Gateway Testnet, BarnBridge, Flexible Leverage Index, and Governance Updates
Compound Digest - March 17, 2021
Gateway Testnet is Live
On March 1st, Compound Labs announced the Gateway testnet, the first step towards launching a fully functional, cross-chain interest rate protocol. Gateway is a Substrate-based blockchain capable of transferring value & liquidity between various peer ledgers, first described in the Compound Chain Whitepaper last December. The testnet is currently running on the Ethereum Ropsten Test Network and allows users to upload and download Ethereum assets, as well as the native unit of account, CASH, to and from Gateway.
The easiest way to get started with Gateway is to visit the dashboard and try it for yourself! You can also watch a video recording of the February 24th Developer Community Call, where Compound Labs’ Application Lead, Torrey, walks through sample interactions on the Gateway interface. We invite everyone in the community to share any bugs, feedback, or general observations in the #Gateway channel in Discord.
A full list of resources for Gateway users, developers, and validators can be found below:
Gateway GitHub Repository
Compound Chain Whitepaper
Gateway Validator Guide
Gateway Dashboard Guide
Gateway Testnet Forum Post
BarnBridge, a risk tokenizing protocol for hedging yield sensitivity, recently integrated Compound into a new SMART Yield product. The integration tranches out the yield from Compound’s USDC market into junior and senior tokens, where senior token holders are entitled to a fixed yield on their supplied capital and junior token holders receive the variable rate plus any excess interest above the senior tranche APY. If the variable rate falls below the senior tranche APY, junior token holders must make up the shortfall. The end result is that junior token holders are able to earn a higher variable interest rate and senior token holders have access to a predictable rate of return.
The launch of sophisticated risk mitigation tools like BarnBridge signals a maturation of the DeFi space, as investors can more precisely select their desired yield characteristics. Tyler Scott Ward, the Founder of BarnBridge, explains more about the benefits of SMART Yield and the decision to launch with Compound as the first integration.
“BarnBridge + Compound gives users the ability to take a variable interest rate and "tranche" it into a fixed rate and a higher variable rate (the fixed rate's upside). We'll add more coins from Compound soon but we did deep internal security audits on various protocols and we thought the safety and longevity of Compound was a no-brainer for our first integration.”
Flexible Leverage Index
Index Coop launched the Flexible Leverage Index, built on Set Protocol and Compound, which allows users to get 2x leverage on ETH. Under the hood, the ETH 2x Flexible Leverage Index borrows USDC from the Compound protocol, in order to purchase Compound Ether.
The Flexible Leverage Index (FLI) lets you leverage a collateralized debt position in a safe and efficient way, by abstracting its management into a simple index, reproducible by a fully-collateralized ERC20 token built on Set Protocol.
Since the last newsletter, Proposal 39 passed through the governance system with a narrow margin of support, and Proposals 40 and 41 passed with unanimous support from the community.
Status: Executed March 7th, 2021
Voting Results: 952,359 For and 411,686 Against
Summary: Proposal 39 raised the collateral factors of ZRX and BAT from 60% to 65%, and lowered the WBTC collateral factor from 75% to 65%. While the ZRX and BAT parameter updates were broadly supported by the community, there was a lively debate on the original forum post about decreasing the WBTC collateral factor. Proponents of the proposal argued that the high volatility and insufficient liquidity of WBTC posed a threat to the financial health of the protocol, as illustrated by Gauntlet’s Autogov Dashboard. Opponents of the proposal argued that Gauntlet’s risk model did not take into account key sources of WBTC liquidity, including Curve, 1inch, CoinList, etc., and that an aggressive lowering of the collateral factor would create a poor user experience for borrowers who need to recalibrate their positions. A summary of highlighted voting opinions are listed below:
Status: Executed March 14th, 2021
Voting Results: 1,557,378 For and 0 Against
Summary: Proposal 40 distributed 5k COMP to the Compound Grants Committee multi-sig, officially kicking off the start of the 6-month pilot program. The Grants committee consists of 1 lead, Larry Sukernik (Sheepshead Bay, LLC), as well as 7 reviewers: Getty Hill (Grapefruit Trading), Aparna Krishnan (Opyn), Monetsupply (Independent), Min Teo (ConsenSys), Leighton Cusack (PoolTogether), Jesse Walden (Variant), and Nick Cannon (Gauntlet). This committee will operate a 4 of 7 multi-sig in order to nimbly distribute funds to projects that benefit the Compound ecosystem as a whole, and represents a major step forward in the protocol’s ability to incentivize positive outcomes for the community. The committee will prioritize funding for protocol development, code audits, third-party integrations, and advertising, and will also support hackathons, events, and miscellaneous bounties. If you’re a developer interested in contributing to the future direction of the Compound protocol and its ecosystem, join the new #Grants channel in Discord to stay up to date with the latest information about the grant application process.
