Compound <> Gauntlet Year 5 Partnership

[Gauntlet]

Summary

Gauntlet proposes a one‑year renewal to continue safeguarding Compound’s markets, maximizing capital efficiency, and optimizing incentive spend. We have aligned with the Compound Foundation on an expanded partnership, focused on risk-aware growth, to accelerate Compound’s most important initiatives while ensuring sustainability. Gauntlet looks forward to a strategic partnership in the coming year, committed to supporting Compound’s growth and investing in providing additional value as part of this relationship and in line with our dialogues with the Compound Foundation. Our 30% insolvency refund remains in place, further aligning our compensation with Compound’s market‑risk outcomes.

Results & Track Record

Over the past four years, under Gauntlet’s dynamic risk management, Compound has avoided any material insolvencies stemming from market risk. Highlights over the past year include:

• Quantitative Research: Delivered action-oriented research on areas including Collateral Factors, Market Downturn Comet Analysis, OEV Risks and Considerations, Sandbox Development Support, Correlated-Asset Price Oracle (CAPO)
• Analysis: To support Compound’s multi-chain strategy, provided initial parameter recommendations for all Comet deployments including: Base - Aero, Mantle - USDe, Ethereum - USDS, Scroll - WETH, Linea - USDC, USDT, and WETH, Base - USDS, Sonic - USDC and S, Ronin - USDC, RON, and WETH, Unichain - USDC, Arbitrum - USDS, and Unichain - WETH
• Risk Alerts: Firefighting during all market crisis events while communicating closely with Compound Guardian and the community. Avoided any meaningful insolvencies in Compound. As of August 21, 2025, total unpaid debt across all Comets stands at $904.10, entirely attributable to dust borrow accounts
• Recommendations: Provided 816 parameter recommendations, including 8 IR curve recs, 11 COMP incentive recs, and 42 new market listing recs. Gauntlet currently covers Compound’s 27 Comets
• Transparency: Provided weekly market updates, downturn retrospectives, and ongoing participation in developer calls
• Treasury operations via Aera: Kick-started Compound’s treasury management practices. Through non-custodial Aera infrastructure, the Compound DAO deployed idle assets to generate permissionless yield. In less than a year, this strategy has generated over $1.4M in realized income with assets being allocated solely into Compound V3, and is on track for ~$1.7M in annualized yield at current market rates. While these initiatives were aimed at bootstrapping Compound’s treasury management strategy, we are engaged with the Compound Foundation for further iterations to optimize DAO returns

Proposal

Scope

Gauntlet and the Compound Foundation have aligned on an expanded partnership with a broader scope. Under this scope, Gauntlet will deeply collaborate with the Foundation and DAO across protocol support, roadmap planning, and future aspirations. In anticipation of this growth, our proposal also includes enhanced support for Comets, strict and transparent SLAs to the Foundation and its partner service providers, as well as initiatives to strengthen Compound’s awareness and drive risk-aware growth opportunities.

Risk Management and Optimization

Compound’s growth requires a risk framework that adapts to changing market conditions and network deployments. Gauntlet’s simulation-driven models continuously adjust market parameters to protect solvency while allowing for risk-adjusted expansion of borrowing capacity.

• Risk management for up to 50 Comet deployments (about 100% increase from the existing Comets) across all active Compound-supported chains
• Parameter recommendations (Borrow Collateral Factor, Liquidation Collateral Factor, Liquidation Factor, Supply Cap, Target Reserves, Storefront Price Factor) to balance risk and capital efficiency in accordance with Compound’s unique risk mechanisms
• 24/7 monitoring, rapid crisis response, and risk alerts to prevent cascading liquidation failures
• Biweekly market updates, comprehensive risk dashboards, participation in community events, and active governance involvement
• COMP optimization to maintain healthy liquidity and borrowing activity while minimizing spend. Campaigns are targeted towards sustaining Compound’s liquidity. These controlled experiments are iterative and flexible as needed, and will be conducted under guardrails and in partnership with the DAO, Compound Foundation, and other service providers
• Continuous tuning of interest rate curves according to Compound’s risk thresholds with balanced borrowing/supply rates

Strategic Initiatives for Risk-Aware Growth

• Provide risk management expertise to support the Foundation’s strategy and operational initiatives, to be announced by the Foundation soon
• Evaluate real-world assets (RWA) integrations and conduct quantitative analysis that drive risk-adjusted returns for Compound
• Align with the Compound Foundation and service providers on sensitive incident-response runbooks, communication cadences, and prioritization for new listings and chain deployments within agreed guardrails
• Facilitate onboarding and operations for service providers: as new service providers such as Certora, Chainsecurity, and Cyfrin come onboard, Gauntlet will help them quickly get up to speed on Compound DAO’s historical context, governance processes, and operating model

Growth-oriented Support to Compound

• Gauntlet will significantly expand its investment in Compound’s strategic initiatives, partnering with the Compound Foundation on mutual business development efforts, co-marketing, and partnership referrals. Efforts also include shaping solutions architecture for key developments and strengthening support in prospect engagements which will be shared by the Foundation with the DAO and community

