Compound <> Morpho <> Polygon Collaboration

[DudeCOMPONLY]

I have no affiliation with Gauntlet lmao.

[cmrn]

@bryancolligan

One-Click Migrator

For the record, Torque already built this and could easily extend it. AG refused to support it when it mattered and there are witnesses to that. If AlphaGrowth could focus on BD and tap into Compound’s dev pool more often, Compound would enjoy greater outcomes.

[DonofDAOs]

For context as this is my first (of many) responses as an individual delegate, my name is Jordan Karstadt, and I am one of the founders of Event Horizon.

I would like to reaffirm the Event Horizon team’s support of the initial proposal commented above:

@EventHorizon

This comment is representative of the Event Horizon team and does not represent the entirety of the Event Horizon community nor can it reflect any certainty of how the Event Horizon community may meta-govern this proposal should it come to a vote:

The Event Horizon team appreciates Guantlet’s efficiency and tact in pulling this proposal and partnership together in fairly short order. The opportunity to create a beachhead within Polygon is a particularly tactful landing point and green pasture opportunity. We have high confidence in Guantlet’s capacity to execute this initiative well.

Further, I would draw question upon setting the precedent of market competition through the subdivision of already extant proposal structures. Echoing some of the comments above, a significant sum of work has already been enacted to bring the proposal this far. Supporting a last-minute division of ownership in the name of competition would in effect condone proposal goaling tend. A construct by which external parties may intercede on an original contributor’s previous labor in the 11th hour in an attempt to split the results of the original contributor’s efforts. Notably, this division would occur without the interceding party having actually contributed anything to the necessary work which made the proposal possible in the first place.

A stronger form of engagement and market competition would be to either create a stand-alone counter proposal or to simply join the initial proposal as a collaborative contributor.

[bryancolligan]

Thanks for joining in. The willingness to stay nimble, to pivot when new information surfaces, is what allows projects and organizations to thrive.

This logical trap you might be experiencing is called the sunk cost fallacy.

Sunk cost fallacy for Organizations

“In organizations, the sunk cost fallacy can manifest in a variety of ways, often leading to inefficiencies and missed opportunities. For instance, a company may continue to fund a failing project because of the amount of resources already put into it, even when it’s clear that the project is unlikely to succeed. This can happen with everything from product development to marketing campaigns. Employees and managers alike might feel pressured to “make it work” because abandoning the project would mean admitting that the initial investment was a mistake. However, this mindset can prevent organizations from reallocating resources to more promising ventures.”

The Sunk Cost Fallacy - The Decision Lab

[DonofDAOs]

It’s not a sunk cost. That isn’t the point. There is no end limit on who (or how many people) could intercede at the very end of each and every proposal and say “for competition’s sake, give me a cut”. Hence, feel free to create a stronger standalone proposal, and, should it succeed, the entire cost of the current proposal could be cast away.

[compensator]

https://x.com/0xfluid/status/1897291421817954801

There’s a clause like the highlighted in this proposal too, right?

COMP rewards only after +60m TVL is added.

[cmrn]

[Gizmoh]

This deal is now a bummer, now that we have a competitor with a better deal clause!

[marcboiron]

We are excited about this relationship and hope this can be the start of a long one.

Although the vote currently looks like it will pass (210k votes FOR, 0k votes AGAINST), Polygon Labs would like to express its confidence and bullishness in the initiative outlined above by providing additional liquidity and incentives to this deployment:

• $5M of stablecoin liquidity allocated to a combination of two upcoming RWA vaults that Gauntlet will be curate: (1) Spiko ($100M+ TVL on Polygon PoS), and (2) a high-yield RWA from a top 25 global firm by AUM. This will highlight Polygon PoS as the home for RWAs and Compound as the place to go for added utility on those RWAs.
• $5M of POL, which Polygon Labs will look to borrow against as it makes sense operationally. This will drive borrow fees for Compound lenders.
• 250,000 in additional POL earmarked to incentivize the Spiko vault or second RWA vault mentioned above.

Notes:

(A) If for whatever reason, the Spiko or other RWA vault is not live in the next month, April 7th, then Polygon Labs will work with Gauntlet to deploy the stablecoins in another vault that is most valuable to Compound’s growth.

(B) Polygon Labs commits to leaving liquidity in the vaults above for a minimum of one month, after which it retains the right to remove liquidity as needed.

