocol through targeted Business Development, Integration, and Marketing Campaigns. The program is structured with a total budget of 7770 COMP, distributed over a 4-month period and allocated into two distinct funds: BD Fund and Growth Fund. The forum post for the proposal can be found here.

Proposal 198 - OpenZeppelin Security Partnership - 2024 Q1 Compensation

• Status: Executed December 7, 2023

• Proposer: OpenZeppelin

• Voting Results: 510,804 For and 0 Against

• Summary: We receive our quarterly payments in a lump-sum of COMP. Based on the last week's volume-weighted average price, this would be $52.01 per COMP for a total quarterly payment of 19,229 COMP equaling $1M per the original agreement. This COMP will be transferred from the Comptroller using _grantComp. More detail in this forum post.

Proposal 197 - [Gauntlet] 2023-11-27: Arbitrum Native USDC - Risk Recommendations

• Status: Executed December 4, 2023

• Proposer: Gauntlet

• Voting Results: 560,849 For and 0 Against

• Summary: A proposal from Gauntlet to adjust two risk parameters in the Arbitrum Native USDC comet:

  • Increase ARB Supply Cap from 4M tokens ($4.10M) to 8M tokens ($8.20M)

  • Increase WBTC Supply Cap from 600 tokens ($22.30M) to 1,200 tokens ($44.60M)

• For more details, see the full forum post here.

Proposal 195 - [Gauntlet] 2023-11-20: Base v3 WETH Interest Rate Curve Recommendations

• Status: Executed November 27, 2023

• Proposer: Gauntlet

• Voting Results: 437,092 For and 0 Against

• Summary: A proposal from Gauntlet to adjust five Interest Rate (IR) Curve parameters and one risk parameter in the Base WETH comet:

  • Decrease Annual Borrow Interest Rate Base from 0.0099 to 0.005

  • Decrease Annual Borrow Interest Rate Slope Low from 0.037 to 0.035

  • Increase Annual Borrow Interest Rate Slope High from 0.5172 to 1.0

  • Decrease Annual Supply Interest Rate Slope Low from 0.0284 to 0.025

  • Increase Annual Supply Interest Rate Slope High from 0.6067 to 1.0

  • Gauntlet recommends the following risk parameter update:

  • Increase baseBorrowMin from 1e-18 to 1e-6

• For more details, see the full forum post here.

Proposal 194 - Top-up COMP Rewards on Compound V3 mainnet contract

• Status: Executed November 20, 2023

• Proposer: Gauntlet

• Voting Results: 564,601 For and 0 Against

• Summary: COMP rewards ran out on the Compound III mainnet CometRewards contract, resulting in users being unable to claim their COMP rewards. Gauntlet proposes to transfer 100,000 COMP (corresponding to roughly 150 days of distribution) from the Comptroller to the Rewards contract for Compound III on the mainnet.

Proposal 193 - [Gauntlet] 2023-11-13: Compound v2 Deprecation (Phase 4)

• Status: Executed November 20, 2023

• Proposer: Gauntlet

• Voting Results: 614,601 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 7 Compound v2 risk parameters for Phase 4 of the Compound v2 Deprecation.:

  • Decrease AAVE Collateral Factor from 63% to 58%

  • Decrease COMP Collateral Factor from 50% to 45%

  • Decrease LINK Collateral Factor from 69% to 64%

  • Decrease MKR Collateral Factor from 63% to 58%

  • Decrease SUSHI Collateral Factor from 57% to 52%

  • Decrease YFI Collateral Factor from 65% to 60%

  • Decrease ZRX Collateral Factor from 55% to 50%

• For more details, see the full forum post here.

Proposal 192 - Add rETH as Collateral to wETHv3 Mainnet

• Status: Executed November 17, 2023

• Proposer: Michigan Blockchain

• Voting Results: 730,861 For and 5,208 Against

• Summary: See proposal and parameter recommendations here.

Proposal 190 - [Gauntlet] 2023-10-30: Compound v2 Deprecation (Phase 3)

• Status: Executed November 7, 2023

• Proposer: Gauntlet

• Voting Results: 564,609 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 7 Compound v2 risk parameters for Phase 3 of the Compound v2 Deprecation:

  • Decrease AAVE Collateral Factor from 68% to 63%

  • Decrease COMP Collateral Factor from 55% to 50%

  • Decrease LINK Collateral Factor from 74% to 69%

  • Decrease MKR Collateral Factor from 68% to 63%

  • Decrease SUSHI Collateral Factor from 62% to 57%

  • Decrease YFI Collateral Factor from 70% to 65%

  • Decrease ZRX Collateral Factor from 60% to 55%

• For more details, see the full forum post here.

Proposal 189 - CGP 2.0 Updates and Renewal

• Status: Executed November 5, 2023

• Proposer: Michigan Blockchain

• Voting Results: 610,457 For and 21,285 Against

• Summary: Based on the impact and insights derived from CGP 2.0, we propose renewing CGP 2.0 with a budget of $970k for two quarters. The domain allocators will utilize this budget to fund proposals that align with Compound's roadmap. Domains:

  • Dapps and Protocol Ideas - $450K

  • Multi - Chain/Cross chain Strategy, Dev Tooling - $200K

  • Security Tooling - $150K

• Detailed information related to CGP 2.0’s funding breakdown, relevant metrics, insights, and proposed improvements going forward can be found here.

Proposal 188 - [Gauntlet] Arbitrum v3 USDC Native - Risk Recommendations (2023-10-16)

• Status: Executed October 23, 2023

• Proposer: Gauntlet

• Voting Results: 484,014 For and 0 Against

• Summary: A proposal from Gauntlet to adjust one risk parameter in the Arbitrum v3 USDC Native comet: Increase WBTC supply cap from 300 tokens to 600 tokens. For more details, see the full forum post here.

Proposal 187 - Aera Pilot Proposal

• Status: Executed October 23, 2023

• Proposer: Gauntlet

• Voting Results: 484,013 For and 0 Against

• Summary: A proposal from Aera to initiate a free $500k pilot to diversify out of ZRX and BAT reserves (from Compound V2 ETH) and then hold the proceeds in a Volatility targeted portfolio. For more details, see the full forum post here.

Ongoing Discussions

See all the latest discussions on the Compound Community Forum. Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development.

Compound Liquidator Bot Tutorial

Learn how to build a liquidator bot on the Compound protocol with Adam Bavosa, Developer Relations Lead at Compound Labs. Powered by Alchemy, Autocode, and Sendgrid, the liquidator bot actively monitors positions and executes liquidations, with real-time email alerts.

Watch the tutorial on Alchemy University’s YouTube channel:

stMATIC added as collateral on the USDC • Polygon market

Lido staked MATIC (stMATIC) has been added as a collateral asset on the USDC • Polygon market.

View the USDC • Polygon market.

New Markets overview page

The Markets page now displays all Compound III markets on one page, letting users more easily navigate Compound. Markets are grouped by network, with each market’s primary data arranged on a single row, and can be sorted by Earn or Borrow APR, or Totals.

See the new Markets overview page at https://app.compound.finance/markets/

Compound V2 market data can be accessed here.

Protocol Governance Updates

Proposal 186 - [Gauntlet] 2023-10-09: Compound v2 Deprecation (Phase 2)

• Status: Queued October 14, 2023

• Proposer: Gauntlet

• Voting Results: 709,157 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 8 Compound v2 risk parameters for Phase 2 of the Compound v2 Deprecation:

  • Decrease cAAVE Collateral Factor from 73% to 68%

  • Decrease cCOMP Collateral Factor from 60% to 55%

  • Decrease cLINK Collateral Factor from 79% to 74%

  • Decrease cMKR Collateral Factor from 73% to 68%

  • Decrease cSUSHI Collateral Factor from 67% to 62%

  • Decrease cYFI Collateral Factor from 75% to 70%

  • Decrease cZRX Collateral Factor from 65% to 60%

  • Increase v2 USDC Reserve Factor from 30% to 45%.

• For more details, see the full forum post here.

Proposal 185 - OpenZeppelin Security Partnership - 2023 Q4 Compensation

• Status: Executed September 29, 2023

• Proposer: OpenZeppelin

• Voting Results: 865,101 For and 0 Against

• Summary: We receive our quarterly payments in a lump-sum of COMP. Based on the last week's average price, this would be $39.76 per COMP for a total quarterly payment of 25,148 COMP equaling $1M per the original agreement. More details in this forum post.

Proposal 184 - Add stMATIC as Collateral to USDCv3 Polygon Market

• Status: Executed October 5, 2023

• Proposer: Penn Blockchain

• Voting Results: 734,587 For and 0 Against

• Summary: This proposal is to set the parameters for stMATIC as below based on Gauntlet's recommendations: 

  • supplyCap: 8,000,000 

  • borrowCollateralFactor: 60% 

  • liquidateCollateralFactor: 65% 

  • liquidationFactor: 7%

Proposal 182 - [Gauntlet] Arbitrum v3 USDC Reward Recommendations (2023-09-18)

• Status: Executed September 28, 2023

• Proposer: Gauntlet

• Voting Results: 678,169 For and 0 Against

• Summary: A proposal from Gauntlet to adjust two COMP reward distributions in the Arbitrum USDC native comet:

  • Increase Daily COMP USDC Supply Rewards from 10 to 20.

  • Increase Daily COMP USDC Borrow Rewards from 0 to 20.

• For more details, see the full forum post.

Proposal 181 - Gauntlet <> Compound Renewal 2023

• Status: Executed September 25, 2023

• Proposer: Gauntlet

• Voting Results: 673,172 For and 0 Against

• Summary: A proposal to renew Gauntlet’s 12-month engagement with Compound on continuous market risk management to maximize capital efficiency while minimizing the risk of insolvency and liquidations to create long-term sustainable growth. Gauntlet renewed its partnership with Compound last year in September, which runs through September 27, 2023. The service fee structure will be a fixed annual fee of $2,000,000, completely in COMP tokens.

• For more details, see the full proposal.

Proposal 180 - [Gauntlet] 2023-09-11: Compound v2 Deprecation (Phase 1)

• Status: Executed September 18, 2023

• Proposer: Gauntlet

• Voting Results: 658,176 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 8 risk parameters, distribution rewards, and IR curve parameters across the v2 and Ethereum v3 USDC protocols for Phase 1 of the Compound v2 Deprecation:

  • Increase v2 USDC Reserve Factor from 15% to 30%.

  • Decrease v2 USDC daily COMP supply distribution from 66.20 to 0.

  • Decrease v2 USDC daily COMP borrow distribution from 91.20 to 0.

  • Increase Ethereum v3 USDC COMP supply distribution from 100 to 257.40.

  • Decrease Ethereum v3 USDC Supply Kink from 95% to 93%.

  • Decrease Ethereum v3 USDC Borrow Kink from 95% to 93%.

  • Increase Ethereum v3 USDC Annual Supply Interest Rate Slope High from 0.76 to 1.5.

  • Increase Ethereum v3 USDC Annual Borrow Interest Rate Slope High from 0.567 to 1.5.

• For more details, see the full forum post here.

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below. Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development.

CGP 2.0 Updates and Renewal

• Proposer: harsha (Questbook)

• Summary: Based on the impact and insights derived from CGP 2.0, we propose renewing CGP 2.0 with a budget of $970k for two quarters. The domain allocators will utilize this budget to fund proposals that align with Compound’s roadmap. After researching, and gathering feedback from domain allocators, active community members, and builders, we propose supporting the following domains:

  • Dapps and Protocol Ideas ($450K)

  • Multi - Chain/Cross chain Strategy, Dev Tooling ($200K)

  • Security Tooling ($150K)

Aera Pilot for Compound v2 Reserves

• Proposer: Aera (Gauntlet)

• Summary: The proposal does the following:

  • Accepts ownership of the vault, asset registry, and hooks module.

  • Removes ZRX and BAT from V2 reserves.

    • Specifically, ~$400k of ZRX and ~$100k of BAT. This ratio was chosen due to onchain liquidity conditions.

  • Deposits into the Compound Aera vault.

  • Resumes the Aera vault to allow for rebalancing to take place by the vault guardian.

• This is a non-custodial vault, meaning the Compound Governor Bravo Timelock owns the vault. Thus, the DAO can initiate withdraw/deposit requests via a governance proposal at any time.

• Gauntlet will serve as the vault guardian for this vault. There are no fees associated with this pilot.

Compound launches on Base

Compound is now live on Base, Coinbase’s recently launched layer 2 chain.

Compound currently features a bridged USDC market, and ETH market on Base.

ETH and cbETH can be used as collateral to borrow bridged USDC, or cbETH to borrow ETH in each respective market. 

Native USDC on Arbitrum

The native USDC market on Arbitrum is live on Compound.

Users can transfer native USDC from the Arbitrum market to different chains via Circle’s cross-chain transfer protocol (CCTP), without needing to bridge back to Ethereum.

The bridged USDC.e Arbitrum market will continue to operate, while Arbitrum develops its native migration solution.

Net interest rates now displayed in Compound

The Compound dashboard and markets pages now shows net interest rates, inclusive of token distributions. Hovering over the APR in the dashboard reveals a visual breakdown to help users understand how net rates are calculated.

A quick walkthrough in an example below for the USDC market:

4.23% Net Borrow APR for USDC:

• 6.41% interest (paid to suppliers in USDC), subtracting 2.18% interest (distributed by the protocol in COMP)

6.81% Net Supply APR for USDC:

• 6.24% interest (paid by borrowers in USDC), adding 0.56% interest (distributed by the protocol in COMP)

Note the token amount distributed is based on its value determined by Chainlink’s price feed, on a block-by-block basis. Due to token price fluctuations, the tokens distributed may not reflect the original interest rate.

Protocol Governance Updates

Proposal 179 - Add stMATIC as Collateral to USDCv3 Polygon Market

• Status: Active

• Proposer: Penn Blockchain

• Voting Results: 75,555 For and 0 Against

• Summary: For Compound, stMATIC offers a good collateral option because of its extensive use and composability on Polygon. Forum discussion.

Proposal 178 - Initialize native USDC market cUSDCv3 on Arbitrum

• Status: Executed September 1, 2023

• Proposer: Compound Labs

• Voting Results: 555,668 For and 0 Against

• Summary: This proposal takes the governance steps recommended and necessary to initialize a Compound III USDC (native USDC on Arbitrum) market on Arbitrum. Simulations have confirmed the market's readiness, as much as possible, using the Comet scenario suite. Further detailed information can be found on the corresponding proposal pull request and forum discussion.

