Pantera Capital is voting AGAINST Compound Governance Proposal 32 to distribute COMP to users affected by DAI liquidations on Nov 25 2020 as compensation.
Financial markets are more prone to hidden tail risks when participants deploy instruments with high leverage or for uses far from their intended purpose. Such risks are difficult to measure, which leads to scenarios where returns are attractive and too low at the same time.
As a Compound user (note: not farmer or private investor), we’re responsible for knowing the potential risks involved in using the protocol, including faulty oracle feeds and illiquid markets. Compensating users encourages looser risk-taking when efforts are still underway to measure and mitigate such risks. It also undermines the ability to properly assess risk vs. reward in Compound markets by artificially deflating perceived risk.
Open protocols can aspire to be trustworthy, but they’re permissionless by design. Usage will inevitably go “out of bounds,” despite disclaimers or risk parameters. Compensating users when known risks materialize is unsustainable in the long term.
We’re supportive of solutions that are sustainable and healthy for the protocol, including:
- protocol insurance funds, with explicitly-stated intent and sources (e.g., market reserves),
- multi-oracle designs, and
- removal of “safe max” language in Compound UI.