Marc Boiron
CEO, Polygon Labs

[bryancolligan]

After a bunch of discussions with Morpho and Gauntlet, AlphaGrowth and the Growth Program are in support of this strategy. The previous major concerns are addressed as follows:

1. Fee Switch : There is no immediate plan to enable fees. If a fee switch is ever turned on, the morpho code would switch to opensource. Also the DAO would need to vote separately to activate Gauntlet fees. Compound would be free to fork in a scenario where the fees become onerous.
2. Breakeven Analyis : $1.5MM is a healthy investment and the anticipated breakeven is a 6–12 month time horizon.
3. Strategic Implications : This proposal would shift Compound’s focus from a purely protocol-driven project to something more like a fee driven holding company. AlphaGrowth will align it’s strategy, pursuing multiple revenue streams, and leveraging marketing, branding, and distribution efforts.
4. Further Expansion : Morpho has committed to collaborate on multiple chain expansions with Compound. The Growth program will have more things to sell to Chains on behalf of Compound.This is a substantial pivot from Compound’s traditional approach of prioritizing v3 adoption and relying on a single revenue source. As the DAO embraces this new vision, we can accelerate growth by partnering with multiple protocols to create multiple income streams.

[twinker]

Disclaimer Missing

Worth to note that Morpho is direct competitor to Compound Finance. I beleive it’s important to mention a disclaimer to people who don’t know that:

1. Robert Leshner (co-Founder & ex-CEO at Compound Labs) and Tarun Chitra (Founder & CEO at Gauntlet) co-founded VC called Robot Ventures

2. Robot Ventures invested in Morpho on a Strategic Round

3. Gauntlet become one of the main Curators on Morpho in February 2024, just after they canceled their annual support contract with AAVE prematurely.

4. Robert Leshner delegated 216,455.81 COMP to Gauntlet during last 2 months.

5. Gauntlet has total 356.52K COMP voting power which is around 90% of the quorum. It’s spreads accross 2 wallets: 0x683a4f9915d6216f73d6df50151725036bd26c02, 0x7B3c54e17d618CC94daDFe7671c1e2F50C4Ecc33

6. Gauntlet might receive service fees from Morpho Labs.

Unfortunately, OpenZeppelin wasn’t able to identify those threats.

Potential long-term risks

1. Compound will become front-end for Morpho.

2. Gauntlet will launch more Morpho-based markets on Compound.

3. Compound will invest Treasury funds to drive user growth into Morpho markets on Compound front-end, while Morpho investing zero.

4. Gauntlet will shift it’s focus from native Compound to Morpho markets.

5. Compound users will move funds to Morpho markets since it has more support and incentives.

6. Morpho will switch fees from 0% to 25% or less.

Questions

Fees

What’s the guarantee that 25% fee switch for Morpho will never be activated?

Mechanism Improvements

Why those mechanism improvements were never brought to the table to improve Compound Finance protocol first?

Other questions

1. Why Gauntlet wants to work for free to service this market? Why Gauntlet doesn’t work for free for the current Compound markets? Why Gauntlet doesn’t want to work for performance fee for Compound, but dumping millions of incentives to unprofitable Compound markets for years?

2. What’s the jusdification for Compound to provide $1.5M to Morpho and why it’s single-sided? Morpho is able to switch their fees to 25% anytime.

3. Can Gauntlet provide a statistics about spent COMP on incentives and Gauntlet service fees versus Compound generated fees for the last 24 months?

Combining all points, there is a big chance that this proposal is a first step of coordinated vampire attack. I suggest Gauntlet to abstain from voting for this initiative because of confilcts of interest, and other delegates take points above into account.

As Marc Zeller said:

comp needs to fire gauntlet that is currently pillaging the COMP treasury to subsidy their own competitor growth if they want to survive.

[allthecolors]

Less than one day before closing, this proposal has accrued over 1M votes in favor with only dust-scale opposition. I believe the current on-chain vote does not reflect the breadth of perspectives voiced on this forum and other social channels.

@Gauntlet’s decision to actively vote its 89% of quorum on this proposal is disappointing and should give the community some pause. The team has been working hard to educate delegates in good faith about the proposal, and most delegates seem to believe the benefits outweigh the risks. So, why risk the perception of tipping the scales on this proposal?

On X and in this forum, I am seeing some concerns that opposition to this proposal might be being stoked by Aave community members to sow discord among its competitors (and perhaps to stick it to Gauntlet for perceived past wrongs in their relationship with Aave). I don’t know whether that’s happening or not, but I do know that my concerns are unrelated to any of that and are more fundamental to what this vote means existentially for the Compound DAO.

@bryancolligan put it well:

@bryancolligan

This proposal would shift Compound’s focus from a purely protocol-driven project to something more like a fee driven holding company.