Out of Scope

• Protocol development (e.g., Solidity changes)
• Security auditing

Parameter & Listing Cadence

• Routine parameter reviews: weekly
• IR curve reviews: monthly review plus ad‑hoc updates as markets warrant
• Incentive recommendations: monthly optimization reviews
• New asset listings (risk assessment & initial parameters): depending on prioritization and asset potential; ≤ 5 business days after receipt of high-impact market listing request
• New Comet deployments (initial parameters): ≤ 5 business days from go‑live schedule confirmation
• Rapid incident response: Gauntlet will partner with the Compound Foundation and DAO to deliver a comprehensive risk management playbook designed to prepare for crisis scenarios such as correlated market crashes and asset depegs, while also safeguarding against economic exploits from malicious price manipulation.

Tooling Reliability

• Public risk dashboard with daily refresh

Impact Metrics & Targets

We measure our success by Compound’s sustained growth and resilience. These metrics are actively monitored and optimized to balance security with risk-adjusted growth:

• Value at Risk: conveys capital at risk due to insolvencies when markets are under duress (i.e., Black Thursday). The current VaR in the system is delineated by collateral type. Gauntlet computes VaR (based on a measure of protocol insolvency) at the 95th percentile of our simulation runs
• Liquidations at Risk: conveys capital at risk due to liquidations when markets are under duress (i.e., Black Thursday). The current LaR in the system is delineated by collateral type. Gauntlet computes LaR (based on a measure of protocol liquidations) at the 95th percentile of our simulation runs
• Borrowing Power: measures capital efficiency, representing potential upside for the protocol. Borrowing power represents the total available borrows based on collateral supplied to the protocol, calculated as supplies multiplied by the collateral factors of each collateral asset
• Maintain zero meaningful insolvencies from market risk that fall within Gauntlet’s scope

Engagement Terms

• Fee: $2.3M fixed for the term. The fixed fee ensures sustainability and predictability for the DAO and Gauntlet
• Timeframe: Sept 28, 2025 → Sept 28, 2026
• Coverage: up to 50 Comet deployments

Payment Structure

• 70% of the fee streamed in COMP linearly over the engagement via Compound Streamer, in line with the DAO’s preference with recent security provider proposals for ChainSecurity, Certora, and ZeroShadow
• 30% Insolvency Fund: transferred to Gauntlet at the start of term (50% USDC / 50% COMP), subject to the refund below
  • Losses are defined as any new insolvencies related to market risk or oracle failure.
  • Exclusions: Issues related to smart contract bugs or related to an underlying asset that is smart contract related and dust accounts (defined as accounts with borrow less than $1,000). Refunds do not apply if any of our risk parameter (excluding Reserve Factor) proposals do not pass governance.
  • Should losses occur, we will share an update with the community and send funds back to the DAO in a timely manner.

Next Steps

• We welcome community feedback.
• We intend to bring this proposal on-chain in two weeks, pending community feedback.

About Gauntlet

Gauntlet is the leading simulation platform for DeFi market‑risk management and protocol optimization. We have partnered with protocols including Arbitrum, EigenLayer, Uniswap, NEAR, among others, to deliver quantitative research, risk calibration, incentive optimization, and real‑time risk operations.

[cliffton.eth]

On behalf of Tally, I’m writing to express our strong support for Gauntlet’s proposed Year 5 partnership renewal with Compound. We strongly believe this renewal represents both prudent risk management and strategic value for Compound.

Strategic Alignment with Compound’s Growth Trajectory

The expansion to support up to 50 Comet deployments directly addresses Compound’s aggressive multi-chain strategy. As the protocol deploys across Unichain, Sonic, Ronin, and other emerging networks, established risk management infrastructure becomes critical. Gauntlet’s commitment to 5 business day SLAs for new deployments ensures Compound can maintain competitive positioning without compromising security.

We’re particularly encouraged and excited by their expanded scope:

• Risk assessment for RWA integrations, unlocking significant new markets

• Enhanced collaboration with newly onboarded security providers (Certora, ChainSecurity, Cyfrin)

• Direct support for the Compound Foundation’s growth initiatives and BD efforts

• Continued optimization of COMP incentive distribution for maximum capital efficiency

Their track record speaks for itself: 4 years of management accruing just $904 (dust accounts) in total bad debt across all markets, while generating $1.4M+ in treasury yield through Aera vault management. The 30% insolvency refund mechanism ensures continued alignment with protocol security.

Critical Infrastructure at a Pivotal Moment

As Compound accelerates expansion across new chains, maintaining continuity in risk management is key. Gauntlet possesses 4 years of institutional knowledge about Compound’s unique risk mechanisms and governance processes. Transitioning to a new provider now would introduce unnecessary risk and slow growth momentum.

Their established infrastructure (risk dashboards, simulation models, and 24/7 monitoring systems) represents continuous of protocol-specific development. The cost of rebuilding these capabilities, in both time and resources, would far exceed the proposed $2.3M annual renewal in our opinion.