Proposal 177 - [Gauntlet] 2023-08-21: Polygon USDC - Risk Parameter Updates

• Status: Queued Aug 29, 2023

• Proposer: Gauntlet

• Voting Results: 625,672 For and 0 Against

• Summary: A proposal from Gauntlet to adjust one risk parameter in the Polygon USDC comet: Increase WBTC supply cap from 1k tokens to 1.5k tokens For more details, see the full forum post here.

Proposal 176 - [Gauntlet] 2023-08-14: Ethereum WETH - Risk Parameter, IR Curve, & Incentive Updates

• Status: Executed Aug 22, 2023

• Proposer: Gauntlet

• Voting Results: 554,038 For and 0 Against

• Summary: Gauntlet recommends the following changes to the Compound III Ethereum ETH market:

  • Increase storefront price factor from 50% to 100%

  • Decrease wstETH liquidation penalty from 5% to 2.5%.

  • Decrease cbETH liquidation penalty from 5% to 2.5%.

  • Decrease Annual Borrow Interest Rate Slope Low from 0.051 to 0.037.

  • Increase COMP daily supply distribution from 38 to 70.

• For more details, see the full forum post here.

Proposal 174 - Initialize cWETHv3 on Base

• Status: Executed August 19, 2023

• Proposer: PGov

• Voting Results: 897,879 For and 0 Against

• Summary: This proposal takes the governance steps recommended and necessary to initialize a Compound III WETH market on Base. Simulations have confirmed the market's readiness, as much as possible, using the Comet scenario suite. Further detailed information can be found on the corresponding proposal pull request and forum discussion.

Proposal 173 - [Gauntlet] 2023-08-07: Arbitrum USDC - Reward Updates

• Status: Executed Aug 18, 2023

• Proposer: Gauntlet

• Voting Results: 810,026 For and 0 Against

• Summary: Gauntlet recommends the following change to Arbitrum USDC rewards: Decrease daily COMP supply rewards from 34.73 to 10.

• For more details, see the full forum post here.

Proposal 172 - Add MaticX as Collateral to USDCv3 Polygon Market

• Status: Executed August 14, 2023

• Proposer: Penn Blockchain

• Voting Results: 641,916 For and 0 Against

• Summary: For Compound, MaticX offers a good collateral option because of its extensive use and composability on Polygon. Forum discussion.

Proposal 171 - Initialize cUSDbCv3 on Base

• Status: Executed Aug 12, 2023

• Proposer: Compound Labs

• Voting Results: 645,643 For and 0 Against

• Summary: This proposal takes the governance steps recommended and necessary to initialize a Compound III USDbC (bridged version of USDC on Base) market on Base. Simulations have confirmed the market's readiness, as much as possible, using the Comet scenario suite. Further detailed information can be found on the corresponding proposal pull request and forum discussion.

Proposal 170 - [Gauntlet] 2023-07-24 Pause supply for Compound v2 Tail Assets

• Status: Executed July 31, 2023

• Proposer: Gauntlet

• Voting Results: 810,026 For and 0 Against

• Summary: Gauntlet recommends pausing supply for the following collateral assets on Compound v2:

  • cAAVE

  • cCOMP

  • cLINK

  • cSUSHI

  • cUNI

• For more details, see the full forum post here. 

Proposal 169 - [Gauntlet] 2023-07-24 Increase supply cap for WETH, WBTC, UNI, LINK on Ethereum Compound v3 USDC

• Status: Executed July 31, 2023

• Proposer: Gauntlet

• Voting Results: 942,537 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 4 parameters for 4 Ethereum Compound v3 USDC assets.

  • Increase WETH supply cap from 350k tokens to 500k tokens.

  • Increase WBTC supply cap from 12k tokens to 18k tokens.

  • Increase UNI supply cap from 2.3M tokens to 6M tokens.

  • Increase LINK supply cap from 1.25M tokens to 4M tokens.

• For more details, see the full forum post here. 

Proposal 168 - Gauntlet Recommendations: Ethereum Compound v3 USDC - Interest Rate Curve & Incentive Changes

• Status: Executed July 17, 2023

• Proposer: Gauntlet

• Voting Results: 629,800 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 2 Interest Rate Curve parameters and 2 COMP reward distributions in Ethereum Compound v3 USDC.

  • Increase Borrow Kink from 90% to 95%

  • Increase Annual Borrow Interest Rate Slope High from 0 to 0.567

  • Decrease daily USDC COMP borrow rewards from 481.41 to 381.41 (~$22,800/day)

  • Increase daily USDC COMP supply rewards from 0 to 100 (~$6,000/day)

• For more details, see the full forum post here. 

Proposal 167 - Compound V2->V3 Migration Proposal Phase 4

• Status: Executed July 17, 2023

• Proposer: Gauntlet

• Voting Results: 662,296 For and 0 Against

• Summary: Of the two options proposed in the recently published Phase 4 migration post, the community has voted in favor of Option 1, whose plan is outlined below. See the forum post for more detail.

  • Increase v2 USDC Reserve Factor from 7.5% to 15%

  • Decrease v2 daily USDC supply COMP rewards from 161.20 to 111.20 (-50)

  • Decrease v2 daily USDC borrow COMP rewards from 161.20 to 111.20 (-50)

  • Decrease v2 daily DAI supply COMP rewards from 161.20 to 111.20 (-50)

  • Decrease v2 daily DAI borrow COMP rewards from 161.20 to 111.20 (-50)

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below.

Draft for Compound Growth Program

Proposer: sharp (Alpha Growth)

Summary: We at AlphaGrowth believe that the Compound Protocol will benefit by expanding to more blockchains and supporting more money market pools. We plan to help Compound Community map out and execute a strategy to increase the utility of the Compound Protocol.

[Alastor & w3s] Compound Strategy & Growth Proposal

Proposer: w3s

Summary: Alastor 3 and web3 Studios 1 (“w3s”) propose to collaborate on the revitalization of Compound DAO through strategy and growth initiatives and establishing accountability structures. Leveraging our multidisciplinary team with experience contributing to projects such as Uniswap, Lido, and others, we aim to re-establish Compound as a leader in the DeFi lending market.

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development.

Encumber - a new approach for retaining custody in DeFi

Encumber is a mechanism to let users separate their ownership of tokens from the right to transfer them.

When a token owner encumbers their tokens to another address, they give it the exclusive right to transfer the tokens while maintaining ownership. This enables token holders to commit to terms within a smart contract without transferring ownership of their tokens to an external address.

By using Encumber, token holders can retain ancillary ownership benefits such as airdrops, governance rights, or access to content and events while still participating in DeFi. Encumber advances the non-custodial ethos of DeFi while streamlining some of the most successful DeFi use cases, such as collateral for lending markets, options contracts, and swaps.

See the full details and example implementation of encumber in the Compound Labs blog.

Jayson Hobby, CEO at Compound Labs

Jayson Hobby, formerly VP of Product, has recently stepped up to be CEO at Compound Labs. Jayson has shaped Compound Labs’ products since their inception, and is excited to be leading the next chapter at Compound Labs.

Robert Leshner has departed Compound Labs to serve as Superstate’s founding CEO. Read more about Superstate’s launch superstate.co.

Follow the latest updates from Compound Lab’s new website at compoundlabs.xyz

Compound on Linea

Compound III is currently live on the Linea testnet. Linea is a ZK-rollup for Ethereum developed by Consensys, which is starting its mainnet alpha release.

During its first week in Linea’s testnet Voyage quests, Compound contracts facilitated over 295,000 transactions.

Join the discussion on the Linea mainnet launch proposal in the forums.

Protocol Governance Updates

Proposal 168 - Gauntlet Recommendations: Ethereum Compound v3 USDC - Interest Rate Curve & Incentive Changes

• Status: Executed July 17, 2023

• Proposer: Gauntlet

• Voting Results: 629,800 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 2 Interest Rate Curve parameters and 2 COMP reward distributions in Ethereum Compound v3 USDC.

  • Increase Borrow Kink from 90% to 95%

  • Increase Annual Borrow Interest Rate Slope High from 0 to 0.567

  • Decrease daily USDC COMP borrow rewards from 481.41 to 381.41

  • Increase daily USDC COMP supply rewards from 0 to 100

Proposal 167 - Compound V2->V3 Migration Proposal Phase 4

• Status: Executed July 17, 2023

• Proposer: Gauntlet

• Voting Results: 662,296 For and 0 Against

• Summary: Of the two options proposed in the recently published Phase 4 migration post, the community has voted in favor of Option 1, whose plan is outlined below. See the forum post for more detail.

  • Increase v2 USDC Reserve Factor from 7.5% to 15%

  • Decrease v2 daily USDC supply COMP rewards from 161.20 to 111.20 (-50)

  • Decrease v2 daily USDC borrow COMP rewards from 161.20 to 111.20 (-50)

  • Decrease v2 daily DAI supply COMP rewards from 161.20 to 111.20 (-50)

  • Decrease v2 daily DAI borrow COMP rewards from 161.20 to 111.20 (-50)

Proposal 165 - OpenZeppelin Security Partnership - 2023 Q3 Compensation

• Status: Executed July 1, 2023

• Proposer: OpenZeppelin

• Voting Results: 401,159 For and 0 Against

• Summary: OpenZeppelin receives quarterly payments in a lump-sum of COMP for their auditing and security support for Compound III, this proposal was to initiate the next quarterly payment to OpenZeppelin. Based on the last week's average price, this would be $29.31 per COMP for a total quarterly payment of 34,118 COMP equaling $1M per the original agreement. This COMP will be transferred from the Timelock's existing balance. More detail in this forum post.

Proposal 164 - Top-up COMP Rewards on Compound V3 mainnet contract

• Status: Executed June 29, 2023

• Proposer: Gauntlet

• Voting Results: 613,398 For and 0 Against

• Summary: A proposal from Gauntlet to transfer 78,015 COMP (corresponding to 150 days of distribution) from the Comptroller to the Rewards contract for Compound III on the mainnet.

Proposal 163 - Gauntlet <> Compound Incentive Optimization

• Status: Executed June 4, 2023

• Proposer: Gauntlet

• Voting Results: 917,558 For and 0 Against

• Summary: A proposal to formalize and expand Gauntlet’s existing work with Compound. Gauntlet will leverage its Incentive Optimization Platform to provide recommendations adjusting incentives across Compound V2 and Comet markets to drive sustainable, efficient growth. The service fee structure is a $300K fixed fee, paid in $COMP tokens, as well as a variable performance fee; this proposal only implements the $300K fixed fee portion. Full proposal and forum discussion.

Proposal 162 - Interest Rate Curve Updates for Ethereum Compound v3 USDC

• Status: Executed May 30, 2023

• Proposer: Gauntlet

• Voting Results: 534,699 For and 0 Against

• Summary: A proposal from Gauntlet to adjust 7 IR Curve parameters in the Ethereum v3 USDC market. For more details, see the full forum post here. 

  • Increase Annual Supply Interest Rate Slope Low from 0.0325 to 0.034

  • Increase Supply Kink from 80% to 95%

  • Increase Annual Supply Interest Rate Slope High from 0.4 to 0.76

  • Decrease Annual Borrow Interest Rate Base from 0.015 to 0.01

  • Decrease Annual Borrow Interest Rate Slope Low from 0.035 to 0.0333

  • Increase Borrow Kink from 80% to 90%

  • Decrease Annual Borrow Interest Rate Slope High from 0.25 to 0

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below.

Deploy Compound III on Linea

• Proposer: PGov

• Summary: The Linea team from Consensys and PGov are proposing the deployment of Compound III on Linea, a zkEVM incubated by Consensys, to continue broadening Compound’s multi-chain future and establish the lending market as a leading protocol on a promising zkEVM with a robust distribution network.

• Last week’s testnet voyage, “DeFi week 1,” was live for 7 days, during this period, Compound Contracts have facilitated over 295,000 transactions. We propose that the Linea deployment starts with an isolated USDC market with crypto majors as collateral. We also propose a conservative approach, after the applicable parties provide market and asset recommendations.

Deploy Compound III on Base

• Proposer: Compound Labs

• Summary: Compound Labs proposes the deployment of Compound III on Base for the community. Compound Labs has already deployed two instances of Comet (cUSDCv3 and cWETHv3) on the Base Goerli testnet and welcomes the community to start trying them out.

• As Base gears up for mainnet launch in 2023, Compound Labs aims to position the Compound protocol as a core DeFi lego on the nascent chain. We believe that Coinbase’s popularity with retail users can onboard a new wave of users to the Compound protocol and community.

stMATIC and MaticX listing on Polygon Compound v3

• Proposer: Gauntlet

• Summary: The community has expressed interest in adding stMatic and MaticX to Compound v3 Polygon. If the community wishes to list these assets, below is Gauntlet’s analysis, and defer to the community for the risk tolerance here.

• Conservative:

• Aggressive:

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here.

Compound III is live on Arbitrum

The Compound III USDC market is live on Arbitrum! This marks the third chain Compound is deployed on - bringing the security and efficiency of Compound III to more ecosystems.

At launch, ARB, GMX, WETH, and WBTC can be used as collateral to borrow USDC.

View the new market by selecting Arbitrum from the market selector in the Compound interface, or by clicking the link here: https://app.compound.finance/?market=usdc-arb

Transaction History now available in the Compound App

Transaction History is now available in the Compound interface - users can easily view all their transactions on Compound III in one place.

To access Transaction History, go to https://app.compound.finance/transactions, or click the wallet address in the top right corner of the Compound interface, and click “See All” next to Recent Transactions.

Unpacking the US regulatory environment for crypto with Polygon

Our guest is Rebecca Rettig, Chief Policy Officer at Polygon Labs. On this episode of Compound Thesis, we unpack the flurry of events in crypto legislation and regulation, implications for builders in the crypto space, and how Polygon is navigating these developments:

1. Why the US is taking a drastically different regulatory approach compared to rest of the world, and its implications

2. Real-world use cases already deployed by major brands and organizations on Polygon

3. The path forward to regulating tech-driven financial innovations

Watch the full episode, or listen and subscribe to Compound Thesis on YouTube, Spotify, or Apple Podcast.

Protocol Governance Updates

Proposal 161 - Risk Parameter Updates for Polygon Compound v3 USDC (5/9/23)

• Status: Executed May 18, 2023

• Proposer: Gauntlet

• Voting Results: 549,917 For and 0 Against

• Summary: A proposal from Gauntlet to adjust the supply cap for 3 assets in the Polygon | USDC market, and adjusting the COMP distribution in the same market.

