Hello, so I have found some issues with cCOMP and its COMP distribution, and I have an easy solution, so no worries.
Regarding the COMP speeds and distribution:
Lets look at the data:
10,597.82/474 = 22.35 Comp/day
(Speeds) COMP Per Day=65.70
To Borrowers (daily) =32.85
Supply APY 1.91%
Net Rate= 5.85%
Net Rate= -5.14%
Number of Borrowers=91
Borrowers are getting paid more comp than they pay in interest, meaning that they have no reason to ever pay it back, and are currently “locked” into farming and making a lot of leveraged comp. They are not participating in governance, they sold it/lent it.
If you do the math brought up in the recursive borrowing piece, and use the:
- cCOMP Collateral Factor=60%
- Iteration Sum:(1/(1-cfactor))
- Lending size is leveraged 2.5 times and 1.5 borrow with a net borrow rate of 5.85%, and -5.14% respectively
- The original borrower can make 27.475% from borrowing and lending comp recursively
(Check the bottom of this post for accounts, take a look)
Another Issue arises when you look at the borrow caps.
This is the reason the borrowers are “locked”
We have a borrow CAP on COMP,as is it stated in
Compound Chapter 2: Verse 27: Detail 5
(plz laugh, or chuckle; it was cute)
“A borrowing cap of 50k COMP is set as well.”
EDIT UPDATE: The borrow cap is under control of the community multisig, but with a limit at 100k (its at around 91k ATM)
A proposal is needed to up the comp the borrow cap, or lower the comp speeds.
In business, economics or investment, market liquidity is a market’s feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset’s price
Utilization for cCOMP: Percentage of supplied funds that are borrowed, calculated as supply/borrow
But utilization is “the action of making practical and effective use of something.”
If you cant borrow any more because all of the allowed funds are being borrowed, then there’s effectively no liquidity and 100% Utilization.
Well, the liquidation system is THEORETICALLY tainted.
Lets say these accounts get margin called, someone’s gonna buy COMP on a DEX, and liquidate the portfolio.
Another way, in a self sustained enjoinment would be for another account to borrow comp on their own account, with no slippage, pay back the debt and close the account.
But… There’s no liquidity in this situation, even though the UI says there’s liquidity, on a closed end system (testnet, compound cash, extreme market conditions,Black Thursday), there could be a slight issue.
Again, this angle shouldn’t be too much of a concern, its mostly theoretical and to prove a point.
So, what’s the Solution?
For starters, we need to lower comp speeds on cCOMP to fix this imbalance.
Because we cant just yet change it from 50:50- Borrowers : Suppliers , cutting cCOMP speeds by 80% will make cCOMPS balance sheet make economic sense. From there we work on allowing different speeds other than 50:50.
Because hopefully soon we will have a grants committee up and sunning soon, I want to take half the COMP grant and attempt to fund this development, in a transparent, socially conscious and equitable way.
If you have any ideas about community development and equal opportunity in tech, PM me to help out.
Last two addresses are large
https://etherscan.io/tx/0x20d61a9f251e3ff6f5e4251fa34e778c09d412a241f3d51723420b5489e70e7c https://etherscan.io/tx/0x1f251bc7168ff22f78f7c8dd6149cf7a364434d5552931383729868410701bad https://etherscan.io/tx/0x769d3a98b1b7064234fb30516517b3ab95743e3d16dbc670d7ed772a061fdab4 https://etherscan.io/tx/0x4cd129dc2edd4ccde766003812cc3a5b798491bec97da3bd579341eb7333cdb2 https://etherscan.io/tx/0x19d7147d6a6dd43b4be050c8d4ad099d1af3b8c436e28d851e115e83af828db3 https://etherscan.io/tx/0xe7354239a37e71ecf66f0653d084448e900346a41db475604d5f854077f27e48 https://etherscan.io/tx/0xc4fc3098072b4f9727ac704df0a651eb569a3465a99f76a886bb7a79293f922e https://etherscan.io/tx/0x5e2a86b573ac0a15dc8a1af894808c3086daa55d9e75fb5d5143738c2423a07d https://etherscan.io/tx/0xb4a798954bf3862bbe8551def8aa6b98dd21bbb29b2b50c4ce3cc9ac98689896