Compound LitQuidity

First. Read this. Gotta love wikipedia

Now that its been a few days after this forum post and this Compound Liquidity presentation during our community call, I think it is now more important than ever to establish priorities regarding compound’s role in bootstrapping liquidity for partner projects, its role in other projects, and compound’s “treasury”.

This includes

  • Who to fund/bootstrap

  • How to do it

    • Governance

    • Paying for it

  • Managing Risk

To start with the who question.

I will make two distinctions for this category. The first one being projects like pooltogether ,Fluidity, and Dharma, projects that are directly built on or incorporate the compound protocol into their own projects. These projects can be funded originally by compound grants and those who were are perfect for this category

The second will be projects that incorporate compound indirectly. Projects like MakerDao, which not only help users move assets into compound to generate yeild, but also allows COMP for onboarding and borrowing DAI.

Below are examples where MakerDao interacts with Compound

COMP onboarding for vaults-

COMP-A Stability Fee-3.00 % Liquidation ratio 175.00 % Liquidation Fee 13.00 %

DAI on Compound, 4 Billion Dollars of DAI are in compound, generating yield.

At this point in 2021, defi protocols work with and within each other, whether they like it or not. If MakerDao has a say in compound, seeing as their token generates yeild on top of COMP, then compound should act the same.

Now, How to do it and how to pay for it.

What proposal actions would need to occur? I believe the Timelock would need to ERC-20 approve COMP to cCOMP, etc.

@rleshner posted this in the forum a few weeks ago and we may have seen a glimpse of an answer in the call today from @jared

Please correct me where I am wrong.

It is not as straight forward as making the timelock _grantcomp, lend and then borrow.

Giving the timeclock from governor bravo the responsibility for opening a loan is beyond a reasonable expectation for a governance timelock to do, especially when we consider the other steps.

How will the timelock collect comp? How will the timelock act if there an issue with liquidation?

I don’t know the answers to this, but it takes a minimum of 4? days for governance to do things, without including the actual forum and governance process. It is simply out of reach for governance to maintain any kind of loan position like this, borrowing or lending.

What is not unrealistic (this means it is doable) is the sweep reserves function, called two times to pay @arr00 put along a governance proposal, and another realistic thing is to _grantcomp to a multisig like the CGC proposal did.

Realistically, our funding sources are the depreciated market reserves, which ought to be swept towards compound liquidity, as well as the comptroller contract.

Below are Funding Sources

SAI Reserves

After the money is swept, now what?
I would love a multisig, just like CGC has, but with more community oversight. Today we had the privileges’ of hearing proposals for bootstrapping in our call, maybe after these calls, we can vote?

What does pooltogether think?

To clarify my proposal. Compound governance would maintain complete control of these funds and could unwind the position at anytime. I would advocate for a one year timeline as the assumed deposit length which could be unwind early or extended if desired.

If by compound governance you mean a multisig holding and controlling swept funds, yes. We need governance and their oversight to manage the postions, but what do comp holders get in return?

Although currently “sponsors” do not accrue POOL I do think that will change and Compound governance would accrue POOL. There has been a consensus in the PoolTogether community to start rewarding sponsors with POOL and although this hasn’t been implemented yet I expect it will be.

Perfect, COMP holders get exposure and diversification towards like minded projects, we get to help each other out and in return for using compounds liquidity and “equity”, comp holders will get POOL, or FLUID, or MKR, or whatever kind of situation we work out. However, there needs to be some kind of equity/governance compensation. Maybe down the line we will make a POOL market that will get comp speeds as well, as it all works out.

But risk needs to be managed, COMP cant just sit idle, I like the idea of onboarding some of the “treasury multisig” funds towards makerdao, to generate DAI, just to mitigate some “at home” risk.

These are all just ideas, keep them coming.

delegate comp to me plz 0xba2ef5189B762bd4C9E7f0b50fBBaB65193935e8

NOT financial advice, plz no sue. ALL FUNDS ARE SAFE NO FUD.

1 Like

Thanks for taking time to put a variety of thoughts together @massnomis.

A few points around mechanics:

  • If assets are held in the Timelock contract (of which Governor Bravo is the admin), then use of those funds requires COMP token-holder approval
  • If assets are held in a multi-sig wallet (e.g. the community multi-sig), use of those funds does not require COMP token-holder approval, and instead of based on a social contract, Snapshot voting, etc.
  • The Timelock by default acts as the Compound “treasury”; any reserves removed from a market first enter the Timelock
  • The Timelock contract can receive governance instructions from COMP-tokenholders, including to borrow assets, transfer them, etc; it can collect COMP on its own (although the claim function can be called by anybody to collect the Timelock’s COMP).

In regards to the PoolTogether proposal, without any code changes, token-holders could through a proposal:

  1. Transfer a significant overcollateralization of COMP to the Timelock (such that it doesn’t face, in any short time-frame, reasonable liquidation risk)
  2. Approve COMP to cCOMP; enable cCOMP (and cUNI?) as collateral; mint cCOMP; borrow USDC
  3. Call the sponsor function of PoolTogether; end sponsorship if/when ready

This process would not change the dynamics of the community, proposal process, or entrust any individuals with funds or managing assets; the entire process would be subject to COMP token-holder governance.

If this process is successful, the community could expand liquidity operations in any number of ways; all of which will be fun to design and debate.

2 Likes

So I absolutely love the idea of sponsoring this pooltogether comp pool.

Regarding Governance,

I think the best way to go about this is by doing two separate proposals
The first should be a “test” transaction, the timelock sponsoring the pooltogether pool with 1 Dollar, in addition to sweeping reserves of depreciated assets. With the money lying around and the pooltogther contract tested and the community shown, then a second proposal should go through with actually doing the full amount (after community discussion).

Also, @rleshner, what are your thoughts on sweeping depreciated asset reserves.

The only problem i have with the above proposal is the question of equity. How can we in a trustless way “trade” our treasury investments for pool tokens?

maybe @lay2000lbs could help out here…

1 Like

Thanks for all this work @massnomis !

I think the best way to go about this is by doing two separate proposals

Instead of doing two on-chain proposals, I think we can do a “fork test” where we fork mainnet exactly and test it out to make sure everything works smoothly. That will eliminate the need

The only problem i have with the above proposal is the question of equity. How can we in a trustless way “trade” our treasury investments for pool tokens?

This is pretty simple. When the withdraw is going to happen a transaction to claim and transfer accrued POOL tokens can be called!