We’ve made a post back in early June, asking the community to review the potential while being in close contact with the Alpha Growth team. We’ve also given a presentation about the solution during the Compound Developer Community Call on June 26th, while also asking for review from all relevant parties again here. Gauntlet has been answered, after which everything went dead silent again for nearly three weeks.
Overall, the proposals doesn’t seem to be taken seriously because delegates don’t think sufficient voting power can be acquired to move the matter forward, despite proposers taking every measure possible to receive recognition or feedback, which is very frustrating.
We’re more than happy for an official review, in fact have been asking for it for months.
Despite the fact that Chainlink is being illustrated as the ultimate solution, this is far from the truth.
There have been misreports of Chainlink like e.g. the one on Silo.Finance, where a misreport of the wstETH/ETH price feed caused nearly 2 Million in false liquidations. The only reason there wasn’t a huge uproar on the matter is because Chainlink got lucky, as the Silo teams’ own liquidator bots caught the positions and simply returned the money.
Similarly, there are Chainlink products like the Sequencer Uptime feeds that are simply not working when it matters most. The Chainlink team doesn’t even bother to go into why that is the case despite being asked by the respective projects to do so.
Our data feeds have been operating since early 2023 and secured $1.2 Billion at the peak a couple of months ago. During all of this time, there were no incidents. Believe me, you would have heard it everywhere and it would have been posted under the posts we’ve made in the Compound Forum relentlessly.
While we’re not securing several billions yet, it was also not a core metric for us to grow beyond a $1 billion. Our goal for 2024 in total was to reach $1 Billion to gain “legitimacy” in order to be able to give our OEV product better standing.
Our focus was to release our OEV product that allows us to differentiate ourselves from other oracle projects to begin with. Without the OEV product and the prospect of recapturing several million $ in additional revenue per year, dApps simply have no incentive to switch from their known oracle provider. The push with this proposal comes at a time, where we are ready to recapture significant value as all requirements have been completed in recent weeks, which is also why we’re being so aggressive about it. This doesn’t mean that we’re not happy to be thoroughly looked at (again like we’ve been asking for since the beginning).
We first got to Compound because we were introduced to Alpha Growth for ways to earn additional revenue for Compound. In fact, recent discussions around future revenue generation even go precisely into what we are proposing here. Our solution has the potential to recapture millions of dollars per year for Compound and we’ve chosen a smaller market to illustrate this potential.
The lending and borrowing space is pretty cut-throat. Compound spends multi-millions a year on operations financing entities like @Gauntlet or OpenZepplin(@cylon). Despite this massive expenditure and liquidity mining, Compound is losing.
On Ethereum Mainnet, Compound is currently the third largest lending protocol, soon to shoved to the fourth spot by a rapidly growing Morpho.
On Arbitrum, Compound stands at 1/5 the size of AAVE despite throwing the biggest incentives there apart from mainnet. According to this dashboard, the Arbitrum Comets are being incentivized with 130 COMP daily. That’s a loss of $5.5K daily for COMP to be 1/5 the size of AAVE, while AAVE isn’t even handing out any rewards.
On Base, Compound is ranked #5 largest lending protocol, potentially being shoved to #6 or even #7 with rapidly growing Radiant and Fluid. This is despite distributing 26 COMP (or $1.1K) daily rewards.
On Optimism, Compound stands at 1/10 the size of AAVE, despite distributing 27 COMP (or $1.1K) daily rewards.
On Polygon, Compound stands 1/12 of the size of AAVE, despite distributing 23 COMP (or $1K) daily rewards.
When Compoundv3 was deployed on Scroll in early April, the total chain TVL was standing at roughly $55M. Since then it grew to over $650 Million. Compound has a total of $1.5 Million in size on that chain. In April, AAVEs’ Scroll Deployment had $5 Million in TVL and is currently sitting at nearly $140 Million, which is nearly 100 times larger than Compound.
One could argue that size doesn’t matter if the protocol would actually make money with the deployments, but if you take a look at @Gauntlet’s weekly reporting on the matter, nearly all comets are effectively losing money. What’s the endgame here?
The direction for Compound is pretty obvious, if things continue in the same path they have been until now. You have significant cost centers in service providers ranging from security firms, to risk assessment and growth initiatives. On top of all of this significant sums are being spent on liquidity mining incentives.
Does Compound make enough money to offset this in any meaningful way?
If you can trust the data from Defillama or TokenTerminal, it doesn’t seem like it at roughly $3 Million a year. Our initial conversations with Alpha Growth also heavily indicated that Compound is looking for ways to make money. The recent push towards a stCOMP product also heavily indicates that Compound is looking for ways to maximize value for stCOMP holders.
This isn’t a proposal that asks Compound for money (despite the fact that the operation of the product costs us money). In fact, I’d even argue that this is probably one of the most unique proposal that has ever been made, that promises making money for Compound while asking for nothing monetary in return.
Happy to discuss the matter further.
Here is a dashboard that illustrates the potential for recapture for all Compv3 deployments:
https://dune.com/ugurmersin/compoundv3-liquidation-data