  • Increase daily USDC supply COMP distribution from 0 to 34.73 ($1,268/day)

  • Increase WBTC supply cap from 400 ($12M) to 1,000 ($30M)

  • Increase WETH supply cap from 11k ($22M) to 20k ($40M)

  • Increase MATIC supply cap from 10M ($10M) to 20M ($20M)

  • For more details, see the full forum post here.

Proposal 160 - Initialize cUSDCv3 on Arbitrum 

• Status: Executed May 15, 2023

• Proposer: Compound Labs

• Voting Results: 490,143 For and 0 Against

• Summary: This proposal takes the governance steps recommended and necessary to deploy the Arbitrum | USDC market on Compound III. Simulations have confirmed the market's readiness, as much as possible, using the Comet scenario suite. Further detailed information can be found on the corresponding proposal pull request and forum discussion.

Proposal 159 - Refresh Polygon COMP

• Status: Executed May 7, 2023

• Proposer: Compound Labs

• Voting Results: 490,291 For and 0 Against

• Summary: Since the launch of the Compound III Polygon | USDC market a month ago, the market has grown steadily and is operating as expected. The initial seeding of COMP distribution only provisioned enough for a few months, as a conservative starting point. This proposal bridges an additional 12,500 COMP to sustain the current distribution speeds of the market for an additional year (approximately). More discussions can be found on this forum thread.

Proposal 157 - OpenZeppelin Security Partnership - 2023 Q2 Compensation

• Status: Executed April 7, 2023

• Proposer: OpenZeppelin

• Voting Results: 462,555 For and 0 Against

• Summary: OpenZeppelin receives quarterly payments in a lump-sum of COMP for their auditing and security support for Compound III, this proposal was to initiate the next quarterly payment to OpenZeppelin. Based on last week's average price, this would be $42.34 per COMP for a total quarterly payment of 23,617 COMP equaling $1M per the original agreement. This COMP will be transferred from the Timelock's existing balance. More detail in this forum post.

Proposal 156 - Compound V2 -> V3 Migration (Phase 2)

• Status: Executed April 5, 2023

• Proposer: Gauntlet

• Voting Results: 945,605 For and 0 Against

• Summary: Following community feedback, please see the below Phase 2 plan to align with the community's strategic preference. See the forum post for more detail.

  • Decrease v2 daily USDC supply COMP distribution from 211.20 to 161.20 (-50)

  • Decrease v2 daily USDC borrow COMP distribution from 211.20 to 161.20 (-50)

  • Decrease v2 daily DAI supply COMP distribution from 211.20 to 161.20 (-50)

  • Decrease v2 daily DAI borrow COMP distribution from 211.20 to 161.20 (-50)

  • Increase v3 daily USDC borrow COMP distribution from 281.41 to 481.41 (+200)

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below.

stMATIC Compound Listing

• Proposer: Kyros

• Summary: This discussion is about adding stMATIC as a collateral asset in the Polygon | USDC market on Compound III. The stMATIC token is a Lido-created asset allowing for the usage of staked Polygon as collateral in Defi protocols. 

  • Liquidity Report - stMATIC currently has a TVL of 90M$ and total liquidity of 40M$ on ecosystem dexes with Balancer being the lead along with KyberSwap and QuickSwap having the most volume.

  • Kyros Proposed a Collateral Factor of 50%, a Liquidation Threshold of 65%, and a Liquidation Penalty of 10% for stMATIC. 

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here.

Compound III grows to ~$650M in total assets

It’s been 6 months since the launch of Compound III, and the community has since deployed two new markets–including the first cross-chain deployment. As of today there are ~$650M of assets across three deployments of Compound III:

• USDC | Ethereum (~$486M)

• ETH | Ethereum (~$142M)

• USDC | Polygon (~$16M)

Compound III product updates

Over the last 6 weeks, a myriad of other interface improvements have been made and highlighted below. For the first time, all core protocol actions and market data can be found within a single application: Dashboard, Markets, Vote, and Extensions.

Mobile Optimized - Using DeFi on your mobile device has become increasingly popular with wallet providers delivering an improved mobile experience.

Improved COMP Claiming - The COMP dropdown in the menu bar now displays your token balances and unclaimed balances across networks, with the ability to claim COMP from multiple deployment in a single transaction.

Upgraded Vote Experience - You can now vote on proposals directly in the Compound III interface without needing to visit a different url–streamlining the Compound ecosystem. Note: proposal creation is still only accessible via the legacy page.

Lido Staked ETH -  Now with improved asset cards, users are informed that supplying either Lido Staked ETH or Wrapped Lido Staked ETH will continue to accrue their staking rewards.

Dashboard Currency Toggle - While on the Dashboard view of the interface, you can now toggle between $USD and the native base asset denomination of the deployment by clicking or tapping the main balance in the top left. 

Find the full announcement and details on the forums.

How Bitwave is solving for the massive scale of enterprise crypto accounting

We chat with Pat White, Founder and CEO of Bitwave, about how their platform helps enterprises account for millions of crypto transactions across dozens of chains, and the unique challenges companies face when managing digital assets on their balance sheet. In this episode, we cover:

1. How enterprises account for the massive scale of transactions in crypto

2. Strategic finance and planning for businesses processing crypto revenue and expenses

3. Why the velocity of transaction volumes is set to increase across crypto and traditional businesses

"Because of the blockchain, the cost per transaction is just gonna plummet. And I don't mean BPs or like paying 7 cents to do a transaction, I mean how easy it is to programmatically do a transaction.

We haven't really gotten to the true world of high velocity programmable money that some of us thought we'd already be in now. And so the high level for us, we think that the transaction volume of the world is gonna explode and we have designed our whole system to be able to handle that."

Watch the full episode of Thesis, or listen and subscribe on YouTube, Spotify, or Apple Podcast.

Protocol Governance Updates

Proposal 154 - Resume cUSDC minting

• Status: Executed March 18, 2023

• Proposer: Arr00

• Voting Results: 400,348 For and 0 Against

• Summary: As the price of USDC fell through $0.90, cUSDC minting on Compound V2 was paused out of caution by the community multisig. This proposal resumes minting of cUSDC.

Proposal 153 - Risk Parameter Updates for V2 and V3 WETH Comet

• Status: Executed March 14, 2023

• Proposer: Gauntlet

• Voting Results: 537,163 For and 0 Against

• Summary: Reduce collateral factor of cWBTC from 70% to 60% in Compound V2; and increase cbETH supply cap from 30,000 to 40,000. Forum post for V2, and forum post for V3 ETH adjustments.

Proposal 152 - Compound V2 -> V3 Migration Phase 1

• Status: Executed March 6, 2023

• Proposer: Gauntlet

• Voting Results: 636,253 For and 0 Against

• Summary: Gauntlet provides this initial proposal for Compound V2 -> V3 Migration aligning with the community's strategic preference. In summary, V2 COMP rewards are decreased for USDC and DAI for both supply and borrow. V3 COMP rewards are increased for USDC borrow, ETH and WBTC supply caps are raised, and the storefront price factor increased. See the forum post for more detail.

Proposal 151 - Initialize cUSDCv3 on Polygon

• Status: Executed March 7, 2023

• Proposer: Compound Labs

• Voting Results: 403,036 For and 0 Against

• Summary: This proposal takes the governance steps recommended and necessary to initialize a Compound III USDC market on Polygon; upon execution, cUSDCv3 will be ready for use. WETH, WBTC, and WMATIC can be supplied as collateral in this initial launch. The forum post for this proposal can be found here.

Proposal 150 - CGP Hackathon Sponsorships in 2023

• Status: Executed March 4, 2023

• Proposer: Questbook

• Voting Results: 947,654 For and 0 Against

• Summary: The Compound Grants Program seeks an additional $100K (1962.70 COMP) in grants budget to sponsor these ETHGlobal hackathons: ETHGlobal Toronto, ETHGlobal New York, ETHOnline (Remote). Find the community feedback on the proposal here.

Proposal 149 - Increase cbETH Supply Cap in cWETHv3

• Status: Executed February 20, 2023

• Proposer: Compound Labs

• Voting Results: 691,136 For and 0 Against

• Summary: Set supply cap for cbETH on Comet via Configurator to 30000; the associated forum post for this proposal can be found here.

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below.

Deploy Compound v3 on Arbitrum

• Proposer: pennblockchain

• Summary: We believe the Arbitrum One optimistic rollup is a great next step as a deployment option for Compound III for several reason:

  • Arbitrum One is the leading DeFi ecosystem on Layer 2 despite not offering any protocol incentives

  • Deploying to Arbitrum One can bring a lot of benefits (gas cost savings, fastest growing L2, etc.)

  • Arbitrum is aligned with Vitalik’s vision of a rollup centric Ethereum roadmap

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here.

All of the data returned from this API is publicly available as read-only data from the Ethereum blockchain.

To access the source of the data, you can do so using a node provider with history enabled, from a firm like alchemy.com or infura.io. These third-party providers have a free usage tier for users with minimal API usage.

The Compound v2 protocol will continue to run on the Ethereum blockchain unless otherwise changed through community governance. Users are encouraged to migrate from Compound v2 to v3 however no action is required in relation to the REST API shut down.

The v2 Dapp at v2-app.compound.finance no longer needs the API as a dependency. The Dapp is open source, community maintained, and will continue to be available after the API shut down.

Questions related to the REST API shut down can be asked in the #development channel of the Compound Discord (https://compound.finance/discord) or on the forums at https://www.comp.xyz/t/compound-v2-rest-api-permanent-shut-down/.

Compound III ETH Market is Live

The Compound III ETH market is now live, and offers the most streamlined & efficient ETH borrowing experience in DeFi for stETH and cbETH collateral. Users can borrow up to 90% collateral value of stETH and cbETH.

Since launching on January 24th, the Compound III ETH market has over 9,166.96 ETH in borrow against 13,558.95 ETH of collateral as of this newsletter. 

See the current rates for the ETH market, or try supplying or borrowing on Compound III here.

Compound Grants 2.0 is Now Accepting Applications

The Compound Grants Program (CGP) 2.0 is now live and accepting new applications. Managed in partnership with Questbook, CGP 2.0 aims to strengthen the builder community, and more effectively identify, attract and fund projects by delegating the capital allocation to members of the community rather than a central committee.

An approved fund of $800,000 will be allocated across 4 domains - strategic areas of focus for which the foundation wants to disburse grants. You can apply and find more details on each of the domains on Questbook here:

• New protocol ideas and dapps, Miscellaneous

• Security Analysis Tools & Security Bounties

• Developer Tooling

• Multichain Strategy

See full details on the grants program in the executed proposal here, or feel free to drop by with any questions in the grants channel on Discord.

Compound Thesis - Moody’s Outlook on the Digitalization of Financial Markets

On the latest episode of Thesis, we chat with Fabian Astic, Managing Director, Head of DeFi and Digital Assets at Moody's Investors Service on their outlook for digital assets in the upcoming year on:

1️. The digitalization of financial markets - more efficient settlements infrastructure, new digital asset types & mechanisms for increased exposure

2. Balancing the benefits of blockchain transparency vs cybersecurity risk and privacy needs for institutions

3. Enhancing financial inclusion by reducing barriers to entry for businesses and individuals

4️. How regulators are progressing to implement frameworks across the globe

“If all the values of a given report are in compliance with pre agreed amounts… settlement times can be reduced from several days to just a few minutes or even a few seconds, which can in turn improve customer service and reduce the cost of counterparty risk management and also ultimately a bunch of other costs.”

Watch the full episode, or listen and subscribe on YouTube, Spotify, or Apple Podcast.

Protocol Governance Updates

Summarized below are highlighted proposals since our last newsletter - find all proposals at https://compound.finance/governance.

Recent Proposals

Proposal 147 - Risk Parameter Updates for 3 Compound V2 Assets

• Status: Review

• Proposer: Gauntlet

• Summary: A proposal to adjust three (3) risk parameters (collateral factor & borrow cap) across three (3) Compound V2 assets.

  

Proposal 146 - Increase cbETH Supply Cap in cWETHv3

• Status: Active

• Proposer: Compound Labs

• Voting Results: # For and 0 Against

• Summary: Set supply cap for cbETH on Comet via Configurator to 20000; the associated forum post for this proposal can be found here.

Proposal 145 - Risk Parameter Updates for USDC Comet Market

• Status: Executed January 30, 2023

• Proposer: Gauntlet

• Voting Results: 740,214 For and 0 Against

• Summary: Increase the supply cap of COMP on the Comet USDC market from 600,000 COMP to 900,000 COMP.

Proposal 144 - Initialize cWETHv3 on Ethereum

• Status: Executed January 24, 2023

• Proposer: Compound Labs

• Voting Results: 716,821 For and 0 Against

• Summary: This proposal takes the governance steps recommended and necessary to initialize a Compound III WETH market; upon execution, cWETHv3 will be ready for use. Simulations have confirmed the market’s readiness, using the Comet scenario suite.

• This proposal initializes the market with a supply cap of 64,500 wstETH and 7,100 cbETH, and 38.7 COMP per day allocated to WETH suppliers.

• Further detailed information can be found on the corresponding proposal pull request and forum discussion.

Proposal 143 - Compound UAV v3 Upgrade

• Status: Executed January 17, 2023

• Proposer: Chainlink (via GFX Labs)

• Voting Results: 495,502 For and 0 Against

• Summary: GFX Labs is proposing on behalf of Chainlink to upgrade the Compound II UniswapAnchoredView (UAV) Oracle. The upgrade will update the UAV’s reference prices from Uniswap V2 pools to Uniswap V3 pools. Forum Post

Proposal 141 - Risk Parameter Updates for 5 Collateral Assets

• Status: Executed January 2, 2023

• Proposer: Gauntlet

• Voting Results: 618,747 For and 0 Against

• Summary: A proposal to adjust five (5) risk parameters (collateral factor & borrow cap) across five (5) Compound V2 assets. Full proposal and forum discussion.

  

Proposal 140 - Risk Parameter Updates for USDC Comet Market

• Status: Executed December 19, 2022

• Proposer: Gauntlet

• Voting Results: 471,508 For and 0 Against

• Summary: A proposal to adjust two (2) parameters for two (2) Compound V3 assets on the USDC market. Increase the supply cap of UNI on the Comet USDC market from 1,250,000 UNI to 2,300,000 UNI; and decrease COMP liquidation factor on the Comet USDC market from 93% to 88%.

Proposal 139 - OpenZeppelin Security Partnership - 2023 Q1 Compensation

• Status: Executed December 16, 2022

• Proposer: OpenZeppelin

• Voting Results: 1,182,845 For and 0 Against

• Summary: Going forward, we will receive our quarterly payments in a lump-sum. Based on the last week's average price, this would be $38.20 per COMP for a total quarterly payment of 26,179 COMP equaling $1M per the original agreement. This COMP will be transferred from the Timelock's existing balance. More detail in this forum post.

