I think it might be good time to come back to discussing addition of COMP market, though i would like to look at it at different angle.
First i would like to address market liquidity. That’s a moot argument. It was presented with WBTC first AND proven wrong. There’s not sufficient market liquidity BECAUSE there’s no market implementation. So as long as there’s no market, liquidity WILL be low obviously. Was same with WBTC for month with liquidity never coming. Compound COULD fix it itself with enabling WBTC as collateral, but that was actually addressed first by MAKER team, by adding the WBTC vault, and as soon as there appeared usability, capital went there creating liquidity, hitting their vault caps multiply times.
Concern about WHAT if someone would be able to borrow COMP from market and use it for creating proposals/ voting. I guess we never know before it comes, AND the thing is IT DOESNT ALREADY MATTER what Compound do. Since CREAM.finance already implemented that market and it already can be used for that, and while liquidity might not be enough yet, it will get there eventually no matter if Compound itself create that market or not. Besides you don’t really need to borrow COMP, you can borrow some stable coin and temporarily buy COMP with that. And that not necessarily would be more expensive than borrowing COMP, likely even cheaper, might even end in profit if market buying push price high enough, and then you can slowly sell it back higher. So that possibillity kind of always was there, and probability will just increase with more COMP created and entereng market daily.
But that’s not my main point. I want to higlight the benefits of having COMP market.
Many people mentioned that it would be nice if Compound protocol would reward COMP holders. And i think this is great way how. Compound could adapt some of the methods “food tokens” utilise and benefit from them. If someone not aware how it’s done, the idea is quite simple: User provide COMP to supply side of COMP market and recieve cCOMP tokens. User than “stake” (timelock) that tokens and recieve reward in COMP distributed to the pool of that “staked” tokens. For visual example how it could work, you can check cream.finance and their native CREAM token. By that initiative basically several things are achieved, creating liquidity in supply side, locking that liquidity (user can’t unstake it prematurely and thus can’t remove COMP from supply pool) and rewarding of long term holding of COMP.
But more than that, i believe the system could be improved. Compound could have longer timelock on staked pool tokens. Like 3 months, 6 month, 1 year which could recieve bigger rewards for longer lock of tokens. Maybe even locked tokens could give weighted votes in governance. For example, 1 year locked COMP tokens could have 2x voting weight or something like that, ensuring that long standing commitment have a bigger voice out there.
Now from where COMP tokens to reward that initiative should come? Well that’s quite simple, from that same pool of tokens which are now distributing via liquidity mining initiative. I see couple of ways to do that, we can either reduce emission speed OR “cut the tail”, keep emission speed same but shorten the time, like not 4 years of distribution, but like 3 years, 9 months. Either way is fine and could be voted on details.
Maybe some of you noticed that i was strongly against reducing emission. Well i’m not against reduction itself, i’m against “just reduce it so we could possible use it for something else”. I believe we should FIRST have that something else, and then we could reduce emission to secure funding. But if there’s nothing else existing yet, than emission shouldn’t be touched yet as well.
And from financial stand point ability to “stake” cCOMP tokens timelocking them in staking pool will remove a portion of tokens from circulation on market likely helping the price. But that’s not really main point, rather an additional benefit for COMP community.
Last it’s a bit strange that Compound don’t support market for it’s own governance token. Is it not enough confidence in own token?