If passed, Proposal 413 would mark a foundational shift in Compound DAO’s collective vision of its purpose. COMP was introduced to govern a protocol, initially Compound V2. When Labs proposed a V3 of the protocol, COMP holders voted to assume stewardship of the V3 protocol through the DAO’s governance system. Since then, the DAO has voted on hundreds of occasions to modify protocol parameters, to incentivize contributors to enhance the protocol and manage protocol operations, even to upgrade its own governance – all in service of the protocol and the ecosystem built around it.

Proposal 413 differs fundamentally from these activities. The stewardship being assumed in Proposal 413 is for a Morpho vault that Gauntlet will manage under the DAO’s “brand”, with the DAO serving for all practical purposes as a pass-through vehicle for approval of Gauntlet’s management of the vault.

It’s not the fact that these contracts were not developed by Compound Labs that bothers me. I would argue that it doesn’t really even matter that the contracts were developed by members of a DAO that many in the space view as a direct competitor to Compound (I think that perspective is an oversimplification).

What bothers me is that Gauntlet is asking real labor of the DAO – reviewing, and approving or challenging on an ongoing basis, Gauntlet’s risk management of a Morpho vault, which it already performs in the absence of a pass-through DAO – with real costs and only speculative benefits. Here is how I see them:

Real Costs:

• one-shot disbursal of ~2% of COMP in the Unitroller as short-term incentives which are, more likely than not, going to have the effect of reducing TVL in Compound’s own perfectly operational V3 Comets on Polygon that could be the target of incentives for Aave migrators instead. Unlike all prior markets under the DAO’s stewardship, the incentives to be approved in this proposal are not manageable by Compound governance.
• social perception of capitulation to Morpho vaults over the DAO’s own protocols. It is clear from the proposal text that Gauntlet views V3 as technically inferior to Morpho vaults and would be very likely to use any success in attracting TVL here as justification for the DAO to drive incentives to other Compound x Morpho vaults over investing in its own protocols.
• increased dependence on Gauntlet: with no authority to revoke or manage the COMP incentives disbursed in this proposal, the DAO sets up a precedent for Gauntlet to directly control COMP incentives in future vault deployments. This arrangement would put the DAO in an unnecessarily precarious negotiating position when Gauntlet seeks to renew its risk management partnership with the DAO.

Speculative Benefits:

• promise that some fraction of TVL on Aave V3’s Polygon instance will migrate to this new vault over the long term, accruing fees to the DAO. Polygon has committed (unenforceably) to some seed TVL for one month, maybe more if it isn’t in their best interest to reallocate elsewhere.
• promise that Compound will benefit from earnings on this and future vaults associated with RWA platforms coming to Polygon in the near future.

On top of all the misgivings I’ve tried my best to lay out here, others have pointed out the rather tangled web of investments and incentives that make it difficult to view Gauntlet’s leadership of this initiative as entirely for the shared benefit of all three DAOs (Morpho, Compound, Polygon) without any conflicts of interest.

For the above reasons, and to ensure the on-chain vote meaningfully captures the non-unanimity of community viewpoints on this collaboration, I am voting against Proposal 413.

[Sudipan_Chainrisk]

Thanks for putting up the Disclaimer @twinker.

However we would love to know more details about your identity as we can see that you joined the forum just 2 hours ago and put this up as your first comment in this thread. Having no involvement in a proposal that was put up so long ago but suddenly putting this up is a bit fishy.

I was thinking someone would put these points up at some point, coz to me it is somewhat concerning as Gauntlet has already chosen to vote on this proposal.

Another disclaimer to add here is that Gauntlet is right now the largest curator on Morpho. They also took the bold step to leave AAVE and join Morpho a year back. You can find more details about how much incentives Gauntlet generated from Morpho right here.

I request @Gauntlet to revert back on this thread on some questions you have posted to have public declaration and proof that nothing shall go against the Compound DAO in the future.

We have also recently posted about the same conflict of interest issue that Gauntlet shouldn’t have voted on this proposal. You can find it here.

While it is completely fair for Tarun and Robot Ventures to pursue investments in Morpho, we as a DAO need to ensure that nothing harms Compound in the long run.

Also another disclosure to make is - Marc Zeller and the AAVE ACI has had previous conflicts with Gauntlet due to a strained relationship. But in no way should we as a DAO make any decisions about this considering AAVE’s stand on Gauntlet. Gauntlet has been a trusted risk management service provider to the DAO and we are here to work together with them to get more transparency on this matter. So its erroneous to call this a Vampire attack of any kind.

---

Also sighting another interesting case study for the DAO to really think about solving the conflict of interest.