Proposal 138 - Reserve Maintenance

• Status: Executed December 15, 2022

• Proposer: Compound Labs

• Voting Results: 455,545 For and 1 Against
  Summary: First, the proposal withdraws the reserves of deprecated markets: SAI, REP, FEI, and WBTC (legacy) to the Timelock, in four actions. Next, the proposal redeems the Timelock’s cDAI and cUNI for DAI and UNI in two actions.

• Then, the proposal redeems the balance of SAI held by the Timelock for WETH through MakerDAO’s SaiTap contract, by calling approve and then redeeming. Last, the proposal migrates the balance of REP held by the Timelock to REPv2, by calling approve and then migrating.

• This proposal is a series of minor maintenance actions from the list of Protocol Maintenance Tasks.

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below.

Compound V2 → V3 Migration Planning

• Proposer: pauljlei

• Summary: V3 offers capital efficiency and risk management enhancements compared to V2, including additional parameters such as supply caps. As such, it is valuable for the community to align on the goals of migration and the risk tradeoffs.

• What should the community define as the goals and non-goals of migration?

  • Is the goal to incentivize user position migration to V3 as much and as fast as possible, or should V2 co-exist as an “equally attractive” protocol?

  • Should the protocol care about losing recursive borrowers on V2?

  • It would be a sub-optimal outcome if the protocol’s actions result in just losing V2 TVL instead of accelerating V2 → V3 migration. These outcomes are difficult to predict, but how can the community best minimize the chances of this risk of losing TVL?

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here.

Introducing Compound Extensions

Starting today, users of the Compound interface have access to a new feature: Extensions. Extensions are optional add-ons, built by community developers, that enhance the Compound experience.

When you enable an extension, it can leverage Compound III’s new account management functionality to add new features to your account–such as automation, composability with other DeFi protocols, or position management. Or, it can run without requiring any permissions, and simply provide information–such as liquidation alerts.

This is an experimental, entirely new approach to the DeFi user experience, and opens up a new frontier for community developers.

Read the full Compound Extensions announcement and join the discussion here.

Compound In the News

• The Economist - A crypto-exchange founder makes his case for decentralised finance

• The Defiant - Compound Caps Borrowing Levels for 10 Assets to Reduce Risk 

• AIThority - MakerDAO Brings DAI Direct Deposit Module (D3M) to Compound

Why Fidelity International believes blockchain will transform global finance - on Compound Thesis

Our guest is Luc Froehlich, Global Head of Digital Assets Solutions at Fidelity International. Fidelity International, with over $600B in AUM, provides investment solutions, advisory, custody, trading services across equities, fixed income, mutual funds and digital assets to clients across 25 countries.

We'll be discussing why Fidelity International believes blockchain will transform global finance, the major pain points it can address, and how it might change the way major institutions operate.

Click “attend” to join us live or be notified for the full recording on LinkedIn.

Protocol Governance Updates

Summarized below are highlighted proposals since our last newsletter - find all proposals at https://compound.finance/governance.

Recent Proposals

Proposal 137 - Increase WETH Supply Cap in cUSDCv3

• Status: Executed December 7, 2022

• Proposer: Compound Labs

• Voting Results: 487,559 For and 0 Against
  Summary: The first action of the proposal sets the configurator supply cap for WETH to 150,000, twice the current cap of 75,000. The second action deploys and upgrades to a new implementation of Comet, using the newly configured parameters.

• The cUSDCv3 market is currently limited by the WETH supply cap, which has been reached. Since setting these caps (in units of each collateral asset), prices of collateral assets have decreased, effectively lowering the current caps, while usage has grown. The associated forum post for this proposal can be found here.

Proposal 136 - CGP 2.0 by Questbook

• Status: Executed December 4, 2022

• Proposer: Questbook

• Voting Results: 593,227 For and 2 Against

• Summary: A community-run grants program for Compound using delegated domain allocation. We propose a Compound Grants Fund of $800K USD (22087.24 COMP), spread across 2 quarters, to find and fund a wide variety of teams building on Compound. We also propose $200K USD (5521.81 COMP) to compensate the grants committee for running the program.

Proposal 135 - Borrow Caps for Compound V2 Assets

• Status: Executed November 30, 2022

• Proposer: Gauntlet

• Voting Results: 470,137 For and 50,001 Against

• Summary: A proposal to adjust ten (10) risk parameters (borrow caps) for ten (10) Compound V2 assets. Full proposal and forum discussion.

Proposal 133 - Risk Parameter Updates for 1 Collateral Asset

• Status: Executed November 6, 2022

• Proposer: Gauntlet

• Voting Results: 487,542 For and 50,001 Against

• Summary: We recommend decreasing SUSHI collateral factor from 73% to 70%. The community has aligned on a risk off framework. Full proposal and forum discussion.

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below.

Upgrade Compound II’s Oracle to UAV3

• Proposer: CL_Michael

• Summary: This proposal is to upgrade the Compound II UniswapAnchoredView (UAV) Oracle. The upgrade will update the UAV’s reference prices from Uniswap V2 pools to Uniswap V3 pools. A significant amount of liquidity on Uniswap V2 has shifted towards Uniswap V3 as liquidity providers capitalize on concentrated liquidity provisioning strategies; upgrading the oracle will provide higher reliability and security assurances by reducing the risk of price manipulation or other issues related to low liquidity.

Protocol Maintenance Tasks

• Proposer: rleshner

• Summary: A partial list of maintenance tasks which could be addressed by one or more governance proposals. While these might be low-impact or invisible to users, it would be good governance hygiene to address and update concerning: Deprecated Markets, Current Markets, Comptroller & Timelock and Block Speeds.

Compound V3 USDC Market: Risk Parameter Updates 2022-12-01

• Proposer: pauljlei

• Summary: Based on Gauntlet’s simulation results as of 2022-11-30, decreasing COMP liquidation factor from 93% to 88% reduces Value at Risk (VaR) for COMP (showed in blue below) from $5.6m to $4.5m, a ~20% decrease. This reduction is reflected by the increase in the amount of COMP purchased by liquidators in simulation results.

• We’d note that VaR here refers to the amount of collateral that has been absorbed by Comet but not purchased by liquidators. In other words, the VaR calculation refers to the value of absorbed collateral that is sitting on Comet’s balance sheet and is subject to pricing risk. This definition of VaR is slightly different from the definition of VaR for Compound V2 in order to align specifically with Comet’s new liquidation mechanism.

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here. 

Assessing the DeFi Markets with S&P on Compound Thesis

In the latest episode of Compound Thesis, we hosted Chuck Mounts, Chief DeFi Officer and Charles Jansen, Head of DeFi Transformation at S&P Global to discuss how innovations in DeFi could transform the global financial structure.

“One of the obvious things that everybody sees… is well, the fact that the settlement is instantaneous… There are also tokenization of everything aspect and the fractionalization of this asset and also derivatives that can be done of that. And all of that will be 24/7.”

• Charles Jansen, Head of DeFi Transformation, S&P Global

“I break it down to thinking about back office functions versus front office functions… the promise of blockchain, digital assets, crypto, DeFi …to make the back office and market functioning more efficient and as a result reduce risk and bring down costs…

But I think actually the bigger disruption risk is probably from the front office. And that is how does DeFi and Web3 create, enable the creation of new kinds of capital pools, and access to those capital pools from a new set of borrowers… that is actually transformational.”

• Chuck Mounts, Chief DeFi Officer, S&P Global

Watch S&P’s full replay here.

Be sure to watch our next episode to learn how Gauntlet manages and models risk for the top DeFi protocols - click “attend” to join us live or be notified for the full recording on LinkedIn.

Compound In the News

• Decrypt - DeFi 'Should Be the Foundation’ of Every Financial Product

• Blockworks - Bell Curve - DeFi in the Next Bull Cycle

• Unchained - The Chopping Block - Why ETH Dumped So Hard After the Merge

• Anchorage - A Look at Smart Contract Voting with Compound

• Brave - Brave adds 19 new DApps to its Wallet Partner program

Protocol Governance Updates

Summarized below are highlighted proposals since our last newsletter - find all proposals at https://compound.finance/governance.

Recent Proposals

Proposal 132 - Liquidation Event Handling And Collateral Reserves

• Status: Active

• Proposer: Compound Labs

• Summary: Shortly after the first Compound III market launched, a community developer noticed that the absorb function was missing an event log in the case when an account is left with a positive balance. While this doesn’t have any economic impact, adding this event log will improve the user experience on Etherscan and blockchain explorers, and make analytics easier. We have crafted a patch and created a migration script to create a proposal in this pull request.
  The associated forum post for this proposal can be found here.

Proposal 131 - Pause Supply for Compound Assets

• Status: Executed October 24, 2022

• Proposer: Gauntlet

• Voting Results: 554,125 For and 1 Against

• Summary: A proposal to pause supply for ZRX, BAT, MKR, and YFI on Compound III. An oracle manipulation-based attack analogous to the one that cost Mango Markets $117m is much less likely to occur on Compound due to collateral assets having much deeper liquidity than MNGO and Compound requiring loans to be over-collateralized. However, out of an abundance of caution, we propose pausing supply for the above assets, given their relative liquidity profiles. Details are provided in the governance forum post.

Proposal 130 - Adjust cCOMP and cUNI Parameters

• Status: Executed October 24, 2022

• Proposer: MonetSupply

• Voting Results: 585,262 For and 0 Against

• Summary: This proposal makes changes to the cCOMP and cUNI markets. The borrow cap for cCOMP is increased from 90,750 to 150,000 COMP, and the cCOMP interest rate model is switched to the rate model currently in use for cUNI, resulting in slightly higher borrowing costs across the utilization curve. The rate model for cUNI is switched to the rate model currently in use for cAAVE/cMKR/cYFI/cSUSHI, normalizing it with other similar assets and resulting in slightly lower borrowing costs across the utilization curve. See discussion in the forum for more details.

Proposal 129 - Risk Parameter Changes for FEI: Part 2

• Status: Executed October 16, 2022

• Proposer: Gauntlet

• Voting Results: 560,290 For and 0 Against

• Summary: A proposal to adjust risk parameters for FEI as follows: Pause cFEI minting; Set reserve factor to 100%. Details are provided in the governance forum posts regarding FEI.

Proposal 128 - Increase Compound III Supply Caps

• Status: Executed October 8, 2022

• Proposer: Gauntlet

• Voting Results: 539,589 For and 0 Against

• Summary: This proposal begins raising collateral supply caps, so that Compound III can continue expanding past its trial phase. The changes are specified on the governance forum and summarized below: 75,000 ETH, 6,000 WBTC, 600,000 COMP.

Proposal 126 - OpenZeppelin Security Partnership - 2022 Q4 Adjustment

• Status: Executed September 30, 2022

• Proposer: OpenZeppelin

• Voting Results: 547,898 For and 0 Against

• Summary: As discussed for the Q3 proposal, we will receive our quarterly payment in a lump-sum. Based on the last week's average price, this would be $57 per COMP for a total quarterly payment of 17,544 COMP equaling $1M per the original agreement. This COMP will be transferred from the Timelock's existing balance. More detail in this forum post.

Ongoing Discussions

See all the latest discussions on the Compound Community Forum.

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here.

Institutions can now borrow from Compound Treasury

Last year, Compound Treasury launched an institutional cash management solution powered by the Compound Protocol, offering a 4.00% APR on USD and USDC with daily liquidity. Starting today, to meet the growing demand for liquidity, institutions can now borrow from Compound Treasury, using digital assets as collateral.

Accredited institutions can borrow USD or USDC with fixed rates starting at 6% APR, using Bitcoin, Ether, and supported ERC-20 assets as collateral.

Borrowing is offered with an open-ended term and no repayment schedule, providing our clients the flexibility to draw liquidity and repay balances as they see fit–for as long as they remain overcollateralized.

Liquidity is provided by Compound Treasury clients and the Compound Protocol. Collateral never leaves Compound Treasury’s control, increasing transparency and the safety of funds for our clients.

Read the full Compound Treasury Borrowing announcement here.

Compound In the News

• The Block - Compound Treasury debuts crypto-backed loans for institutional clients

• Blockworks Newsletter - [DAS] Day 2

• BTIG Cryptoasset Currents - Compound Treasury’s Collateralized Crypto Lending Solution Poised to Meet Institutions Unmet Demand for Liquidity (login required)

Digital Asset Summit Recap; meet us at Circle Converge

The Compound Team will be at Circle Converge in SF from Sep 27 - Sep 30 - let us know if you’ll be in town and would like to meet.

Earlier this month at Blockworks’ Digital Asset Summit NYC, Robert Leshner spoke on a panel alongside Copper, Algorand, and dYdX about the “Next Gen Financial Primitives” within digital assets.

"Whether it's CeFi or DeFi, it’s just finance… The biggest difference is DeFi is the foundation of finance being run on an open transparent autonomous system, and CeFi being run by spreadsheets and people in back offices, middle offices, and front offices. 

These two things are converging very rapidly, into just finance conducted in different ways. And eventually we’re going to stop calling it DeFi, we’re just gonna say it’s finance and it runs way better using a blockchain than it does with spreadsheets and people…

10 years from now, we’re gonna say it’s just all finance."
Robert Leshner, CEO & Founder, Compound Labs

Watch the full panel here.

Protocol Governance Updates

Summarized below are highlighted proposals since our last newsletter - find all proposals at https://compound.finance/governance.

Recent Proposals

Proposal 125 - Gauntlet <> Compound Renewal

• Status: Executed September 25, 2022

• Proposer: Gauntlet

• Voting Results: 1,042,898 For and 0 Against

• Summary: A proposal to renew Gauntlet’s 12-month engagement with Compound on continuous market risk management to maximize capital efficiency while minimizing the risk of insolvency and liquidations to create long-term sustainable growth.
  To increase its alignment with Compound, Gauntlet will refund a portion of the payment should Gauntlet's risk parameter optimizations incur losses for the protocol during the engagement. For more details, see the full proposal.

Proposal 124 - Initialize Compound III COMP Distribution

• Status: Executed September 10, 2022

• Proposer: 0xc66e...68a9

• Voting Results: 883,581 For and 0 Against

• Summary: This proposal includes Compound III users in the COMP Distribution, which is accomplished by re-allocating 161.42 COMP per day (14.17% of the total) from v2 markets. The total COMP Distribution is unchanged by this proposal.
  Full proposal and forum discussion.

