COMP Everywhere

Proposals
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Compound Everywhere:

TLDR:

  1. Maxed out Supply caps is a broken product and bad UX.
  2. Compound DAO needs to believe in its token COMP. List on COMP on all markets and chains.
  3. COMP as collateral liquidations can be absorbed by the Protocol Reserves and or Treasury.

Meaning, the Reserves ought to purchase all of the liquidated COMP on these markets at some rate.

WHY:

  1. COMP Everywhere is a COMP Downside Protection Program, subsidized by liquidations at a discount.
  2. Compound DAO will be able to build Larger Liquidity on deployed chains.
  3. Opens opportunities for structured products to earn COMP yield on COMP Collateral.
  4. Deepen Compound’s relationships with other DeFi Protocols, by creating niche market strategies.

COMP Buyback Program

POTENTIAL OBJECTIONS:
  • COMP being absorbed by Protocol Reserves could lead to a depletion of Reserves.
  • Large COMP holders could intentionally offload COMP positions into Reserves Liquidity.

Allowing reserves to absorb COMP, but not allowing liquidators to buyCollateral() means that COMP is offering a floor price for its token. This strategy is powerful because it gives Compound DAO a way to accumulate COMP, using an edge reserved only for the Protocol. The resulting buy pressure from COMP is positive, and signals to COMP holders that fundamentals have improved, as well as token utility.

Absorbing COMP liquidations also means designing cyclical processes to re-distribute COMP tokens as incentives for markets. Circulating COMP this way might be a more sustainable design than our current system.

SOLUTIONS:
  • Set a limit to the amount of COMP which can be deposited as collateral on each market.
  • Create a Campaign which surrounds this change in COMP tokenomics with an intention to drive usage of these new collateral listings.

BUILD COMP Liquidity

POTENTIAL OBJECTIONS:
  • We ought to rely on building COMP liquidity on L2s instead of relying on Protocol Reserves.

COMP is listed as collateral on Mainnet on the USDC and USDT Markets. These markets are supported by 1.4M in Univ3 liquidity on Mainnet. However, we do not have a coherent strategy to achieve comparable liquidity on Base, OP or Arbitrum.

The ability to deposit COMP as collateral, and borrow ETH, AERO, or DOLA leads to LP strategies, where those borrowed assets can then be deposited into Liquidity Pools, and compounded via AERO, VELO or RAM Farm Incentives.

SOLUTIONS:
  1. List COMP as Collateral on the AERO Market on Base.
  2. List COMP as Collateral on the ETH Market on Arbitrum.
  3. Deposit COMP as Collateral, and then LP with the Borrowed Asset to earn yield and build Liquidity
  4. Compound that yield into more LP, or sell yield to deposit more Collateral.

By actively pursuing these strategies, COMP liquidity will increase on these markets, and collateral caps will be able to expand.

COMP Everywhere enables these strategies.

COMP on COMP

“COMP on COMP” means the ability to deposit COMP as collateral, and then borrow an asset that can earn yield, and then sell that yield for more COMP. Strategies like this carry some risk, and would require automated, structured vault products to be built.

Once built, this pattern can be applied as a treasury management tool, toward other existing collateral types. COMP on COMP happens to be the strongest use case for these structured products, but this pattern of structured product represents an opportunity to grow sticky TVL and fees, by treating each collateral type as its own “strategic niche”.

For Example:

Do end users have a clear and definable use case for cbBTC? Are there structured products using cbBTC as collateral on Base? Is there a way to earn cbBTC Yield?

It makes sense to be sure that COMP is the first to benefit from this exploration, and that this pattern could be repeated for other currently existing collateral types.

DeFi Partnerships

Inverse Finance is an interesting DeFi experiment to consider, because COMP / DOLA are our largest LP pairs on Optimism and Base. This is possible, because Inverse Finance has listed COMP as a collateral type for borrowing DOLA, and has enabled bridging to Base and Optimism.

The Current Partnership strategy looks like:

  1. Deposit COMP as collateral
  2. Borrow DOLA
  3. Bridge DOLA to OP | Base
  4. Bridge COMP to OP | Base
  5. Pair COMP / DOLA LP
  6. Deposit LP
  7. Vote for LP and farm yield.

