Summary
This proposal seeks to unpause the COMP market on FiRM. Recent positive developments in Compound Finance’s governance have reinforced the stability of COMP as a collateral asset, justifying the reactivation of the market.
Background
Compound Finance’s governance experienced an existential threat over the last several days akin to a DAO soap opera. This had initially led the Inverse Finance Risk Working Group (RWG) to pause FiRM’s COMP market. This decision was necessary to prevent new borrows under the current market parameters and allow for a reassessment of COMP’s risk profile. At no time were COMP liquidity levels stress tested and our protocol at risk of incurring bad debt.
A breakdown in governance integrity was triggered following the passing of Proposal 289, which was set to transfer approximately $25 million in COMP from the Compound treasury to the GoldenBoys multisig controlled by Humpy. Humpy, a prominent figure in DeFi known for exploiting incentive designs to amass governance tokens, used his substantial voting power to pass a proposal which was poised to strengthen his influence over the DAO, raising concerns about the integrity and decentralization of Compound’s governance.
The Compound Finance DAO responded to these challenges with Proposal 290, which aimed to enable a community multisig as the Timelock Admin, and Proposal 291, authored by Gauntlet which sought to completely off-board COMP as collateral on their lending protocol. These delayed proposals were not to pass in time to prevent the transfer of COMP to the GoldenBoys multisig but stood to secure the protocol and prevent future malicious attempts to drain the treasury in the aftermath of Proposal 289. However, a positive development occurred when AlphaGrowth posted a new proposal titled “Stake Compound Product” to the Compound Forum, which addressed Humpy’s interests and led to the cancellation of Proposals 289, 290, and 291.
The “Stake Compound Product” proposal, backed by major delegates in the Compound community, offered a staking product that aligned with Humpy’s interests in return for the immediate cancellation of Proposal 289. The proposal aims to stream 30% of the current and net new market reserves generated per year to staked COMP holders, thus promoting a sustainable, positive feedback loop within the Compound ecosystem. Following this, Proposals 289, 290, and 291 were rescinded, demonstrating the power of tokenholder activism and on-chain governance.
This resolution leaves COMP in a stronger position than before, justifying the unpausing of the COMP FiRM market. We also plan to explore the launch of an sCOMP market in the future.
Plan
To address the updated risk profile of COMP and leverage the positive developments in its governance, we propose the following action:
- Unpause the COMP market and maintain the current parameters.
By unpausing the COMP market and maintaining the existing parameters, we hope to continue our partnership with Compound Finance by offering fixed-rate loans to COMP holders whilst allowing them to retain their voting rights.