COMP Everywhere

Proposals
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Which pushes up the price of COMP, issuing it is going to cause inflation (which in this case causes COMP to become less valuable).

I get the desire to have more COMP liquidity and I do want it, I just question the cost as it’s going to take a lot. 1inch now supports built-in cross chain bridging when exchanging so it also seems less needed than before to have liquidity on L2’s. I posted an example below, 10% loss when cross chain bridging 100 COMP which may be more because the liquidity on ETH is bad rather than the bridging costs. Ethereum definitely needs better liquidity. Can’t even trade 1000 COMP without major issues.

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I’d rather maintain one strong liquidity pool on Eth than several weaker ones on multiple chains that can just bridge to Eth. However for non L2 chains I’d support establishing a liquidity pool like Solana if COMP ever expands to them. To add, 1inch doesn’t support all chains Comp is on, perhaps that can be fixed.

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Hey Misher – some responses:

  1. In the DOLA scenario described, there are two buckets of COMP:

A - Deposited as Collateral to Borrow DOLA.
B - Paired with the Borrowed DOLA to form COMP -DOLA LP, and farm AERO.

There is no sell pressure on COMP to achieve this.

We can have the treasury holding COMP and earning nothing.
Or, we can have the treasury holding COMP - DOLA LP, and earning ~XX% APR in AERO, which can then be deposited into the AERO market on Base as supply side liquidity.

  1. L2s allow developers to build more interesting structured products on top of Compound, and trade with more affordable transaction fees. It’s also less stressful to trade or manage collateral when mainnet gas costs spike.

  2. The veDEX meta, which has expanded on these L2s, is another approach toward liquidity mining, where the members form a cooperative, and then there is an emissions token – AERO, which then is directed toward LPs – Similar to Curve.

There is no liquidity mining for COMP LP on Mainnet.

Compound can build structured products to serve these communities on L2s, we can charge fees, and accrue veAERO rewards, and build our own position there, to compliment whatever voting share we can get to the DOLA - COMP Pool.

This means that building veAERO can also be a byproduct of expanding Compound TVL.

  1. COMP Everywhere is also about automated cross-chain arbitrage.

Example:

  • ETH utilization is high on mainnet, but low on Optimism.
  • A vault deposits COMP as Collateral on Optimism, Borrows ETH, and Supplies it on Mainnet.
  • Position Closes when arbitrage closes.
  • Markets find equilibrium in utilization, which make borrow rates more attractive on high demand markets.

These are all yield focused strategies, which direct value to the COMP Treasury, make markets more efficient, deepen liquidity, and place us in ecosystems where we can make deals to increase TVL for Compound.

.:.

Mainnet Liquidity can also be improved. You’re correct.

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24

COMP Buyback

The COMP buyback program positions the protocol’s absorption mechanism as a standing limit order, purchasing COMP using blue-chip reserve assets such as USDC and WETH. However, this approach introduces a critical trade-off:

  • Without a strict supply cap, COMP holders could game the system by dumping tokens. For example, by creating risky COMP-collateralized positions and deliberately triggering liquidations, the protocol is forced to absorb COMP collateral and inherit debt.
  • With a strict supply cap, the program’s ability to generate meaningful buy pressure is limited. In addition, Compound’s existing $78 million COMP treasury leaves little room for significant additional accumulation. This raises concerns about the risk-reward tradeoff, as the potential downside of absorbing volatile COMP collateral may outweigh the marginal benefits of increasing treasury holdings.

These risks are further amplified by the role of COMP as endogenous collateral, where the collateral value is directly linked to the protocol’s success. This relationship creates a dangerous feedback loop:

        COMP price declines can trigger sell-offs → collateral devaluation → widespread absorption → the protocol accumulates more devalued assets and increases its exposure to potential bad debts → community confidence erodes, further accelerating the price declines

Beyond this feedback loop, the protocol’s ability to recover from insolvency shrinks just when it is needed most. While Compound markets are less dependent on endogenous collateral, making the LUNA and Thorchain Lending style collapse unlikely to happen, the buyback program could still cause significant damage in times of market stress.

BUILD COMP Liquidity

The community already recognizes a lack of DEX liquidity for COMP on Layer 2s, with meaningful liquidity available primarily on the Ethereum mainnet. Liquidating large COMP-collateralized positions is already challenging even on the mainnet. To demonstrate, consider the liquidation process for the largest COMP-collateralized position:

Given this dynamic, the protocol faces a structural challenge: it is forced to absorb large COMP positions due to insufficient DEX liquidity. Liquidators may have to rely on off-chain CEX liquidity (such as TWAP orders or splitting orders), both of which carry higher execution risks. While it remains unclear whether the proposed code changes for the COMP Buyback program would result in a different outcome, we strongly support initiatives aimed at building COMP liquidity.

Re: “Compound Treasury borrows against it to deposit into the COMP - DOLA LP”

This strategy is similar to the Protocol-Owned Liquidity (POL) model pioneered by Olympus DAO. Experimenting with it could provide clear utility and insights to the community. We recommend starting small (e.g., no more than 5% of the treasury) and re-evaluating the outcome. In addition, we also have several questions about the implementation details:

  • Will this strategy be managed via a multisig, a custom-built solution, or by leveraging existing protocols (e.g., Aera)?
    • Aera has built two POL Vaults (1, 2) for Morpho and one for Euler
  • How can we effectively solve the coordination problem?
  • What measures are in place to ensure accountability for the execution?

DeFi Partnerships

Re: “Deploy DOLA market to Optimism or Base or Both”

To maximize the impact of market expansion, we recommend prioritizing stablecoin markets with higher revenue potential. This focus could drive more borrowing / lending activities and revenue opportunities unless Inverse Finance commits to providing significant incentives.

  • Optimism:
    • sUSD: $32.4M
    • DAI: $18.5M
    • DOLA: $5.4M
  • Base:
    • USDS: $100.6M
    • DOLA: $33.9M
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