While Gauntlet handles all the core markets and their recommendations for Moonwell, Moonwell DAO has delegated curation of their Morpho vaults to two other set of Risk Mangers - Block Analytica and B.Protocol (RiskDAO). This removes the question of the conflict of interest. Here’s the link to get more details - Morpho - Moonwell Governance Forum

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Regards
Team Chainrisk

[Sudipan_Chainrisk]

Very insightful points mentioned by @allthecolors here. Although its probably too late to discuss these points from a voting perspective, we would like to bring everyone’s attention to a few interesting details on DAO voting.

First off, yes as per the comment by allthecolors below, Gauntlet is now at a much higher negotiating position for renewing their risk management services proposal with the DAO. The tables have not turned, it is as if none of us are sitting on the table anymore.

@allthecolors

• increased dependence on Gauntlet: with no authority to revoke or manage the COMP incentives disbursed in this proposal, the DAO sets up a precedent for Gauntlet to directly control COMP incentives in future vault deployments. This arrangement would put the DAO in an unnecessarily precarious negotiating position when Gauntlet seeks to renew its risk management partnership with the DAO.

This again justifies and points out the pressing need of a secondary risk manager to the DAO as we have mentioned here yesterday.

While on one end Gauntlet handles the existing comets on V3 and the Morpho <> Compound Vaults, Chainrisk is here to support on new comet deployments and the development of Sandbox. This will solve for 3 things -

1. No Conflict of Interest within the DAO moving forward.
2. Faster recommendations and Faster deployment cycles to foster healthy relationships with partner protocols and Chains.
3. A bit more aggressive parameters ( while not compromising on the Risks ) to bring more retail and institutional eyeballs which are right now either going to AAVE or our recent DAO partner - Morpho.

That being said, here’s an additional major concern to be addressed regarding Gauntlet’s voting power in the DAO. Let me breakdown a series of events.

• Gauntlet was allotted an extra delegation of 216455.81 Votes by Robert Leshner on December 30th giving them a total voting power of 306519.98 Votes which is almost 90% of the Quorum.
  

  

• Weirdly, Gauntlet has not voted on most of the proposals that have gone up since then. Why ?
  

  

• Suddenly when there was no fee to be accrued by Gauntlet (atleast for now) in the Compound <> Morpho collaboration, they voted all in on the proposal despite of conflict of interest.

• Also whilst they prefer to abstain from simple proposals like updating supply caps, why did they chose the vote on such an important proposal for compound which was brought in by themselves ? Anything here that the DAO doesn’t know yet or is happening backdoors ?
  

  

• Does all of this also have chances to indicate that Gauntlet could also possibly vote on their next renewal proposal to make it pass ? That would be one of a kind sight to experience lmao.

• Also, bringing attention again to the Delegate Compensation Program Proposal that got defeated due to sudden surge of rejection from Humpy Wallets. Shouldn’t Gauntlet, being the second largest delegate, have voted to counteract the Humpy attack ? This is not for showing support but for counteracting Bad Actors in the DAO.

There are several other questions to be answered which brings us back to the point of accountability and transparency in the DAO. These two are the most pressing issues if we want to foster growth for Compound.

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Regards
Team Chainrisk

[euler_mab]

Dear Compound DAO,

It is widely recognised that soliciting competitive bids through an open tender process often leads to better commercial outcomes. Given the substantial controversy surrounding this proposal—particularly regarding its value for COMP holders—would it not have been prudent to consider offers from additional parties? At Euler, we believe we could have provided more attractive commercial terms, potentially including support through our own incentive structures.

The market design proposed for Morpho could, in fact, be replicated seamlessly on Euler today. So there is no technical reason not to choose Euler. Like Morpho, our platform offers immutable, risk-isolated pairs, reactive interest rates, and aggregated asset management vaults. These can be deployed out of the box today, requiring no additional development work.

However, whilst isolated-pairs can be a powerful solution to create new markets, they have yet to prove themselves outside of a bull market or in conditions where there aren’t heavy incentives on both the supply and borrow side. Only more capital efficient models have proven themselves to work in both bull and bear, and with or without incentives. Euler’s flexibility would allow Compound DAO to not just create isolated pairs, but also recreate Compound-style Comet markets, or implement more capital-efficient clusters of vaults (similar to a mini Aave), or even develop a fully bespoke solution tailored to your needs. Our protocol also offers numerous other advanced optional features, including vault-level governance, customisable hooks with access controls, firewall solutions, built-in swapping functionality, fixed-rate options, and much more.

Don’t be a stranger. Many of us at Euler were inspired to get started building in DeFi because of your pioneering protocol. Compound’s design today may have some drawbacks, but all money market designs have trade-offs. We stand ready to help make Compound great again if the DAO ever wants to consider bringing its partnership with Gauntlet - also one of our partners - over to Euler.