Executive Summary
Following Tally’s successful RFP response to become Compound’s Voting Service Provider, we began exploring how we could implement visibility improvements for MarketAdmin transactions as per one of our deliverables. However, through consultations with key stakeholders during this process, it became clear that MarketAdmin, while serving as a necessary interim solution, represents a suboptimal operational model for Compound’s long-term needs on market parameter adjustments. The fundamental limitations of the approach became increasingly apparent:
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Inherent Opacity: Even with improved surfacing on Tally, MarketAdmin operates through a single guardian entity, limiting distributed oversight
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Limited Scalability: The mechanism is only deployed on OP Mainnet, with no clear path to efficiently scale across Compound’s expanding multi-chain presence.
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Restricted Community Visibility: The guardian model provides little to no visibility for delegates for oversight purposes.
Rather than investing further resources into improving visibility around a fundamentally limited system, we identified optimistic governance as the transparent and efficient pathway that aligns with Compound’s decentralization values while solving the core efficiency challenges.
This proposal seeks to implement Optimistic Governance as a transparent and efficient alternative to the existing MarketAdmin system for managing market parameter updates on Compound. With optimistic governance, proposal lead times can be reduced by >80% (from ~ 20 days to ~5 days), while maintaining robust DAO oversight and significantly improving transparency compared to the current MarketAdmin approach.
Background
Current State
Compound requires frequent parameter changes to add/remove assets, manage risk, and expand to new networks. Today, these changes occur through two mechanisms:
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Full DAO Vote: Standard governance proposals that take 30+ days to complete (discussion, snapshot, on-chain vote, timelock)
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MarketAdmin: Deployed in mid-2024 as a near-term solution, currently live only on OP Mainnet.
The Problem
The current system has significant limitations:
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Inefficiency: Market parameter updates on high-activity chains (Ethereum mainnet, Base, Arbitrum) follow monthly governance cycles, creating unnecessary delays for time-sensitive, risk management decisions.
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Voter Fatigue: Routine administrative changes consume governance bandwidth that should be focused on strategic decisions.
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Lack of Transparency: MarketAdmin operates as an opaque process with limited visibility for delegates and community members.
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Limited Scope: MarketAdmin is only deployed on OP Mainnet, leaving other chains without efficient parameter update mechanisms.
The Solution: Optimistic Governance
Optimistic governance offers a solution to these challenges by assuming that most proposals are approved, unless explicitly veto-ed by delegates otherwise. In this model, the decision-making process is streamlined, with a clear mechanism for delegates or community members to intervene if necessary. This is particularly useful for proposals related to maintenance upgrades, technical changes, or parameter adjustments, which may not require extensive community deliberation, but still need oversight and the ability to veto in the edge case that the proposed changes are malicious.
Optimistic Governance was identified in mid-2024 by DoDAO as the long-term solution to these challenges for Compound. This proposal brings that vision to reality, establishing a transparent and efficient for market parameter updates, whilst maintaining DAO oversight and veto capabilities.
Key Benefits of Optimistic Governance
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Transparency: All proposals are publicly visible on Tally.
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Efficiency: 4 day proposal lifecycle versus 20+ days for standard governance ( >80% reduction).
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Maintained DAO Control: Token holders retain ultimate authority through veto rights
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Reduced Voter Fatigue: Delegates only need to engage when they disagree with a proposal
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Faster Risk Response: Critical parameter adjustments can be implemented in days, not weeks
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Accountability: Clear attribution of decisions to specific council members
Proposed Implementation
Phase 1: Pilot across Arbitrum, Base, and Optimism (this proposal)
Deploy optimistic governance contracts for market parameter updates on 3 established, but lower-stakes networks:
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Arbitrum
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Base
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Optimism
These chains have good traction and activity, and represent an appropriate risk profile for piloting this new governance mechanism before mainnet deployment.
Council Composition
The Optimistic Governance Council will consist of 5 key stakeholders:
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Gauntlet - main proposer for market parameter updates
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Compound Foundation
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WOOF
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ChainSecurity
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Certora
Council Threshold: 3 of 5 council votes required to progress a proposal to the veto voting stage.
Governance Parameters
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Council Quorum: 3 out of 5 council members
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Proposal Expiration: 1 week (if council quorum isn’t reached)
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Veto Voting Duration: 3 days (veto period)
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Veto Quorum: 400,000 COMP (current quorum)
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Veto Quorum Extension: 3 days (triggered when 200K COMP ‘VETO’ votes are cast)
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Timelock Delay: 1 day (after successful veto period)
How It Works
- Proposal Creation: Any council member can create a proposal, which will be visible on Tally upon creation. Once 3 of 5 council members vote, the proposal advances to the veto stage. If proposals don’t achieve the council quorum of 3 council member votes in 7 days since proposal creation, the proposal would expire and be canceled.
- Veto Period: For 3 days, COMP delegates can review the proposal on Tally and cast veto votes.
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Execution:
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If the veto quorum (400K COMP) is NOT reached, the proposal passes optimistically and enters 1-day timelock.