Status: Queued March 17th, 2021
Voting Results: 474,890 For and 0 Against
Summary: Proposal 41 begins the process of migrating the legacy, immutable cToken contracts to newer, upgradable cToken contracts, starting with the WBTC market. BAT, ZRX, USDC, and ETH are also legacy cToken contracts that the community can upgrade after WBTC. The new cToken contract allows for functionality like token sweeps to return accidentally sent funds, supply caps for risk mitigation, and sending liquidation fees to reserves. Once the proposal is executed, it will create a second WBTC market with the same collateral factor of 65% and a new interest rate model with an inflection at 80% utilization. No immediate action is required from current cWBTC holders, however, the COMP distribution will be redirected to the new WBTC market to incentivize users to migrate over at their own pace. Integrated applications should plan for a second WBTC market. Check out the accompanying forum post for more information on the migration, and consider voting for or against the proposal.
Arr00 recently created a CAP entitled Migration to Governor Bravo, which would transfer Compound governance to the new Governor Bravo contract. The CAP would also reimburse Compound Labs with $27k of cUSDC for the Open Zeppelin audit, and distribute Arr00 and Blurr 160 COMP and 80 COMP, respectively, for their work on the proposal. Read the accompanying proposal forum post and development forum post for more information on Governor Bravo, and consider delegating your support to this CAP.
See below for highlights from the Compound Community Forum, and join in the discussion:
Compound Grants Program Application: Compound Gateway Chain Integrate with Zenlink DEX Protocol - @v-van requests a grant in order to integrate Gateway with the Zenlink DEX protocol.
Retroactive Grants to Contributors - @lay2000lbs asks the community to help organize a list of Compound contributors who should be retroactively be compensated by the newly formed grants committee.
Acala x Compound Chain - Gateway to Polkadot - @bettec proposes a development plan to build a starport on Acala in order to connect Gateway with Polkadot assets.
Oracle Infrastructure: Chainlink Proposal - @Johann_Eid, the Head of Integrations for Chainlink Labs, provides next steps for how the Compound community can evaluate using Chainlink for the protocol’s price feeds.
Legacy market migration: WBTC - @blck lays out a plan to migrate the legacy, immutable cToken contracts to newer, upgradable cToken contracts, beginning with the WBTC market.
stETH Listing Proposal - @paraficapital proposes adding support on Compound for stETH, a token issued by the Lido Protocol that represents user’s staked ETH balance on the Ethereum 2.0 beacon chain.
Celo x Compound Finance & Compound Chain - @dimi provides a list of next steps for building a Starport on Celo.
Be sure to either vote on proposals with your COMP, or delegate your COMP voting rights to a representative of your choice.
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, or listen to it on your favorite podcast platform.
Current supply on Compound is at $11.8B from 283k unique addresses. 23% of this supply volume is DAI, 22% is WBTC, and 22% is USDC. (source).
Open borrowing is at $5.2B from 7.6k unique addresses. 44% of this borrowing volume is DAI, 39% is USDC, and 8% is USDT. (source).
For live figures please refer to our Markets page.
Image Source: IntoTheBlock
Links & Discussions
Compound Labs General Counsel, Jake Chervinsky, joins the Bully Esquire podcast to discuss regulatory topics in DeFi.
Spendless announced a new campaign for the Gitcoin Grants Matching Pool Fund, where users can donate the interest generated on DAI supplied to Compound towards open source development.
Scout launched a dashboard of key metrics for the Compound protocol.
DeFi Rate reports on the Compound Grants Program and Gateway Prototype.
Compound Labs CEO, Robert Leshner, joins DeFi Dad on Yield TV to discuss Gateway and the evolution of the DeFi space.
Compound Labs Developer Relations Lead, Adam Bavosa, joined the DEFiiCON Conference to discuss building on top of the Compound protocol.