Proposal 123 - Risk Parameter Changes for FEI

• Status: Executed September 10, 2022

• Proposer: Gauntlet

• Voting Results: 1,052,153 For and 0 Against

• Summary: A proposal to adjust risk parameters for FEI as follows: Pause FEI borrowing; and Set reserve factor to 99%.
  In light of Tribe DAO’s proposal to enter a terminal state, the FEI market on Compound should be deprecated. Pausing FEI borrowing and setting a high reserve factor is the first step in winding down the FEI market.

  Details are provided in the governance forum posts regarding FEI.

Proposal 122 - cETH Risk Mitigation

• Status: Executed September 9, 2022

• Proposer: monet-supply

• Voting Results: 914,647 For and 0 Against

• Summary: Several changes to the cETH market on Compound v2 in preparation for the upcoming Ethereum merge and switch to POS consensus. This includes setting a borrow cap of 100,000 ETH, as well as updating the interest rate model to a jump rate model with much higher rates after exceeding 80% borrow utilization, up to a maximum of 1000% APR at 100% utilization.

  See the forum discussion for further details.
  

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below.

Proposal: Compound Grants Program 2.0 - Delegated Domain Allocation

• Proposer: harsha

• Summary: We propose a Compound Ecosystem Fund should be launched to find and fund a wide variety of teams building on Compound. We propose a budget of $1.5M spread across 2 quarters. We are open to iterating this budget amount based on the response from the community.
  
  We additionally propose this budget be managed by 5 individuals - each managing $300K (domain allocator). End of every quarter the Compound community can come together to vote to replace, continue or increase budgets to each domain allocator.

Proposal: Normalize ETH Market Post Merge

• Proposer: pauljlei

• Summary: Proposal 122 has been passed to mitigate risk in the ETH market ahead of the Ethereum Merge. ETH borrowing demand is currently low on Compound - as such, there is limited downside for keeping Proposal 122’s borrow cap under current market conditions.
  
  As for the interest rate curves, it would be prudent to revert the interest rate changes when ETH utilization is back to a healthy state. As market conditions evolve up to and after the merge, we will provide more details on the recommended precautions the community should take ahead of reverting any parameter changes from Proposal 122.

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here.

Compound III is live

Following a successful governance proposal, Compound III is live. Compound III is a streamlined version of the protocol, with an emphasis on security, capital efficiency, and user experience. 

The most profound change was to move away from Compound v2’s pooled-risk model, where users can borrow any asset. In this model, collateral is constantly rehypothecated, and a single bad asset (or oracle update) can cause increased risk across the market rather than isolating to a single base asset.

Instead, each deployment of Compound III features a single borrowable asset. When you supply collateral, it remains your property — it can never be withdrawn by other users (except during liquidation). 

The first Compound III market allows you to borrow USDC using ETH, WBTC, LINK, UNI, and COMP as collateral. While you won’t earn interest on collateral anymore, you’ll be able to borrow more; with less risk of liquidation and lower liquidation penalties; using fewer transactions; spending less on gas.

The launch announcement includes a full list of new features & changes.

Launching this next-generation protocol has been a massive effort bringing together all corners of the community; thank you to everyone that contributed, reviewed, tested, audited, debated, and voted to bring the protocol to life.

Try Compound III here.

Compound In the News

Blockworks - With Compound III Launch, DeFi Pioneer Emphasizes Security

The Block - DeFi protocol Compound says multi-chain Comet upgrade is ready to go

Coindesk - Why DeFi Might be Safer than Traditional Finance

A16z Crypto - Treasury Management: A Guide to Navigating Downturns

Compound Thesis latest episodes; meet with us at Digital Asset Summit in NYC

The Compound Team will be at Digital Asset Summit in NYC from 9/12 - 9/14 - let us know if you’ll be in town and would like to meet.

Previously on Compound Thesis, we hosted Mark Palmer, Managing Director and Head of Digital Asset Research at BTIG, a major investment bank and institutional prime brokerage, who sees an industry trend of increasing institutional crypto adoption:

"But what we have seen over the last couple of years is that group has really expanded and now includes a wide swath of traditional institutional investors that are seeing what's going on in web 3, not just speculative crypto assets but all of web 3 and are looking to get involved.

And more recently… we're seeing pension funds, which are known for being some of the most conservative entities out there, understanding that some allocation to digital assets can actually create a very interesting risk reward opportunity."
Watch BTIG’s full replay here.

In the latest episode, we discussed building and investing in web3 with Tai Panich, CEO & CIO of SCB10x, the VC arm of Siam Commercial Bank, the oldest bank in Thailand. Catch SCB10x’s full replay here.

Protocol Governance Updates

Summarized below are highlighted proposals since our last newsletter - find all proposals at https://compound.finance/governance.

Recent Proposals

Proposal 117 - Compound Oracle Upgrade v3

• Status: Queued August 27, 2022

• Proposer: Chainlink (via GFX Labs)

• Voting Results: 696,665 For and 0 Against

• Summary: GFX Labs is proposing on behalf of Chainlink to upgrade the protocol's oracle contract (currently v2) to v3, which switches the anchor market from Uniswap v2 to v3. Forum Post

Proposal 116 - Initialize Compound III (USDC on Ethereum)

• Status: Executed August 25, 2022

• Proposer: 0xc66e...68a9

• Voting Results: 1,203,196 For and 0 Against

• Summary: The first proposed Compound III market is USDC on Ethereum; the contracts have been tested, audited, and deployed to production, with help and input from OpenZeppelin, Chainsecurity, Certora, Gauntlet, Chainlink, and many members of the community.
  
  This initialization proposal creates supply caps for five collateral assets, and transfers 500,000 USDC controlled by Compound Governance into the market as initial reserves. Upon execution of this proposal, you can begin using the USDC market on Ethereum. Market Parameters; Discussion.

Proposal 115 - Enable sending ETH from Timelock (Revised)

• Status: Executed August 5, 2022

• Proposer: Arr00

• Voting Results: 691,259 For and 0 Against

• Summary: There has been a longstanding quirk in the Compound Governor which requires all ETH spent in a proposal to come from the executor of the proposal. This disallows sending ETH stored in the Timelock. This proposal changes the implementation of GovernorBravo to allow for sending ETH from the Timelock. Finally, the proposal was audited and signed off by Open Zeppelin as can be verified here. Discussion.

Ongoing Discussions

See all the latest discussions on the Compound Community Forum - highlighted proposals below.

Proposal: Deprecate FEI Market

• Proposer: monet-supply

• Summary: Fei Protocol is planning to be wound down in the near future. To ensure an orderly wind down process for Compound’s cFEI market, I believe Compound should adopt the following changes: Disable new FEI borrowing and supplying; Set reserve factor to 100%. Changes to be executed as a two-part proposal.
  
  If within 1 month of proposal execution the amount of FEI borrows outstanding is still large, the community could consider further changes such as interest rate model change (increasing borrowing rates) to ensure all cFEI users are able to withdraw funds and participate in the TribeDAO organized redemption process promptly.

Proposal: Adjust ETH Interest Rate Model

• Proposer: monet-supply

• Summary: The upcoming Ethereum merge upgrade is expected to be accompanied by at least one ETH fork that maintains POW consensus. Specially for Compound, the merge and prospect for fork(s) has the potential to significantly increase liquidity risk for cETH.
  
  This proposal adjusts parameters for the Compound ETH market. Specifically, this proposal would implement a borrow cap and update the interest rate model to a new jump rate model featuring a much higher maximum borrow rate to ensure continuous withdrawal liquidity for Compound ETH collateral:

  Rate at 0% utilization: 2%

  Optimal utilization (kink point): 80%; rate at optimal utilization: 20%

  Rate at 100% utilization: 1000%
  Set a borrow cap for the cETH market of 100,000 ETH.

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here.

Compound III

At the end of June, Compound Labs released a code repository to the Compound community, which we hope can form the basis of a multi-chain deployment strategy: comet, which the community has been referring to as Compound III.

Compound III is designed with borrowers in mind, to be capital efficient, gas efficient, safe, and simple to govern. Highlights of the major changes listed below:

• Compound III deployments feature a single borrowable (interest earning) base asset. All other assets are collateral. This reduces risk, and can improve capital efficiency.

• There are separate borrowing collateral factors, and liquidation collateral factors. This protects borrowers from early liquidation, and can improve risk management.

• Supply/borrow interest rate models can be decoupled from one another; governance has full control over economic policy.

We look forward to working with the community to finish auditing the protocol, and compiling our learnings from the current testnet ahead of beginning deployments to other EVM chains.

Check out the Compound III documentation, and join the forum discussion on comp.xyz.

Compound In the News

Messari - State of Compound Q2 2022

Axios - Compound's founder is unworried about DeFi defaults

Coindesk - Celsius Reclaims $172M Collateral From Aave, Compound

Pantera Capital - DeFi Worked Great

The Defiant - Compound Goes Multi-Chain in Major Upgrade

How on-chain data powers Nansen’s Treasury strategy - Thesis Episode 1

This week, we hosted Compound's first episode of Thesis, discussing the intersection of crypto and capital markets with industry thought leaders.

In this episode, we spoke with Morten Fylkesnes, Treasury Manager at Nansen. Prior to Nansen, Morten was a trader at Norges, the largest sovereign wealth fund in Norway with >$1T AUM.

Here’s Morten’s take on how firms can start getting more comfortable with digital assets:

“You don't have to be an investment fund or a hedge fund or a VC to invest in crypto. It's become this market where you have fixed income and an equity market inside digital assets… if you take the time to understand and get comfortable with the new types of risks… you have a great opportunity to outperform by taking very limited market risk.”

Watch the full replay on LinkedIn.

Protocol Governance Updates

Summarized below are highlighted proposals since our last newsletter - find all proposals at https://compound.finance/governance.

Recent Proposals

Proposal 112 - Return Accidentally Sent Funds #3

• Status: Executed July 11, 2022

• Proposer: Arr00

• Voting Results: 675,681 For and 0 Against

• Summary: Following the two proposal which returned accidentally sent funds, this proposal will return 90% of the accidentally sent WBTC to a user that sent the WBTC to the Comptroller here. Finally, the proposal was audited and signed off by Open Zeppelin as can be verified here. Discussion.

Proposal 111 - Risk Parameter Updates for 2 Collateral Assets

• Status: Executed July 4, 2022

• Proposer: Gauntlet

• Voting Results: 686,289 For and 0 Against

• Summary: Updated Risk Parameters aligning with Moderate Risk Level - increasing collateral factor for cUSDC to 85.5%; cDAI to 83.5%. For more details, please see Gauntlet's Parameter Recommendation Methodology and Gauntlet's Model Methodology.

Proposal 110 - OpenZeppelin Security Partnership - 2022 Q3 Adjustment

• Status: Executed July 2, 2022

• Proposer: OpenZeppelin

• Voting Results: 696,327 For and 0 Against

• Summary: As outlined in the original proposal, at the start of every quarter OpenZeppelin will create a proposal to update the service fee payment in accordance with the formula outlined in the proposal. The dollar value of $1M in COMP remains the same as the original agreement. More detail in this forum post.

Ongoing Discussions and RFPs

See the Compound Community Forum to see and join in the latest discussion.

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here. 

Markets Update

Current supply on Compound is at $3.7B from 301K unique addresses. 27% of this supply volume is USDC, 22% is ETH, and 20% is DAI. (source). 

Open borrowing is at $895MM from 9.0K unique addresses. 36% of this borrowing volume is USDC, 29% is USDT, and 28% is DAI. (source). 

For live figures please refer to our Markets page. 

Image Source: IntoTheBlock

S&P Global maintains Compound Treasury’s risk profile

Given the recent significant market events, S&P Global published a bulletin on Compound Treasury, "Risk Profile Remains Consistent With Our Initial Expectations, Despite Large Crypto Price Corrections." In the bulletin, S&P notes the following as support for maintaining the risk profile:

• Investor redemptions were met smoothly within the contractual window

• Although loan liquidations on the Compound protocol have risen, loan losses so far have remained de minimis 

• The value of USDC against USD has remained stable, and convertibility of USDC into USD has been maintained

• Despite continued pressure on the supply interest rate for USDC, the capital base of the company only moderately reduced since the initial rating assignment

See the full bulletin here (subscription required).

Compound In the News

Bankless - CeFi Broke. DeFi Didn't. [LITE]

Coindesk - Siam Commercial Bank Is Chasing DeFi Yield Through Compound

PR Web - Voltz Launches First Synthetic Interest Rate Swap Protocol for DeFi

Decrypt - Circle Launches Euro-Backed Stablecoin

Circle is launching Euro Coin

Circle will be launching Euro Coin (EUROC), their newest stablecoin, on June 30th, with a full reserve model such that it’s always redeemable 1:1 for euros.

Euro Coin is launching with support from Compound Labs alongside other ecosystem leaders, including Curve, Uniswap, Metamask, Ledger, and more. Euro Coin’s addition to the Compound Protocol is pending its proposal being submitted and passed by the community. 

Developers can begin integrating with the Euro Coin smart contract today, ahead of the official launch on June 30th when liquidity will begin flowing.

Consensus Recap

It was great to connect in-person with our partners and new friends in Austin at Consensus earlier this month. Some of the main themes around DeFi that arose at the conference:

• Institutional interest in crypto and DeFi continues to grow, with significant presence at Consensus from Fidelity, FIS, Mastercard, Paypal, and more

• During bear markets, it’s time to focus on innovation and building more value within crypto, not hype

• An open financial system is inevitable, and holds the potential for benefiting massive amounts of users, even if access might be through centralized platforms

Despite the 100 degree Austin weather, thanks to all those that were able to make it to our Compound Happy Hour.

Protocol Governance Updates

Summarized below are highlighted proposals since our last newsletter - find all proposals at https://compound.finance/governance.

Recent Proposals

Proposal 109 - Reserve Factor Decreases for 10 Assets

• Status: Failed June 18, 2022

• Proposer: Gauntlet

• Voting Results: 112,179 For and 412,712 Against

• Summary: We recommend decreasing reserve factors for cUSDC, cUSDT, and cTUSD from 7.5% to 3.75%, and decreasing all other reserve factors (cETH, cWBTC2, cDAI, cBAT, cZRX, cUNI, cLINK) by 500 bps (for example, decreasing ETH reserve factor from 20% to 15%). More details on Gauntlet’s updated reserve factor methodology here.