It’s possible to deepen these existing arrangements through two decisions:

  1. Launch a DOLA market for Base / Optimism.
  2. List COMP as Collateral on the DOLA market on Base / Optimism

Once this structure exists, it would be possible to deposit COMP, and borrow DOLA, and then add LP to the existing pools.

A stronger, reciprocative relationship with Inverse Finance would likely lead toward deeper pools, and coordinated voting to direct incentives toward those pools. It would also likely lead toward a high utilization rate for this market.

Following the links above, you can see the Inverse Finance DeBank Treasuries for their Velodrome and Aerodrome Positions. Compound could be expanding the positive sum games that are possible with Inverse Finance.

Using COMP as collateral to borrow farmable assets is an entry point into this realm of partner related strategies, and these strategies could be repeated with other partners.

CONCLUSION:

The following actions would be strategically useful to Compound:

  1. List COMP as collateral on AERO Market on Base
  2. List COMP as collateral on ETH Market on Arbitrum
  3. Deploy DOLA market to Optimism or Base or Both
  4. List COMP as collateral on DOLA market on Optimism or Base or Both

In each of these markets, all liquidations are to be absorbed into Reserves, but not available for external liquidators to call buyCollateral().

Gauntlet determines Collateral caps for COMP, as well as Parameters for the DOLA market.

This represents a radical change in the way that COMP is used as a token, but the potential for growth is compelling. These decisions would open up areas of critical innovation for expanding COMP liquidity on Layer 2s, and would have positive second and third order effects.

COMP Everywhere, as a strategy opens up a broad range of benefits, and builds value for Compound.

3 Likes
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3

As someone that has been buying COMP, liquidity is an issue on ETH much less the other chains, you pay a 5%+ premium on anything over a couple thousand.

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Yea - this is something which we could fix more easily with COMP as collateral on chains like:

  • Optimism
  • Arbitrum
  • Base

You can check Dexscreener:
https://dexscreener.com/search?q=comp

Search for COMP, and then check out the size of the liquidity pools that you see there.

On Mainnet, the pool is 1.2M in size, whereas the pool on Optimism is only 98k.

COMP Everywhere enables LP strategies which could build these pools.

5

I was using mainnet. 1.2M is just not enough. I was planning to buy 100-200k but anything over 10k get’s ridiculous.

1 Like
6

100% agree. It’s next to impossible to trade onchain spot markets. For the time being I recommend Cowswap you can make intent based limit orders. In 2025 the Growth program will start working on Liquidity depth.

2 Likes
7

This is a great proposal. It would be beneficial to backtest or simulate the effects during a black swan event, similar to the one experienced during the governance hack.

1 Like
8

I agree liquidity is low for COMP.

I like the idea of COMP being everywhere but am hesitant given the risk it could provide to other assets.

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@robinnagpal and @mexilc

COMP has already been distributed.

The risk we are taking is that the Reserves will absorb liquidated COMP, and these reserves will be built up by liquidating other assets.

The benefits are that COMP whales such as AlphaGrowth, or the Treasury, or the Grants program, or large holders will be able to leverage COMP to build liquidity, and arbitrage rates accross chains.

Over-Utilized Markets, are causing protocols to unwind their positions, and lack of Liquidity on L2s, is due to a lack of LP Strategy, as well as a lack of assets to build up those strategies.

Adding COMP as collateral on all markets solves both problems, while making COMP a more attractive asset for people to hold.

The question of Risk – is probably one of appropriate Supply Caps, and Liquidation Penalties.

10

Wouldnt making a staked COMP (distributing a portion of accrued reserve factor fees) also make COMP more attractive?

I’ve been a long time lurker, feels like Compound needs a catalyst to drive COMP interest from LPs or users.

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Yes, Staked COMP would make COMP more attractive, and it would not have a liquidation threat – whereas collateral deposit would.

There are legal blockers toward enacting Staked COMP right now.

Once COMP Everywhere is enacted, we will have the collateral to solve cross-chain rate arbitrage opportunities, and build DEX LP on Aerodrome and Velodrome – both being a source of yield for COMP Collateral Depositors, in the form of vaults.

That is in addition to the partnership collaborations, and effective buyback program from liquidated COMP positions, which are absorbed by treasury reserves.

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12

I mean, I assume most of those will go away in a couple months so perhaps we can revisit then?

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