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If 200K COMP of veto votes are cast (50% of veto quorum), the veto quorum is extended by 3 days. This is to allow delegates who have not voted more time to review the proposal at hand, and potentially cast their veto vote as well.
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If the veto quorum of 400K COMP is achieved, the proposal is canceled.
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Clickable Demo:
A clickable demo which walks through the end to end proposal lifecycle under the Optimistic Governor track can be accessed here. (pw: onchain)
Scope of Authority
The Optimistic Governor will have the market admin authority over Compound markets on Arbitrum, Base, and Optimism, including:
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Adding/removing collateral assets
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Adjusting risk parameters (collateral factors, liquidation incentives, etc.)
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Setting interest rate models
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Configuring supply/borrow caps
Transparency & Monitoring
All Optimistic Governance proposals will be:
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Displayed on Tally with full parameter change details
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Announced in the Compound Discord and forum by Gauntlet or WOOF
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Subject to the same transparency standards as regular governance proposals
Implementation Details
Before the proposal executes, a cross-chain optimistic governance system would be deployed:
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Optimistic governance that runs on Ethereum mainnet
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Council membership would be assigned to the 5 parties listed about
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Existing COMP delegates would be able to veto proposals on the optimistic governor
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Timelock contracts on Arbitrum, Base, and Optimism that accept cross-chain messages from the optimistic governance contract on L1 AND the main Compound timelock on L1.
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Main Compound governance would be able to add and remove members of the council.
On execution, this proposal’s execution will grant powers to this new system:
- Assign admin permissions of market parameters to the timelocks deployed on Arbitrum, Optimism and Base.
Proposed Implementation Timeline
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Nov 11 - 28 : Forum post (3 weeks)
- 3 weeks to factor in downtime from DevConnect
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Dec 1 - 5: Snapshot
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Dec 8 - Jan 16: Forum post to update DAO on progress towards onchain vote
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Jan 19 - Jan 23: Onchain proposal
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Jan 26: Pilot go live
Future Expansion Path
If the pilot proves successful, the roadmap includes:
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Ethereum Mainnet: Expand admin permissions of market parameters to the timelock of Ethereum mainnet.
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Expand Admin Permissions to all Chains: Expand admin permissions of market parameters to timelocks of all chains.
Cost
Developing, auditing, and deploying optimistic governance contracts represents a relatively big technical undertaking. The full market cost for this scope, including smart contract development, cross-chain timelock integration on 3 networks, and comprehensive audits, would typically exceed $100,000.
However, given that Compound is a highly strategic partner to Tally and we are receiving ongoing support through our successful Voting Service Provider engagement, we are extending a substantial partnership discount. We are requesting $40,000 in COMP for the complete implementation, representing our investment in building governance infrastructure that serves Compound’s long-term interests.
This optimistic governance infrastructure will provide Compound with a scalable, transparent framework that can expand across all chains where Compound operates, while maintaining the efficiency gains that MarketAdmin was designed to provide.
One-time deployment cost: $40,000 for Optimistic Governor contract deployment, testing, and integration with Tally.
This covers:
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Smart contract development and deployment on Ethereum mainnet, with timelock contracts on Arbitrum, Base, and Optimism that accept cross-chain messages from the optimistic governance contract on L1.
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Security review and testing
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Tally integration for proposal visualization
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Documentation and delegate education materials
Comparison: MarketAdmin vs. Optimistic Governance
| Feature | MarketAdmin | Optimistic Governance | ||
|---|---|---|---|---|
| Transparency | Opaque | Fully visible on Tally | ||
| Timeline | Variable, limited visibility | 4 days (consistent) | ||
| DAO Oversight | Guardian veto (single entity) | Delegate veto (400K veto quorum) | ||
| Chains | OP Mainnet only | Arbitrum, Base, Optimism (pilot) | ||
| Delegate Engagement | Minimal | Active veto opportunity |
Success Metrics
After 3 months, we will evaluate:
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Efficiency: Average time from proposal to execution
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Engagement: Number of proposals reviewed vs. vetoed
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Transparency: Community feedback on visibility improvements
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Safety: Number of contentious proposals and veto activation rate
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Adoption: Volume of parameter updates processed through optimistic governance
Voting Options
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FOR: Deploy Optimistic Governor contracts on Ethereum mainnet, which covers Arbitrum, Base, and Optimism with the proposed council and parameters.
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AGAINST: Do not implement Optimistic Governance; maintain current MarketAdmin approach for Optimism, and full governance lifecycle for all other chains.
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ABSTAIN
Next Steps
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Community Discussion: Please share feedback, questions, and concerns in this thread
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Snapshot Vote: Temperature check to gauge community sentiment
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Security Review: Certora and ChainSecurity reviews and confirms the onchain proposal executables.
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On-Chain Vote: Formal governance proposal on Tally
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Deployment: If approved, contracts will be deployed
We believe optimistic governance represents a significant improvement in how Compound manages market parameter updates, which in nature requires the utmost efficiency, whilst not compromising on transparency and DAO oversight capabilities. This enables Compound to be more responsive to market conditions, while reducing governance overhead.
We welcome feedback from delegates and key stakeholders, and look forward to a great discussion.