During the peak of the crypto bull run in 2021, the Compound lending protocol on the Ethereum blockchain was one of the leading tokens for earning interest and securing loans with crypto assets. Since then, the overall value of the protocol has dropped significantly from over $800 per coin all the way down to $33 a year later. 

While on paper this looks terrible for the protocol, the community supporting Compound has remained highly active throughout a tumultuous 2022 and continues to be a standout DeFi service for web3 users with ongoing voting proposals keeping the lending protocol healthy. 

Compound Proposals

The Compound protocol has a variety of proposals that keep the lending platform maintained and afloat during a year when many DeFi and CeFi businesses have failed. Proposals generally range from technical issues to fund management solutions and are frequently voted on.

• Proposal 138 

Proposal 138, approved on December 15th, calls for reserve maintenance to help keep assets protected within the protocol by moving certain cTokens into new pools under Timelock. 

This proposal will help keep SAI, REP, FEI, and WBTC tokens secure by migrating them, but also makes it clear that the proposal does not influence how those assets are used. It merely redirects them to a safer location. 

• Proposal 139 

Proposal 139, approved on December 16th, is a measure to allow OpenZeppelin to provide security services to the Compound DAO. The services include auditing, security advisory, and monitoring of funds to help prevent any major crashes from ruining the protocol. 

The proposal comes at a significant time when auditing and transparency of funds are under intense scrutiny following the FTX collapse which revealed how funds were mismanaged by corporate leaders. 

• Proposal 140

Proposal 140, approved on December 19th, suggests a plan to increase the supply of UNI on the COMET USDC market while also reducing the COMP liquidation factor from 93% to 88%. 

The purpose of this proposal is to readjust the risk factor for Compound v3 assets based on new information provided by Gauntlet involving updated financial metrics within crypto including solvency, liquidations, and borrower usage. 

What is Compound?

Since 2018, the Compound lending protocol has been a leading platform for DeFi. It began as a solution for crypto assets that were sitting in wallets and not being used which solves one of the major criticisms of cryptocurrency - what can you buy with it?

By creating a lending platform, Compound (and many other DeFi services) has opened up a new layer of activity for cryptocurrencies by establishing traditional financial services such as lending and borrowing to a decentralized environment. This allows users to lend to liquidity pools, provide collateral, and earn interest instead of merely sitting in an inactive wallet.

Current state of DeFi

Originally hailed as one of the biggest use cases for cryptocurrencies, DeFi has taken a turn for the worse during 2022 because of so many collapsed projects and protocols which were based off of tokens that were attributed value seemingly out of thin air. 

With so many bad actors phased out of cryptocurrency, confidence in DeFi is low. However, activity within the Compound community shows that there is still significant interest on the network.