[AlphaGrowth] Compound Journeys into TradFi

[JeffMorrell]

Exploring Opportunities and Challenges

TLDR: Compound, renowned for its success in the crypto realm, is now experimenting with the notion of venturing into traditional financial markets with a focus on the fixed-income sector. Insights from a recent conference underscored the potential for us to tokenize corporate bonds, offer digital ledger consultation, and develop fixed-rate products. However, we face challenges like how quickly we’d be able to onboard $1B in new capital and then return to current APRs … and the need for long-term commitment.

Body:

At the recent Fixed Income conference in Boston, our exploration of traditional finance unveiled promising avenues. We deepened our understanding of traditional financial terminology, to pitch Compound to dozens of bankers each with billions of assets under management, looking for financial products with stable returns.

We drew outsized interest from attendees for our historically high APRs and cigar giveaways at our booth. Attendees who understood our technology pointed us in various directions.

A pivotal advantage to using Compound’s underlying tech is our ability to streamline settlement times, a capability poised to enhance operational efficiency and profitability across financial sectors. A recurring suggestion was that we work to modernize how banks manage repo desks. (A business vertical where banks lend and borrow stocks from each other) We were told there’s a large opportunity to accelerate loan and redemption cycles. Stocks can then spend more time in the market earning returns than in escrow, leading to greater capital efficiency. Moreover, the potential to tokenize illiquid corporate bonds presents a lucrative market segment awaiting disruption.

The conference also highlighted a strong interest among attendees in blockchain and digital ledger technologies, signaling a readiness to explore innovative financial solutions amidst evolving market dynamics. There is a growing demand for consultation on digital ledger strategies, from multiple major firms and banks like BofA. A PR group also confirmed that many institutions at the conference are figuring out their “Blockchain roadmaps” with the intention to publish about them in the coming year.

As we deepen relationships over the following year, we must address challenges posed by our scale relative to traditional financial giants. Compound has about $2B TVL at the moment, traditional Financial institutions asked what the avenues of placing an amount ranging from $1 Billion to $6 Billion at a time. We’ll continue to think about how to handle that scale, possibly by developing fixed-rate products on top of Compound tailored to fixed-income market demands.

Conclusion:

In summary, the conference provided us with a comprehensive overview of our ambitions and challenges in integrating into traditional financial markets. By leveraging our technological prowess and adapting strategies to meet traditional finance needs, we aim to bridge the gap between decentralized finance and established financial systems. This strategic move not only promises growth but also sets the stage for collaborative advancements within the broader financial ecosystem, ushering in a new era of innovation and integration.

[dmitriywoofsoftware]

Fantastic @rossgates and AG

[0xajs]

To make sure everything goes smoothly

[allthecolors]

It is great to see the AlphaGrowth team’s efforts blossoming from external grant procurement and new deployments to a well-rounded portfolio of initiatives.

That said, certain elements of this new activity feel misaligned with the DAO’s identity as I see it in the forum and hear it in my interactions with the community. Since this post concentrates several of those perceived misalignments in one place, I’ll flag them here, hopefully to be taken as constructive feedback from a well-intentioned (if picky) community member. I am harsh because I care about this collective endeavor.

(1) Lack of disambiguation between the protocol and its contributors: Other than the AlphaGrowth tag in the title, it’s unclear from the writing who the “we”/“our” in this post is. It seems to move back and forth between “Compound” the protocol and the AlphaGrowth member(s) who participated in this fixed income conference.
Along similar lines, I noticed that AlphaGrowth recently created an X account “@growcompound” for which the name is set to “Compound Protocol”. Personally, I think this is bad form: it misleads folks finding its posts into seeing the account as an official DAO-wide account rather than as the account of one of Compound’s BD partners, plus it feeds into the challenges of account impersonation on X (multiple official accounts called “Compound Protocol” makes it easier for bad actors to also call their account “Compound Protocol” and execute a scam). I really think this account should be called “Compound Growth” or similar.

