Compound III is live
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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 When you supply collateral, it remains your property — it can never be withdrawn by other users (except during liquidation).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.