Last Wednesday’s governance call brought attention to how the treasury’s COMP is being managed/spent. The original intention by Compound Labs was to distribute COMP tokens to users of the protocol and attract more users to the protocol. The protocol is currently rewarding 2252 COMP per day. That is worth roughly $900k. Most of the COMP rewarded to market participants ends up being sold. For example, Yearn Finance is has about $1B in assets that are being used to farm on Compound.
We need to find new ways to build the community and distribute the treasury’s massive COMP position in a way that directly benefits the protocol and its tokenholders. It has been over a year since the incentives began. I think it is time for the community to take a different tack.
Off the bat, I will say I am against burning COMP and doing an airdrop. I think a burn is the least efficient way to distribute funds because it does not attract new users. An airdrop to users who have historically used the protocol is better than burning but not much better, in my opinion.
Robert Leshner posted in the Discord, “my personal view is that any change should be methodical, not a huge step. And, any reduction, should be paired with new ways of distributing COMP to users to increase the community, grow the protocol, and improve the protocol.”
Below are a few ideas for the community to consider/debate. Please post which ideas you like/dislike.
- Reward voters with one or more votes for each proposal they cast a vote. All types of votes would qualify for the reward. It would be some kind of pro-rata their voting power up to a limit, so people don’t just make a zillion wallets to participate in governance and so already large holders don’t receive outlandish rewards. Here is a link for how many COMP the top 100 voters would get if they voted. Feel free to copy the sheet and adjust the parameters. Very roughly speaking, I think we could see +250 new voters.
- Separate supply and borrow side COMP rewards. This has already been brought up in the forums a couple of times. I think it is a great idea. Incentivizing borrowing doesn’t make a ton of sense, so shifting it towards the supply side would better distribute COMP and improve protocol liquidity.
- Supersizing the grants program: Larry and I have been discussing what the grants program will do in September when the trial period ends. We think building out a full-time team (notice plural) to run the program and take a more active role in development would be awesome. We haven’t talked too much about what it will look like, but it likely follows what the Uniswap Grants program is doing. They have a three-person full-time team working and have been making some impressive headway. I won’t say much on this because we need to flush out a more comprehensive plan, but I will say we are looking for a full-time grants lead and others interested in working full-time on grants. DM Larry or me if you want to talk more about that.
- We could start a program to help cover fees related to using Compound. Balancer did something like this where they covered ETH fees associated with trading. A long, long time ago, I did some research on this to see if we covered 80% of ETH fees associated with Compound functions what it would cost the protocol. I could revitalize some of that work if the community likes the idea.
- We could distribute additional COMP rewards to users who also participated in governance. Balancer was the first protocol to start doing this and saw an immediate increase in governance participation. Users who were farming BAL that also participated in governance received extra BAL. We could implement a program that rewards farmers with an extra 2% (open to suggestions) if they vote in the latest completed governance proposal. I think this is a great idea to get users of the protocol also engaged in governance.
I want to note that ideas 1, 4, & 5 would likely be done off-chain. I could develop a script that analyzes activity (open-source) that generates a list of addresses and comp rewards. That list would be published on IPFS and be used for a merkle root drop similar to Balancer’s weekly claim or Sushi’s vesting program. We could do it weekly, bi-weekly, or monthly. To manage this, we would likely use the existing community multisig (or make a new one) to control the COMP and verify the IPFS data/claim. Here is a link to the Balancer site and repo.
Here is my rank of the above ideas (1 being best - 7 being worst):
- Supersize the grants program
- Separate compSpeed into supply & borrow.
- Distribute additional COMP rewards to protocol users who also vote.
- Compound protocol usage fee reimbursement.
- Reward people for voting
- Airdrop (bad idea)
- Burn (worst idea)
Since I didn’t go into detail here, feel free to ask questions. I think I will make a poll a week from today after people have had a chance to ask questions, so we can try to gain a consensus on what people like. If we can reach a consensus, @elee and I can develop it (although we’re getting pretty busy), or I would be happy to work with the community or hand it off altogether to someone.