(2) Emergence of some bizarre and amateurish initiatives: This post makes some odd claims that come across to me as underinformed, to put it kindly, about the Compound protocol and make me worried about how the protocol and DAO are being presented to external parties by a subset of the AlphaGrowth team. Just to highlight a few examples in this post:

• Cigar giveaways? Really?? I thought this was a spam post when I first saw it, in part because of the writing but also because of this line. Maybe it’s just me, but a cigar giveaway feels wildly misaligned with the DAO’s ethos and with what it charged AlphaGrowth with doing in Proposal 199. Would appreciate others’ views on this to understand whether I’m the only one who feels this way.
• The phrase “We deepened our understanding of traditional financial terminology” bothered me for a couple of reasons. First, while I’m a proponent of ongoing professional development, I feel like if Compound’s BD team is going to engage with a fixed-income conference, they should at least come in with (or bring along somone with) fluency in the relevant terminology. Second, as written, this reads like the team came in underprepared and potentially made it more difficult for folks in this sector to take the protocol and its people seriously.
• Engaging a fixed-income audience seems extremely premature given that most bankers could not tap directly into any existing Compound markets’ yields, no matter how much they want to, due to a litany of regulatory and fiduciary restrictions.
• The entire paragraph starting “A pivotal advantage” strikes me as rather irrelevant to Compound as it exists today. Settlement times are a function of the underlying blockchains, plus any regulatory layers placed on top of on-chain transactions; they are not really a function or feature of the Compound protocol itself.
• The interests and suggestions of TradFi attendees strike me as the usual intersections that DeFi-aware TradFi folks would identify and want to discuss.
• The writing here isn’t the AlphaGrowth team’s best. The final reads like a high-schooler trying to hide a lack of meaningful content with complex sentence structure and key vocabulary, especially the sentence that starts “By leveraging our technological prowess”.
• In your slide in the photo, “historic” (i.e. “important in history”, “legendary”) is the wrong word. You mean “historical” (i.e. “concerning past events”, “over the course of its history”).

(3) Mission creep: I couldn’t find any mention of plans for AlphaGrowth to present or table on behalf of the DAO at fixed-income conferences in AlphaGrowth’s proposal to the DAO for its BD partnership, which seemed focused primarily on driving new market deployments, TVL, and external grants procurement. How does attending a Fixed Income conference, apparently as Compound (not Compound Growth team), deliver on the initiatives in Proposal 199?

[bryancolligan]

@Allthecolors, thank you for putting this together. Feedback helps us in recalibrate our strategies. Would love to chat through each concern and address it on a call happy to do it public as well.

We believe getting into Tradfi is a 10x multiplier for the Compound protocol. We do believe it could take 12-24 months for any major impact or execution. As a long term goal for Compound we are exploring 2 paths one is bringing Compound Yield to TradeFi the other is bringing TradeFi products to Compound. If you count PyUSD we are much closer to this reality than 12-24 months. The only way to see and evaluate the opportunity is to be in the conversation. Need to have a starting point of these conversations somewhere, as this has opened more conversations with likeminded organizations like Chainlink who are also working in this direction. We have also been steadily updating the community on this campaign through the last 3 community calls.

Much of the competition like Aave and Spark are running similar growth playbooks to the Compound Growth Program. If we are looking for outsized returns need to take different paths and risks.

There is a longer discussion on how to achieve an intersection between Compound and Tradfi. Sounds like you have some experience in the financial sector. We would love your help if you are up for it. Navigating the relationships of finance circles would be extremely helpful.

[cmrn]

I can attest AlphaGrowth has been transparent about this event over the last months. I can also see how allthecolors (and others) may find this particular presentation less than ideal.

Surely Compound’s properties could be better expressed. For example, the angle could emphasize Compound’s elimination of intermediaries, which enhances security, enables compelling borrowing rates, and significantly reduces counterparty risk.

I’m willing to support graphics where needed. Branding should be up to par and the differentiation, as noted by allthecolors, is important. Attached are some examples of how you could achieve it in the future (I suggest capitalizing logo to match).