Beyond a service provider, we view Gauntlet to be a core strategic partner to the entire Compound ecosystem, and this is also exhibited through their expanded scope and maintained insolvency refund structure. This partnership positions Compound for continued success in an increasingly competitive DeFi landscape, specifically by maintaining best-in-class risk management while pursuing aggressive growth.

[bryancolligan]

After working with Gauntlet directly for 2 years of their 4 years this is an easy No.

4 Main Reasons on Why to NOT HIRE Gauntlet:

1. Economic underperformance: negative net protocol profit after incentives in core markets, antiquated incentive distribution techniques, a fee structure not linked to outcomes.
2. Conflicts of interest: Gauntlet is simultaneously a major Morpho curator and has received sizable MORPHO token grants tied to vault growth directly aligning them with a Compound competitor. (Morpho, Morpho Governance Forum)
3. Operational gaps: no formal SLAs for parameter updates or listings (as confirmed in their own 2024 renewal), slow average forum turnaround, and vendor concentration risk. (comp.xyz)
4. Experiments Vendor Focused Not DAO focused: poor payback on the Morpho-Polygon collaboration vs. public expectations, Aera vaults under perform market beta rates.

A full break down of all the issues is below.

Why to NOT HIRE Gauntlet Crypto in 2025

The renewal of Gauntlet as a risk provider and incentive distributor is coming up and need to make the community aware of key issues. Over the past 18 months, I have worked directly with and engaged Gauntlet privately on multiple occasions to align on profitability targets and parameter changes with Compound’s best interest in mind. TL;DR; Recommendation: Do not rehire Gauntlet under the current model. Instead, run an open RFP with a 90-day dual-track pilot (2 providers) and adopt profit-linke…

Happy to answer any questions on the matter.

[Compound_Foundation]

Compound Foundation Statement on Extending Gauntlet Partnership

The Compound Foundation supports extending our relationship with Gauntlet for one year. This decision follows extensive discussions with delegates, Gauntlet, and other risk vendors over the summer.

Continuity. Gauntlet has supported Compound since 2021 and brings a deep understanding of our protocol’s risk dynamics. As the longest-standing lending protocol in DeFi, we take that seriously— especially as convergence with TradFi heightens the importance of consistent risk and compliance practices. With a recent transition in our audit provider, an additional change now would introduce unnecessary risk.

Avoiding disruption. The Foundation recently completed a major risk-provider transition through a rigorous RFP process, securing ~$2M in annual savings for at least two years. That process demanded significant resources across vendor diligence, negotiations, and stakeholder and change management. Diverting Foundation’s attention to repeating this process now would take away attention from other strategic initiatives critical to Compound’s success in the current market environment.

Strategic initiatives. In discussions with Gauntlet leadership, we focused on deepening the partnership beyond risk services—into product support, business development and public go to market initiatives. We heard the community feedback on past decisions and visible ties to industry peers, and have voiced those clearly to Gauntlet. With the Foundation newly empowered to represent Compound, Gauntlet reaffirmed its commitment as a strategic partner and expressed readiness to engage even more proactively in supporting the protocol’s priorities. We can see a path to generating tangible wins for the DAO that extend well beyond the potential cost savings of running another RFP at this time.

Contractual enhancements. We negotiated additional value on behalf of the DAO, not only on new initiatives across product and growth, but also on SLAs and a refreshed risk framework designed to raise standards further, address community feedback, and improve market agility. These commitments set a clear benchmark against which progress will be measured in the months ahead.

We thank Gauntlet for their yearlong partnership and look forward to driving Compound’s growth together, with the expectation for tighter alignment with Compound and the Foundation, addressing community feedback and demonstrating urgency in execution. The community should expect to hear more about exciting strategic initiatives starting the community call today at 9:30a PT.

[arr00]

I plan to vote in affirmation of this proposal. Gauntlet has been an essential partner of the DAO for four years and has coordinated meaningfully to ensure their impact is maximized over the coming term.

While I do sympathize with the voices calling for an RFP, the DAO is in a time of significant change and minimizing short term change at this point would decrease stress on the DAO and the foundation. The DAO should strongly consider conducting a formal RFP process for the next risk management term.

[DonofDAOs]

I have voted FOR this proposal. I believe it is important to note that it is a great mark of character as to how a person, or team, behaves when there isnt a leader at the helm. And, in the time before the emergence of Foundation, Guantlet has been a trusted and good-faith steward of the DAO, even absent the oversight of any core leading body. This, in combination with my personal experience with all of the Gauntlet team members, makes me confident in their ability to continue doing good, valuable, and ethical work on behalf of the DAO.

[Michigan_Blockchain]

Michigan Blockchain has voted FOR renewing Gauntlet’s engagement for year 5. This proposal represents meaningful progress from prior years, with an expanded scope of responsibilities delivered under the same budget. Several aspects of the proposal stand out as particularly valuable for Compound’s next phase of growth including expanded comet coverage, broader product support (RWA integrations and staked COMP), Treasury Management, and Growth Initiatives. We are excited to have worked with, and continue to work with the Gauntlet team in the coming year.