Proposal 108 - Risk Parameter Updates for 5 Collateral Assets

• Status: Executed June 13, 2022

• Proposer: Gauntlet

• Voting Results: 613,752 For and 0 Against

• Summary: Updated Risk Parameters aligning with Moderate Risk Level - increasing collateral factor for cUSDC to 84%; cLINK to 79%; cSUSHI to 73%; cAAVE to 73%; cYFI to 75% .For more details, please see Gauntlet's Parameter Recommendation Methodology and Gauntlet's Model Methodology.

Proposal 107 - Risk Parameter Updates for 5 Collateral Assets

• Status: Executed May 31, 2022

• Proposer: Gauntlet

• Voting Results: 731,151 For and 0 Against

• Summary: Updated Risk Parameters aligning with Moderate Risk Level - increasing collateral factor for cDAI to 82.5%; cLINK to 77%; cMKR to 73%; cUSDC to 82.5%; cYFI to 73% .For more details, please see Gauntlet's Parameter Recommendation Methodology and Gauntlet's Model Methodology.

Ongoing Discussions and RFPs

See the Compound Community Forum to see and join in the latest discussion.

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here. 

Markets Update

Current supply on Compound is at $3.7B from 301k unique addresses. 24% of this supply volume is USDC, 21% is ETH, and 19% is WBTC. (source). 

Open borrowing is at $869k from 8.9k unique addresses. 36% of this borrowing volume is DAI, 33% is USDT, and 21% is USDC. (source). 

For live figures please refer to our Markets page. 

Image Source: IntoTheBlock

DeFi State of the Union Recap

At Permissionless last week, Compound CEO and Founder, Robert Leshner, discussed what’s next for DeFi alongside panelists from other blue-chip protocols - Uniswap, Aave, and Synthetix.

These protocols were all built in prior crypto bear markets - and the panelists agreed that building and innovating is the way out of bear markets. Conditions for the next bull market require people to be excited around new ideas, and greater institutional adoption of crypto and DeFi.

Compound is focused on building the infrastructure for institutions to easily and safely on-ramp capital into DeFi. Compound Treasury has seen immense growth since its launch in July 2021, and is working to accelerate institutional DeFi adoption.

Compound In the News

• Blockworks - Uniswap COO: Now Is the Time for Community Members To Drive Growth

• CoinDesk - Compound’s Enterprise Arm Receives S&P Credit Rating in DeFi First

• The Block - Compound Treasury nabs credit rating from S&P

Treasury now supports international wires

Compound is excited to offer Treasury’s institutional DeFi platform globally. Treasury Accounts can now be funded and paid out with bank accounts outside of the US, where supported by our partner Circle. 

Adding to our support for international entities, clients will now be able to receive USD wire payouts in addition to on-chain USDC transfers. Compound Treasury is building the global infrastructure for institutions to easily access the benefits of DeFi.

Treasury receives S&P credit rating

Earlier this month, Compound Treasury received a B- credit rating from S&P Global Ratings. This makes Compound Treasury the first institutional DeFi offering to be rated by a major credit rating agency, and signals tremendous progress in the crypto industry’s maturity, as traditional institutions begin to judge the risks of digital asset powered financial offerings.

As part of ongoing discussions with S&P, Compound Treasury’s ratings could be upgraded in upside scenarios such as greater regulatory clarity for the digital asset industry, or a longer track record of stable performance.

Find Compound Treasury’s S&P Credit Ratings announcement and link to the full report here.

Protocol Governance Updates

Summarized below are highlighted proposals since our last newsletter - find all proposals at https://compound.finance/governance.

Recent Passed Proposals

Proposal 105 - Grant request for launching Compound with Aztec Connect

• Status: Executed May18th, 2022

• Proposer: 0xeda2...a36a

• Voting Results: 570,883 For and 0 Against

• Summary: With Aztec Connect, users can deposit into and borrow from Compound with significant gas savings and privacy by default. This quarter, the integration will go live on zk.money. Aztec is requesting a $100,000 grant to subsidize deposits into Compound - with $50,000 distributed upfront and $50,000 released three months after launch. This subsidy will kickstart the network effects for this integration and enable significant gas savings while network throughput ramps up. More detail about the grant request is available here. 

Proposal 103 - Risk Parameter Updates for MKR and AAVE

• Status: Executed May 2nd, 2022

• Proposer: Gauntlet

• Voting Results: 552,804 For and 0 Against

• Summary: Updated Risk Parameters aligning with Moderate Risk Level - increasing collateral factor for cMKR and cAAVE from 65% to 70. Gauntlet’s parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. For more details, please see Gauntlet's Parameter Recommendation Methodology and Gauntlet's Model Methodology.

Proposal 102 - OpenZeppelin Security Partnership - 2022 Q2 Adjustment V4

• Status: Executed April 29th, 2022

• Proposer: OpenZeppelin

• Voting Results: 558,761 For and 0 Against

• Summary: As outlined in the original proposal, at the start of every quarter OpenZeppelin will create a proposal to update the service fee payment in accordance with the formula outlined in the proposal. More details in this forum post.

Ongoing Discussions and RFPs

See the Compound Community Forum to see and join in the latest discussion.

As a reminder, one of the best ways to participate in, and contribute to the Compound ecosystem is completing outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here. 

Markets Update

Current supply on Compound is at $5.4B from 301k unique addresses. 29% of this supply volume is ETH, 20% is USDC, and 19% is DAI. (source). 

Open borrowing is at $1.4B from 9.1k unique addresses. 34% of this borrowing volume is USDC, 31% is DAI, and 27% is USDT. (source). 

For live figures please refer to our Markets page. 

Image Source: IntoTheBlock

Compound Treasury now accepts funding via USDC

Compound Treasury now supports USDC as a source of funding, in addition to USD. Customers can earn a fixed 4% with daily liquidity, on more of their cash and cash alternatives.

Funding with USDC was one of the most requested features we heard from our customers. Corporate treasuries and institutions with idle USDC balances wanted an easy, secure way to earn fixed interest.

The USDC flow of funds is simple and transparent. During deposit, the Client sends USDC to a unique Treasury deposit address on Circle. The USDC is then sent to Fireblocks, which supplies to the protocol and custodies the asset.

During withdrawal, Fireblocks redeems USDC from the protocol and transfers USDC back to Treasury’s Circle account. Treasury creates an external on-chain transfer from Circle to the Client’s pre-approved withdrawal address.

Start earning a fixed 4% with daily liquidity on USDC at compoundtreasury.com

Compound in the news

• Forbes - FIS Partners With Fireblocks To Bring Crypto Trading, DeFi, And Staking Services To Its Global Client Base

• The Information - Compound Labs CEO on How Interest Rate Hikes Will Buoy Crypto Lending

• Coindesk - Compound Labs Founder on Bridging the Gap Between DeFi and Traditional Finance

• The Block - ​​Compound governance rejects proposal wanting to end large token rewards

Governance Updates

The Compound community has reached the 100th governance proposal milestone! Incredible to see the evolution of the protocol led by an engaged community - find all proposals at compound.finance/governance.

Highlighted Proposal

Proposal 100 - COMP Rewards Adjustments - Kickstart Rewards: Step Two

• Status: Failed 

• Proposer: Tyler Loewen

• Voting Results: 492,678 For and 499,849 Against

• Summary: End the current COMP rewards program and to start a new one with the sole purpose of kickstarting new markets: kickstart rewards. This proposal is the second step towards launching the new rewards program - existing rewards are being slashed to 0.
  For more information and discussion, please visit the discussion thread on the forums.

Recent Passed Proposals

Proposal 99 - OpenZeppelin Security Partnership - 2022 Q2 Adjustment V3

• Status: Queued April 13th, 2022

• Proposer: OpenZeppelin

• Voting Results: 912,682 For and 0 Against

• Summary: As outlined in the original proposal, at the start of every quarter OpenZeppelin will create a proposal to update the service fee payment in accordance with the formula outlined in the proposal. More details in this forum post.

Proposal 98 - Risk Parameter Updates for YFI and SUSHI

• Status: Executed April 11th, 2022

• Proposer: Gauntlet

• Voting Results: 692,329 For and 0 Against

• Summary: Updated Risk Parameters aligning with Moderate Risk Level - increasing collateral factor for cYFI and cSushi from 65% to 70. Gauntlet’s parameter recommendations are driven by an optimization function that balances 3 core metrics: insolvencies, liquidations, and borrow usage. For more details, please see Gauntlet's Parameter Recommendation Methodology and Gauntlet's Model Methodology.

Proposal 97 - Reduced MKR borrow limit

• Status: Executed April 11th, 2022

• Proposer: MonetSupply

• Voting Results: 814,331 For and 0 Against

• Summary: This proposal reduces the MKR market's borrow limit from the current value of 25,000 MKR to 5,000 MKR. Lowering the borrow limit makes it more difficult for malicious parties to interfere with MakerDAO governance; full discussion here.

Proposal 92 - COMP Rewards Adjustments - Kickstart Rewards: Step One

• Status: Executed March 26th, 2022

• Proposer: Tyler Loewen

• Voting Results: 883,476 For and 87,585 Against

• Summary: End the current COMP rewards program and to start a new one with the sole purpose of kickstarting new markets: kickstart rewards. This proposal is the first step towards launching the new rewards program - existing rewards are being cut by 50%.

Ongoing Discussions and RFPs

See the Compound Community Forum to see and join in the latest discussion.

As a reminder, one of the best ways to participate in, and contribute to, the Compound ecosystem is to complete outstanding Request For Proposals (RFPs)

Click here for a recap of our most recent Developer Community Call, discussing ongoing protocol and application development, and listen to the audio recording here. 

Markets Update

Current supply on Compound is at $9.2B from 301k unique addresses. 31% of this supply volume is ETH, 21% is USDC, and 17% is DAI. (source). 

Open borrowing is at $3.1B from 9.3k unique addresses. 41% of this borrowing volume is USDC, 38% is DAI, and 14% is USDT. (source). 

For live figures please refer to our Markets page. 

Image Source: IntoTheBlock

Coinbase Launches Compound Integration

On December 9th, Coinbase announced a new DeFi Yield product that allows users to earn a variable interest rate on DAI, powered by the Compound protocol in the backend. The integration features instant liquidity, no Ethereum gas fees, and support for customers in 70+ countries. The US is not currently a supported region, however, Coinbase plans to expand the product to additional assets, protocols, and jurisdictions in the future. 

Coinbase provides a simple, intuitive user experience for opting into DeFi Yield, which will help onboard a new wave of users and liquidity to the Compound ecosystem. This integration highlights the power of composability in DeFi and marks a major step forward in bringing open finance to the masses.

Protocol Auditing Proposals

Since the original forum thread was posted on November 3rd, the Compound community has been evaluating various proposals from blockchain auditing firms to be the ongoing security expert for the protocol. The scope and skillset of each firm’s proposals varies slightly, however, the overarching goal is to ensure that the community avoids future situations where flawed code is added to the Compound codebase, as demonstrated by the bug introduced in Proposal 62.

There are currently three competing proposals from OpenZepellin, Trail of Bits, and ChainSecurity, all which seek a COMP stream in order to kick off the security engagement. The proposal with the most “yes” votes will be the winning proposal, and any other proposals that pass with less votes will be cancelled by the community multi-sig.

These proposals are a landmark move to a “B2DAO” economic system, where technology vendors can directly pitch valuable services to the community in exchange for some portion of the treasury.  This can hopefully serve as an industry-wide model for vendor selection in DeFi and bring greater efficiency and security to a variety of projects. 

MakerDAO Deposit Module to Compound

The MakerDAO community is evaluating a proposal from GFXLabs to add Compound as a destination for the DAI Direct Deposit Module (D3M). This integration would allow Maker to send idle liquidity to the Compound protocol in order to boost revenues and diversify counterparty risk across Compound and Aave. Compound and Maker community members are encouraged to share their thoughts on the proposal in the forums.

Governance Updates

Since the last newsletter, Proposals 71 - 74 passed through the governance system with broad community support, Proposal 70 failed, and Proposals 75 - 77 are in the active voting stage. 

Active Votes

Proposal 77: Continuous Security Engineering for Compound

• Status: Active 1 Days, 6 hrs left 

• Proposer: Trail of Bits

• Voting: 57,555 For and 3,353 Against

• Summary: Proposal 77 would stream the equivalent of $1m of COMP to Trail of Bits every quarter for one year, in exchange for continuous auditing services. The proposal from Trail of Bits encompasses consulting services, security engineering, and process creation, with the goal of preventing faulty code from being merged into the protocol. The proposed services from Trail of Bits will not cover continuous monitoring of the existing codebase or the expansion of a bug bounty program. A detailed breakdown of Trail of Bits’ proposed services can be found on the proposal description.

Proposal 76: OpenZeppelin Continuous Audit & Security Services Proposal

• Status: Active 1 Days, 6 hrs left

• Proposer: OpenZeppelin

• Voting: 585,594 For and 3,254 Against

• Summary: Proposal 76 would stream the equivalent of $1m of COMP to OpenZeppelin every quarter for one year, in exchange for continuous auditing services. OpenZeppelin has revised its earlier proposal to reduce the scope of the engagement and remove the associated performance fee. As a part of this proposal, OpenZeppelin will provide a dedicated security advisor to establish better processes for protocol upgrades, perform continuous audits on new proposals, create security checklists, implement a security dashboard for the community to review, and analyze other safety measures like bug bounties and formal verification. More information can be found on the proposal description and this final proposal document.

Proposal 75: Decentralized long-term security for Compound

• Status: Active 1 days, 6 hrs left

• Proposer: ChainSecurity

• Voting: 0 For and 3,353 Against

• Summary: Proposal 75 would send a total of $960k COMP to ChainSecurity for its auditing proposal, with $340k being sent an upfront payment to establish an auditor training program, and $620k being streamed per quarter as a project maintainer. ChainSecurity takes a different approach from OpenZeppelin and Trail of Bits, by proposing that the community select two independent auditors to review future governance proposals. The overarching goal is to create a broad audit suite that minimizes dependency on a single company and establishes a repeatable process for onboarding new auditors. More information on ChainSecurity’s proposal can be found on the proposal description.

Proposal 74: Risk Parameter Updates for WBTC, BAT, and LINK

• Status: Queued December 17th, 2021

• Proposer: Gauntlet

• Voting: 907,168 For and 0 Against

• Summary: Proposal 74 increases the collateral factors of the following markets: WBTC2 from 65% to 70%, BAT from 60% to 65%, and LINK from 65% to 70%. Note that Proposal 72 aimed to make the same change to WBTC but was executed on a deprecated version of the cWBTC contract. The increased capital efficiency for these markets follows the Moderate Risk Level selected by the Community. These changes reflect an ongoing task of the Gauntlet team as a part of the Dynamic Risk Parameters initiative. More information is available on the original forum thread.

