cCOMP Fix (With Solutions)

Thank you for these questions.

“Traditional” Financially speaking, a user who borrows COMP is short the asset, because they owe it.
However, COMP being a governance token, there seems to be the idea that borrowed funds will be used for that, therefore they must have a strong belief in the underlying. However, if you look at the numbers, the borrower would benefit if COMP goes down. BUT… There’s comp speeds, and just like other markets, users, both on the long and the short side get compensated in COMP for their position.
This works perfectly for DAI, ETH, USDC, etc, but ccomp is spoecial because the “boost” is in kind.

That’s the problem with the ccomp market AS OF NOW, there is no good use case as of now for borrowing, besides for gaming the system. We do have some ideas in the works, like @arr00 said, like ccomp voting, VESTING and others.

As of now, the mechanics are as follows,
There is a multisig that allows to raise the borrow cap
-It was put in to make sure that there was no large borrows to avoid vote manipulation
-100k Limit, for whatever reason, (I wasn’t the decision maker, I don’t hate it or disagree, it just is) before something new comes up to a proposal.

There are 91 Borrowers GETTING PAID 5.85% to BORROW Comp.
These accounts, see above, are simply recursively borrowing/farming it.

the last time on discord The cap was raised publicly, it was to 85k, where the cap is now at like 91k.

Because there is no precedence for announcing new borrow limits in any other markets, only select accounts with this “inside information” (its viewable on etherscan its not a secret) have the ability to take advantage of this glitch.

The second the cap is updated, one tx can be made to borrow, supply, borrow supply, etc., to make 28% APY with zero risk on 4 times the total position (borrow+supply).
Its a pointless game and it makes it seem like supplying comp is a good idea, but no one is really borrowing because the borrowers being funded entirely by comp distribution and are taking on no risk.
Someone who is borrowing comp is clearly gaming the system and therefore does not belive in COMP’s long term success, because they would be open and honest about the problem.

Similar to the “free money glitch” robinhood had, it was patched quickly and individuals were barred from taking advantage.

Borrow cap raising will work, but doesn’t solve the issue, people will still game the system the second the cap is raised and the comp distrobution will foot the bill.

Right now the unrealized loss is over 30 COMP/day for the system as a whole (two separate contracts, ccomp and comptroller/unitroller?)

But if you look at both contracts from a zoomed out veiw, you can see the loss.

So Raising the cap will NOT solve the problem, because with comp speeds like this it is still a game (also we have almost reached the 100k limit)
-But raising the cap will SEEM like it will help, more borrow demand will allow the “natural rate” to increase, but again, the borrow interest is paid by comp speeds.

Lowering comp speeds on ccomp will stop this little leverage/free money game, stopping select individuals with technical skills with intention to profit from the system.

-lowering comp speeds doesn’t make it perfect either, we still dont have a great use case for CCOMP, but we have some in the works.
To speed up this process, i suggested using some of the money we save (30/Comp a day, or $5.5 million a YEAR) to help fund and speed up community development.

For more details on that check here.

Hope I answered some stuff, LMK.

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