Here are today’s trends to watch from Curve Market Cap:
With Curve volume spiking and new pools being added almost daily, this Sunday we’re doing a deeper dive into recent updates surrounding Compound, one of the most innovative teams. Compound is of particular interest to Curve users: the Compound pool is one of the oldest and consistently atop the leaderboards by volume, APY, and total reserves. At present, it’s nearly $100MM in reserves on $3.5MM daily volume and a 6.8% effective APY.
How it Started
Earning interest in the cryptocurrency space was long a dream of HODLers, but the team at Compound was instrumental in making this a reality. The team got started in 2017, but arguably their efforts really took off in the summer of 2020 as the $COMP token launched on Coinbase and the price spiked above $100.
At the moment, the Compound protocol supports depositing nine different assets and earning yields, with interest rates varying from 0.03% on wBTC at the low end to 6.45% on DAI on the high end. In total, Compound currently has nearly $4 billion worth of assets on their protocol.
Despite being a harbinger of the DeFi revolution, Compound is not technically decentralized. The team is backed by cartel of fashionable investors, creating a hypothetical risk that the protocol could get Rippled if it doesn’t deliver moonshot returns or regulators search for a scalp. The team has always expressed a goal of eventually decentralizing their platform and throughout 2020 has made strides towards decentralization.
Decentralized Governance
The release of the $COMP token was the first step taken towards decentralization. The token was deployed in February and started trading more generally in the summertime.
An increasing number of decisions over the future of Compound are made through their governance protocol. At the moment, no one address holds the majority, with the Compound reservoir address reserving about 40% of the supply to periodically disburse to the Compound comptroller.
Since releasing their governance protocol, Compound has released 34 proposals to a public vote via their DAO. Of these, 29 have been executed, 3 defeated and 2 cancelled.
The most recent proposal to be defeated was #32, to distribute $COMP to users affected by $DAI liquidations. Specifically, on Thanksgiving this year 85.2MM DAI were liquidated during a sudden price spike of DAI/USDC and ETH/DAI, affecting 121 Compound users. After a heated discussion the community voted not to bail out the affected addresses.
More recent proposals have not been less controversial. This past week, the Compound community passed two proposals to deal with high gas costs by removing some automatic transactions and adjusting interest rate calculations.
Compound Chain
Just days ago, Compound released their white paper for the Compound Chain.
Essentially, the Compound Chain is a new protocol to allow interchain financial transactions and value transfers denominated in the chain’s new token called CASH. Pricing of assets is pegged to Compound’s Open Price Feed and all validation relies on a proof-of-authority mechanism. A more detailed summary is written out here by @mikewchan:
Making their chain more centralized can help to mitigate gas fees and other costs, allowing some aspects to be quicker and cheaper. However, critics took aim at the centralized aspects of the protocol:
Some noted that reliance on centralized price oracles is what directly caused Compound’s DAI liquidation pricing issue.
Compound has a good track record at pushing revolutionary products quickly and moving toward decentralizing them later. As they deploy the Compound Chain throughout 2021 we’ll be excited to watch to see how the broader ecosystem reacts.