Completed Votes 

Proposal 73: Add Markets: USDP

• Status: Queued December 16th, 2021

• Proposer: Tyler Loewen

• Voting Results: 703,357 For and 108,741 Against

• Summary:  Proposal 73 would add Pax Dollar (USDP) to the Protocol’s list of supported assets. Tyler argues USDP’s regulated state and staunch USD-collateral requirements makes USDP an attractive addition. USDP would be added with a standard 0% collateral factor, 25% reserve factor, no COMP rewards, and the Uniswap-anchored Chainlink price oracle. More information on this Proposal can be found on the accompanying forum thread.

Proposal 72: Risk Parameter Updates for WBTC, UNI, and COMP

• Status: Executed December 8th, 2021

• Proposer: Gauntlet

• Voting Results: 1,045,592 For and 0 Against

• Summary:  Proposal 72 increases the collateral factors of the following markets: WBTC from 65% to 70%, UNI from 60% to 70%, and COMP from 60% to 65%. The increased capital efficiency for these markets follows the Moderate Risk Level selected by the Community. These changes reflect an ongoing task of the Gauntlet team as a part of the Dynamic Risk Parameters initiative. More information is available on the original forum thread.

Proposal 71: Risk Parameter Updates for DAI, BAT, ZRX, and ETH

• Status: Executed November 27th, 2021

• Proposer: Gauntlet

• Voting Results: 1,006,131 For and 0 Against

• Summary:  Proposal 71 increases the collateral factors of the following markets: DAI from 75% to 80%, BAT from 65% to 60%, ZRX from 65% to 60%, and ETH from 75% to 80%. The decreased capital efficiency for the BAT and ZRX markets follows the Conservative Risk Level, and the increased capital efficiency for the DAI and ETH markets follows the Aggressive Risk Level selected by the Community. These changes reflect an ongoing task of the Gauntlet team as a part of the Dynamic Risk Parameters initiative. More information is available on the original forum thread.

Proposal 70: Security Solutions For Compound Governance

• Status: Failed November 25th, 2021

• Proposer: OpenZeppelin

• Voting Results: 120,194 For and 580,247 Against

• Summary: Similar to Proposal 76, Proposal 70 is OpenZeppelin’s bid to become the Compound Protocol’s continuous auditor in exchange for a COMP streaming grant. This proposal included a performance fee and a wide scope of services, which are detailed on the original forum thread. The proposal ultimately failed, in order to allow the community to evaluate competing proposals from Trail of Bits and ChainSecurity.

Ongoing Discussions

See below for highlights from the Compound Community Forum, and join in the discussion:

• Risk Parameter Updates 2021-12-11 - @pauljlei from Gauntlet presents the results from the Dynamic Risk Assessments.

• Auditing Compound Protocol - @sukernik outlined an audit selection process for the community to evaluate all three proposals and choose a vendor.

• Add Market: LUSD - @chaser picks back up the discussion around adding LUSD as the next supported market on Compound.

• FRAX Listing Proposal - @pauljlei from Gauntlet adds to this discussion with an endorsement for FRAX as a collateral asset based on Gauntlet’s market risk assessment.

• Compound Deployment on Numio - In Development - @ansteadm, one of Numio’s co-founders, updates the Compound community on Numio’s work to provide L1 and L2 DeFi support. 

• [RFP12 Implementation] cToken Cleanup - @getty highlights the danger of adding new assets to the protocol which are inflationary, deflationary, or rebasing in nature.

• ​​Enable transfer ETH from Timelock - @arr00 proposes deprecating a line of code in Governor Bravo to allow the community to access and spend the recently supplied ETH in the Protocol Timelock.

• Migrate Contributor COMP Stream to Sablier - @maxdesalle explores using Sablier, an on-chain money stream creator, for COMP streams paid to vendors or contributors in a more secure and efficient manner.

Be sure to either vote on proposals with your COMP, or delegate your COMP voting rights to a representative of your choice.

Active RFPs

As a reminder, one of the best ways to participate in, and contribute to, the Compound ecosystem is to complete outstanding Request For Proposals (RFPs). The Compound Grants Program is offering substantial grants to individuals and organizations who work on the topics listed below. Have an idea in mind that's not included on the list? Feel free to apply with your own ideas here!

• RFP 1: Decentralized batching contract | $25k

• RFP 2: Voting with COMP collateral | $50k

• RFP 3: Bringing Compound to L2's and other chains | $50k

• RFP 4: Adding support for new assets on Compound | $12.5k 

• RFP 5: Gas optimizations | TBD

• RFP 6: Improvements to the liquidations process | $50k

• RFP 7: Uniswap V3 management platforms as collateral | $25k

• RFP 8: Balancer V2 liquidity as collateral | $25k

• RFP 9: Open source Compound Interface | $50k

• RFP 10: Ripcord wallet | TBD

• RFP 11: Governance/Voters rewards | TBD

• RFP 12: cToken Cleanup | $250k

• RFP 13: cToken Interest Rate Model Changes | $100k

• RFP 14: Gas Savings for cToken and Comptroller contracts | $100k

• RFP 15: Dynamic COMP reward distribution | $100k

• RFP 16: Migrate legacy cTokens | $50k

• RFP 17: Deploy upgradeable cETH contract and migrate users to it | $50k

• RFP 18: Uniswap V3 liquidity as collateral | $100k

• RFP 19: Interest rate curve research | $5k

• RFP 20: Optimism Starport for Compound Gateway | $100k

Developer Community Call Recap

The Compound community held a Developer Community Call last week to discuss ongoing protocol and application development. You can access an audio recording of the call here. 

Markets Update

Current supply on Compound is at $17.2B from 298k unique addresses. 35% of this supply volume is ETH, 25% is DAI, and 21% is USDC. (source). 

Open borrowing is at $7B from 9.2k unique addresses. 50% of this borrowing volume is DAI, 36% is USDC, and 9% is USDT. (source). 

For live figures please refer to our Markets page. 

Image Source: IntoTheBlock

Links & Discussions

• Messari launches Messari Governor, an aggregator for users to explore, monitor, and participate in governance activity for major DeFi protocols.

• Compound Labs CEO, Robert Leshner, spoke on a panel at JP Morgan’s Crypto Economy Conference.

• Compound Treasury Partnership Lead, Nick Martitsch, spoke about the role of DeFi yield in traditional investment portfolios in a Coindesk webinar.

  Tweet of the Week 

Gauntlet Risk Management Dashboard

The Gauntlet team recently launched the full version of the Compound Risk Management Dashboard as a part of their ongoing initiative to optimize yield, capital efficiency, and mitigate depositor losses on the Compound protocol. The dashboard shows the data and rationale behind Gauntlet’s dynamic risk parameters and contains the following sections:

• Gauntlet Top Recommendations: Shows suggested changes to help optimize Capital Efficiency and Value at Risk.

• Value At Risk: Shows capital at risk due to insolvencies and liquidations when markets are under duress, broken down by collateral type.

• Borrow Usage: Shows the percentage of borrowing power that borrowers are currently utilizing.

• Collateral Risk: Shows the risk for each collateral type in Compound.

The Gauntlet team is looking for community feedback on the dashboard, so feel free to add your comments to the forum thread or through the “Send Feedback” button on the interface. 

Coinbase Earn COMP Update

In September of 2020, the Compound Labs Team provided an update on the distribution of COMP tokens to the community, which included up to 500,000 COMP designated to Coinbase Earn. The Coinbase Earn program walked users through the process of supplying USDC to Compound and rewarded them with COMP for learning about the basic protocol mechanics. More than 5 million people learned about the Compound protocol through these videos and a Coinbase Wallet onboarding lesson.

The Earn program has since concluded, and Coinbase has transferred 114,100 COMP, 5,426 ETH, and 1,319,371 USDC to the Timelock. The community can use these assets to fund other initiatives that advance governance and benefit the Compound ecosystem.  

Governance Updates

Since the last newsletter, Proposal 66 passed through the governance system with broad community support, Proposal 67 failed, Proposal 68 is queued, and Proposal 69 is in the active voting stage. 

Active Votes

Proposal 69: Risk Parameter Updates for LINK, MKR, SUSHI, and YFI

• Status: Active 2 days, 7 hrs left

• Proposer: Gauntlet

• Voting Results: 0 For and 0 Against

• Summary: Proposal 69 increases the collateral factors of the following markets: LINK from 60% to 65%, MKR from 45% to 55%, SUSHI from 45% to 55%, and YFI from 55% to 60%. The increased capital efficiency for these markets follows the Moderate Risk Level selected by the Compound community, and is an ongoing task of the Gauntlet team as a part of the  Dynamic Risk Parameters initiative. More information is available on the original forum thread.

Completed Votes 

Proposal 68: End cCOMP Borrow Rewards

• Status: Queued November 10th, 2021

• Proposer: Arr00

• Voting Results: 749,593 For and 0 Against

• Summary: Proposal 68 ends COMP rewards for borrowers in the cCOMP market. The combination of the $28.95M borrowing cap and rewards distribution in the cCOMP market has created a negative borrowing rate, and prevented the market from reaching equilibrium. Ending these rewards will create a positive borrowing rate and allow the market to return to a healthy state. COMP rewards will remain the same for suppliers of this market. On the forum thread, community members are also discussing removing or raising the cCOMP borrowing cap.

Proposal 67: [Temp. Check] Should Compound retroactively distribute COMP tokens to early users?

• Status: Failed November 8th, 2021

• Proposer: Tyler Lowen

• Voting Results: 121,013 For and 279,499 Against

• Summary: Rather than changing or upgrading the protocol, Proposal 68 is the first use of the governance system to hold a vote. The proposal asked the community for their feedback on whether COMP tokens should be distributed to early users before further work is done on the distribution mechanics. This discussion has been active for the past year, with proponents arguing that retroactive COMP rewards would further decentralize the protocol and reward early users, and opponents arguing that the tokens in the treasury should only be used for future incentives.

Proposal 66: Risk Parameter Updates for AAVE, LINK, MKR, SUSHI, USDC, and YFI

• Status: Executed November 9th, 2021

• Proposer: Gauntlet

• Voting Results: 1,028,127 For and 0 Against

• Summary: Proposal 66 increases the collateral factors of the following markets: AAVE from 50% to 60%, LINK from 50% to 60%, MKR from 35% to 45%, SUSHI from 40% to 45%, USDC from 75% to 80%, and YFI from 35% to 55%. The increased capital efficiency for these markets follows the Moderate Risk Level selected by the Compound community, and is an ongoing task of the Gauntlet team as a part of the  Dynamic Risk Parameters initiative. The change to the USDC market also marks the first time in the protocol’s history that an asset has a collateral factor greater than 75%.  More information is available on the original forum thread.

Ongoing Discussions

See below for highlights from the Compound Community Forum, and join in the discussion:

• Bug Bounty Program for Compound Proposals - @Rk2357 suggests a bug bounty program for new governance proposals once they enter the timelock stage. 

• VC engagement and inducting new members into governance - @tgmed addresses new expectations for VC/Founder’s participation in governance and rewarding early protocol users through grants.

• Auditing Compound Protocol - @OZSecure from OpenZeppelin shares their proposal to implement new security solutions for the Compound Community.

• Reentrancy protection currently broken - @dvf raises the concern that the reentrancy bug which allowed for C.R.E.A.M’s most recent hack may also be present in cToken contracts.

• Remove cCOMP borrow cap - @arr00 reintroduces the idea of removing the cCOMP borrow cap.

• Continuous Formal Verification - @shelly from Certora discusses a proposal for continuous formal verification of the Compound protocol.

Be sure to either vote on proposals with your COMP, or delegate your COMP voting rights to a representative of your choice.

Active RFPs

As a reminder, one of the best ways to participate in, and contribute to, the Compound ecosystem is to complete outstanding Request For Proposals (RFPs). The Compound Grants Program is offering substantial grants to individuals and organizations who work on the topics listed below. Have an idea in mind that's not included on the list? Feel free to apply with your own ideas here!

• RFP 1: Decentralized batching contract | $25k

• RFP 2: Voting with COMP collateral | $50k

• RFP 3: Bringing Compound to L2's and other chains | $50k

• RFP 4: Adding support for new assets on Compound | $12.5k 

• RFP 5: Gas optimizations | TBD

• RFP 6: Improvements to the liquidations process | $50k

• RFP 7: Uniswap V3 management platforms as collateral | $25k

• RFP 8: Balancer V2 liquidity as collateral | $25k

• RFP 9: Open source Compound Interface | $50k

• RFP 10: Ripcord wallet | TBD

• RFP 11: Governance/Voters rewards | TBD

• RFP 12: cToken Cleanup | $250k

• RFP 13: cToken Interest Rate Model Changes | $100k

• RFP 14: Gas Savings for cToken and Comptroller contracts | $100k

• RFP 15: Dynamic COMP reward distribution | $100k

• RFP 16: Migrate legacy cTokens | $50k

• RFP 17: Deploy upgradeable cETH contract and migrate users to it | $50k

• RFP 18: Uniswap V3 liquidity as collateral | $100k

• RFP 19: Interest rate curve research | $5k

• RFP 20: Optimism Starport for Compound Gateway | $100k

Developer Community Call Recap

The Compound community held a Developer Community Call last week to discuss ongoing protocol and application development. You can access an audio recording of the call here. 

Markets Update

Current supply on Compound is at $19.8B from 297k unique addresses. 33% of this supply volume is ETH, 22% is DAI, and 18% is USDC. (source). 

Open borrowing is at $7.7B from 9.2k unique addresses. 46% of this borrowing volume is DAI, 38% is USDC, and 8% is USDT. (source). 

For live figures please refer to our Markets page. 

Image Source: IntoTheBlock

Links & Discussions

• Messari shares their State of Compound Q3 2021 report, which analyzes the macro and micro trends for the protocol over the last three months.  

• Ripple hosts Robert Leshner for a discussion on institutions’ current usage and future adoption of decentralized finance 

• Adam Bavosa updated the developer guide for borrowing assets from the Compound protocol. 

• Dune Analytics’ creator Supernova created a dashboard delving into some of the protocol’s key metrics such as aggregate LTV and borrowers by address age. 

Tweet of the Week 

Compound Treasury Updates

Compound Treasury is continually improving to meet the demands of institutional clients. After launching the 4.00% APR account in July, the online Dashboard has been updated to include real-time balances, easy funding & withdrawal methods, custom reporting, and access controls. We’ve been delighted at the positive feedback from our early users and are rapidly expanding the product features and customer base.

Treasury has outgrown its old home living within the Compound Protocol’s website at compound.finance. Today, the product has moved to a new home: compoundtreasury.com.

Our team is hiring a Director of Marketing to help spread the word about Treasury. If you have experience scaling software businesses and want to be at the intersection of DeFi and Fintech, we invite you to apply and build the future of finance with us.

Interested in becoming a Treasury customer? Schedule a product demo with our team today.

COMP Bug Fix

When Proposal 62 was executed on September 29th, it introduced a bug into the Comptroller contract that allowed users in certain markets to accrue and claim far more COMP than intended. The end result of the bug is that 163k COMP were incorrectly claimed & returned to the community Timelock, 130k COMP remained in the Comptroller, which could have been incorrectly claimed, and ~200k misallocated COMP are currently outstanding. Users who claimed erroneously accrued COMP are strongly encouraged to return the tokens to the community Timelock. 

The event has galvanized the community to implement more robust code testing and simulation ahead of future governance proposals. Below are forum posts where the community is discussing various security measures to avoid errors moving forward.

• More Rigorous Process On Reviewing Large Code Changes (RE: Comp Bug 9/29/21)

• Protocol Emergency Brakes: Approving a set of Fast-Acting Governance Actions for protocol risk reduction

• Building a more robust deployment process to prevent future meltdown

The Compound community has been a pioneer of decentralized protocol development, and all community members are encouraged to help improve these standards and best practices over time. 

Governance Updates

Since the last newsletter, Proposals 61, 62, and 64 all passed through the governance system with broad community support, Proposal 63 was canceled, and Proposal 65 is in the active voting stage. 

Pending Votes

Proposal 65: Correct Over-Accrued COMP

• Status: Active - 2 days, 3 hrs left

• Proposer: Tyler Lowen

• Voting Results: 0 For and 0 Against

• Summary: Proposal 65 would fully restore the COMP claim functionality for all markets and return the Compound protocol to its normal operating state. The proposal also creates a list of users who accrued more COMP than they should have, and introduces a one-off function called fixBadAccruals that behaves in the following way: 

  • If the user's amount of accrued COMP is greater than the amount they over-accrued, the amount over-accrued is subtracted from their accrued amount (compAccrued).

  • If the user's amount of accrued COMP is less than the amount they over-accrued (i.e. they successfully claimed more COMP than they should have), their accrued amount (compAccrued) is set to 0 and the difference (i.e. what they owe the protocol) is saved to compReceivable. This new storage variable is only used for record-keeping at the moment.

  • An event - CompReceivableUpdated - is emitted when compReceivable is updated.

  • An event - CompAccruedAdjusted - is emitted when this function updates compAccrued.

• It is important to note that a subsequent proposal will be needed to update the record-keeping for users who returned over-accrued COMP to the community Timelock. All community members are encouraged to analyze the forum thread, simulation, and code before voting on the proposal

Completed Votes

Proposal 64: Fix COMP Accrual Bug

• Status: Executed October 8th, 2021

• Proposer: Tyler Lowen

• Voting Results: 1,037,107 For and 0 Against

• Summary: Proposal 64 patched the bug introduced by proposal 62 without reverting transactions when claiming COMP, which was a feature requested by third-party integrators. The proposal also allows the COMP distribution to continue for users who did not interact with the affected markets (cTUSD, cMKR, cSUSHI, cYFI, cAAVE, and cSAI). An analysis of Proposal 64 by Compound Labs CTO, Geoffrey Hayes, can be found here.

Proposal 63: Temporarily Disable COMP Rewards

• Status: Cancelled October 6th, 2021

• Proposer: Arr00

• Voting Results: 1,045,810 For and 162,221 Against

• Summary: Proposal 63 was developed and submitted to the governance system within hours of the COMP distribution bug being discovered. The proposal sought to temporarily disable the distribution of COMP rewards until a longer-term solution could be implemented. Arr00 ultimately decided to cancel the proposal after the voting period, since it would have reverted transactions and broken several third-party integrations that rely on claiming COMP. Further analysis is available on the forum thread.

Proposal 62: Split COMP rewards distribution and bug fixes

• Status: Executed September 29th, 2021

• Proposer: Tyler Loewen

• Voting Results: 729,781 For and 0 Against

• Summary: Proposal 62 updated the Comptroller logic to have two different COMP speeds for the supply and borrow side of each market on Compound, and fixed a previous compSpeed bug that prevented certain markets from having a COMP reward. As explained in the “COMP Bug Fix” section above, this proposal introduced a new bug that allowed certain borrowers to claim far more COMP than they were supposed to be able to from the Comptroller contract. More information on the proposal can be found on the forum thread.

Proposal 61: Dynamic Risk Parameters

• Status: Executed September 27th, 2021

• Proposer: Gauntlet

• Voting Results: 1,480,497 For and 6,564 Against

• Summary: Proposal 61 streams a COMP grant to the Gauntlet team, in exchange for continuous market risk management and the development of a risk management dashboard for the community. The Gauntlet team will perform regular analysis of parameters including Collateral Factor, Close Factor, Borrow Cap, Reserve Factor, and Liquidation Incentive, and create new governance proposals to optimize for yield, capital efficiency, and mitigate depositor losses. Community members can read more about the scope and cost of this program on the forum thread 

Ongoing Discussions

See below for highlights from the Compound Community Forum, and join in the discussion:

• Community Risk Level Consensus Check - @inkymaze asks the community for feedback on the level of risk tolerance for Gauntlet’s dynamic parameters. 

• Add Market: Matic - @nbax contends that Matic’s “ungovernance” process makes it a compelling alternative to existing stablecoins and would be a valuable asset to have on Compound.

• Compound Risk Dashboard by Gauntlet - @shaan from Gauntlet presents the plans for the new Compound Risk Dashboard approved in Proposal 61 ‘Dynamic Risk Parameters’. 

• Analysis of Proposal 64 - Compound Labs team member @hayesgm shares his analysis of Proposal 64 and @tylerether explains the thought process behind Proposal 65.

• Building a more robust deployment process to prevent future meltdown - @kevt explains his idea for a rollback mechanism that could be triggered by the community in the event of a flawed proposal, reversing the changes the proposal made.

Be sure to either vote on proposals with your COMP, or delegate your COMP voting rights to a representative of your choice.

Active RFPs

As a reminder, one of the best ways to participate in, and contribute to, the Compound ecosystem is to complete outstanding Request For Proposals (RFPs). The Compound Grants Program is offering substantial grants to individuals and organizations who work on the topics listed below. Have an idea in mind that's not included on the list? Feel free to apply with your own ideas here!

• RFP 1: Decentralized batching contract | $25k

• RFP 2: Voting with COMP collateral | $50k

• RFP 3: Bringing Compound to L2's and other chains | $50k

• RFP 4: Adding support for new assets on Compound | $12.5k 

• RFP 5: Gas optimizations | TBD

• RFP 6: Improvements to the liquidations process | $50k

• RFP 7: Uniswap V3 management platforms as collateral | $25k

• RFP 8: Balancer V2 liquidity as collateral | $25k

• RFP 9: Open source Compound Interface | $50k

• RFP 10: Ripcord wallet | TBD

• RFP 11: Governance/Voters rewards | TBD

• RFP 12: cToken Cleanup | $250k

• RFP 13: cToken Interest Rate Model Changes | $100k

• RFP 14: Gas Savings for cToken and Comptroller contracts | $100k

• RFP 15: Dynamic COMP reward distribution | $100k

• RFP 16: Migrate legacy cTokens | $50k

• RFP 17: Deploy upgradeable cETH contract and migrate users to it | $50k

• RFP 18: Uniswap V3 liquidity as collateral | $100k

• RFP 19: Interest rate curve research | $5k

• RFP 20: Optimism Starport for Compound Gateway | $100k

Developer Community Call Recap

The Compound community held a Developer Community Call last week to discuss ongoing protocol and application development. You can access an audio recording of the call here. 

Markets Update

Current supply on Compound is at $18.5B from 297k unique addresses. 33% of this supply volume is ETH, 23% is DAI, and 21% is USDC. (source). 

Open borrowing is at $7.5B from 9.2k unique addresses. 43% of this borrowing volume is USDC, 42% is DAI, and 8% is USDT. (source). 

For live figures please refer to our Markets page. 

Image Source: IntoTheBlock

Links & Discussions

• xDai introduces a new way to earn yield on bridged Dai using the Compound protocol, automatically supplying up to 21,000,000 DAI.

• Several members of the Compound community shared presentations during the ETHOnline Compound Grants Summit. A replay of these presentations is available here.

• Twitter user @0xTomoyo shares a well-written explanation of Compound’s liquidation mechanism.

Tweet of the Week 

Compound at ETHOnline Hackathon

The Compound Grants Program is sponsoring the upcoming ETHOnline hackathon, which runs from September 17th to October 15th. There will be $12k worth of bounties available to teams who build interesting applications on top of Compound, with $3k going to each winner of the categories below: 

• Most innovative use of supplying to the protocol

• Most innovative use of borrowing from the protocol

• Best full-featured, open-source interface to the protocol

• Prize pool (must implement the protocol)

You can view this kick-off presentation for inspiration on what to build, and be sure to stop by for a whole day of Compound summits on October 7th. We’re excited to see what you’ll build at the hackathon!

Governance Updates

Since the last newsletter, Proposals 59 and 60 both passed the voting stage with broad community support and are now queued. 

Completed Votes

Proposal 59: Distribute DAI to Users Affected in the DAI Liquidations

• Status: Queued September 15th, 2021

• Proposer: kybx86 (CAP)

• Voting Results: 1,527,754 For and 30 Against

• Summary: Proposal 59 distributes 6,817,798 DAI from the 16.4 million DAI market reserves to users who were affected by the DAI price spike to $1.30 on Coinbase Pro on November 26th, 2020. This distribution amount covers the 8% liquidation penalty on the 85,222,475 DAI that was repaid during the event. Users do not need to take any action to receive the DAI, as a relayer will claim and distribute the proceeds to each wallet address. For additional information on the November 2020 DAI liquidation event, you can read the original forum post and proposal forum post.

Proposal 60: Address Whitelist for Submitting Proposals

• Status: Queued September 15th, 2021

• Proposer: Polychain Capital

• Voting Results: 1,093,837 For and 151,001 Against

• Summary: Proposal 60 allows the community multisig to create a whitelist of contributor addresses that will be able to submit new governance proposals without the existing 65k COMP threshold. The proposed implementation creates a whitelistGuardian, initially set to the community multisig, that is able to add and remove approved whitelisted addresses, as well as cancel proposals from these addresses. Proponents argue that this will reduce the effort and time needed for repeat contributors to submit a governance proposal, ultimately allowing Compound to iterate and improve at a faster rate. Dissenting views by Dennison Bertram and Romain Figuereo highlight the long-tail risks of moving too much of the governance process off-chain and potentially allowing a “friend and family” monopoly to develop. The idea for the governance whitelist was initially proposed in a forum post by Jacob Phillips, with Arr00 leading the engineering effort on the codebase and simulation tests. 

Ongoing Discussions

See below for highlights from the Compound Community Forum, and join in the discussion:

• Add Market: Matic - @LawSirrah provides an update that they deployed cMATIC to mainnet, but are getting an error message on gas fees.

• Add Market: FEI - The community discusses adding FEI as a supported market and evaluates potential risks around the “guardian” multisig of the FEI governance system.

• New Market Addition: Gemini dollar (GUSD) -- The Gemini team proposes listing GUSD on the compound protocol, and community members ask questions about the token’s liquidity and guardrails against fraudulent minting of new supply. 

• Compound & Vesper: Compound Island -- The Vesper team requests a $100K COMP grant in order to fund development of a Compound protocol fork that will support a broader range of assets while still being governed by the COMP token. The goal is to allow Compound to iterate more rapidly without transferring the negative impact of risky assets back to the core Compound markets.

• Compound Grants Program: Lessons and Next Steps - Larry Sukernik provides a recap on the accomplishments of the grants program, and outlines improvements for a new version yet to be launched.

Be sure to either vote on proposals with your COMP, or delegate your COMP voting rights to a representative of your choice.

Active RFPs

As a reminder, one of the best ways to participate in, and contribute to, the Compound ecosystem is to complete outstanding Request For Proposals (RFPs). The Compound Grants Program is offering substantial grants to individuals and organizations who work on the topics listed below. Have an idea in mind that's not included on the list? Feel free to apply with your own ideas here!

• RFP 1: Decentralized batching contract | $25k

• RFP 2: Voting with COMP collateral | $50k

• RFP 3: Bringing Compound to L2's and other chains | $50k

• RFP 4: Adding support for new assets on Compound | $12.5k 

• RFP 5: Gas optimizations | TBD

• RFP 6: Improvements to the liquidations process | $50k

• RFP 7: Uniswap V3 management platforms as collateral | $25k

• RFP 8: Balancer V2 liquidity as collateral | $25k

• RFP 9: Open source Compound Interface | $50k

• RFP 10: Ripcord wallet | TBD

• RFP 11: Governance/Voters rewards | TBD

• RFP 12: cToken Cleanup | $250k

• RFP 13: cToken Interest Rate Model Changes | $100k

• RFP 14: Gas Savings for cToken and Comptroller contracts | $100k

• RFP 15: Dynamic COMP reward distribution | $100k

• RFP 16: Migrate legacy cTokens | $50k

• RFP 17: Deploy upgradeable cETH contract and migrate users to it | $50k

• RFP 18: Uniswap V3 liquidity as collateral | $100k

• RFP 19: Interest rate curve research | $5k

• RFP 20: Optimism Starport for Compound Gateway | $100k

Developer Community Call Recap

The Compound community held a Developer Community Call last week to discuss ongoing protocol and application development. You can access an audio recording of the call here. 

Markets Update

Current supply on Compound is at $19.3B from 295k unique addresses. 32% of this supply volume is ETH, 23% is USDC, and 35% is DAI. (source). 

Open borrowing is at $8.2B from 8.8k unique addresses. 43% of this borrowing volume is USDC, 41% is DAI, and 6% is USDT. (source). 

For live figures please refer to our Markets page. 

Image Source: IntoTheBlock

Links & Discussions

• Compound Labs announces that it has open-sourced the code for the original app interface under the GPLv3 license, allowing the community to improve, maintain, or fork the front-end.

• A16Z launches a Token Delegate Program where individuals and entities can apply for COMP delegations in order to participate in Compound governance.

• KeyFi, a platform for tracking, swapping, and staking tokens, integrates Compound’s borrowing functionality into a new product launch.

• The New York Times features Compound as an example of an innovative DeFi protocol challenging the status quo in traditional finance.  

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