CP039: Avoiding liquidations

One thing that all participants in the recent vote seem to agree on is that changes should try to avoid increasing the quantity of liquidations users face. As users of Compound only provide one piece of identifying information - their address - it’s not clear how to contact them to make sure they are aware of these changes. I’d like to suggest a few things that we could to minimize liquidations and wanted to get feedback on these ideas.

  1. Try to contact the users using ETH transactions. The idea here is to:
    • Send a small, but strange amount of eth, e.g. .0001234 or .000420420
    • Encode a message into the Hex data field that says something like “Check your WBTC borrow on COMP”

This is not a great option for obvious reasons - the user has to see the transaction and also try to parse the Hex Data. However, we’re prepared to “message” as many addresses that are at risk as time and money allows.

  1. Update the Compound UI to notify users of the pending parameter change
    • One thing that we can’t do as a community is to prevent people from opening new WBTC positions that are high risk. Maybe the Compound labs team could push a quick update to the site to warn new users of this change, you could imagine a small toast that users would see until Sunday

@getty and other community members have repeatedly espoused the virtues of WBTC borrowers - that they are sophisticated and that they manage their positions actively. I hope this is true. But we are prepared to do everything we can to try to prevent liquidations in the case this hope is even partially misplaced. No one has been liquidated yet, and I’m optimistic that the community can rally together to minimize the impact of these important changes to the protocol.

Should we try sending small ETH transactions to notify users?
  • Yes, it might help!
  • No, this is a total waste of time

0 voters

Gauntlet is also keeping an active list of those who will be impacted by the new collateral factors. We will keep the community informed as changes occur.

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Thanks to @rleshner for sending the newsletter: Alert: WBTC Collateral Factor Decrease in 48 Hours - The Compound Digest

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really one guy who is gonna take most of the impact here:

typo on my vote. to clarify I think it’s worth doing for this particular case, but not sure it’s the best solution for future collateral factor changes.


It’s so few addresses right now, we might as well give it a shot


I guess sending eth with message could be done, nothing bad can happen from that idea. But frankly it doesn’t look very effective. Not like it’s going to produce sort of popup for users, and might very well pass completely unnoticed. In my opinion it’s mostly going to be just a waste of gas.

It would be great if Compound UI could display a message on front page. And not just in that particular case, but for any future event governance consider important. There unlikely to be many such events, but it likely will be more effective in communication to users.


Sent a couple, will do so again tomorrow

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I support the idea of the front page message brought up by @Sirokko
Further, I’d like to utter my oppinion that we are dealing with mature and responsible users here that invest serious amounts in a volatile and fast-chaning environment. This has to managed actively and changes in the system followed. This is not a set-it-and-forget-it environment as I see it. Changes of the CF have been discussed here actively for a while now and the change attempt only went through with the 2nd proposal; so there was even more time to be aware. I don’t see the need to “run after” folks who operate their borrowing/lending business on the edge to liquidation more than necessary, i.e. front page / news message should be fine.

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An ideal solution is not to liquidate due to change in CF but leave liquidation to market force.

What was the aftermath of the change?

Preliminary analysis shows only one account impacted immediately (1) and one liquidated a bit after (2). Large borrowers are clearly sophisticated users of the protocol and most concerns about the large CF changes appear to have been overstated.

(1) Note this account has also been liquidated 9 times in the past 2 months. Ethereum Transaction Hash (Txhash) Details | Etherscan

(2) Ethereum Transaction Hash (Txhash) Details | Etherscan


Was thinking of moving my some btc into comp to better make use of some of my assets, but recent changes seems to have me rethinking this. I guess users mulling over their investment decisions a bit more is ideal for the platform in general, but the risk I’m weighing now is whether a protocol/governance change that liquidates a part/all of my entire positions might happen while I’m out on vacation. I don’t know if that’s a message we want to convey.

This would be very useful, a popup/modal announcing protocol changes that impact users liquidity/positions would be very helpful.

Also perhaps apart from notifications, for protocol changes that impact users or rather shown liquidate users or increase users chances of liquidation, a longer effectivity time would be ideal.


Hi @jmo , is there a specific update to the protocol that is motivating your concern to minimise liquidation OR is your motivation a general one to avoid liquidations on the platform?

If more general, perhaps there could be an email input opportunity when you make a trade on compound?

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Maybe adding a “Notifications Settings” button on the UI that directs the user to enter their email address and name (optional).

Could say “notify me when…” My Borrow/Supply ratio reaches ##%, Upcoming protocol changes are scheduled, My COMP rewards reaches ## COMP, News regarding the Compound Protocol, etc.

Should be a way to get the user’s ETH address (if they connected their wallet). Then users are more than just ETH addresses interacting with the protocol because they can be contacted/notified via email.

Maybe even have 5,000 COMP (or anything really) set aside to split evenly between users who link their ETH address and email address.


Tyler (TRiLeZ) here.

I could see these types of notifications going unnoticed most of the time.

What I think would really help when it comes to liquidations are three things:

  1. Partial liquidations. When the liquidation threshold is hit, liquidate just enough of the collateral assets to hit an X% borrowing rate.
  2. Time delays. Wait X amount of time after passing the liquidation threshold before liquidating. This gives users more time to manage their loans in the case of a sudden/unexpected market drop.
  3. Liquidation preferences. Where I can select the order of my collateral assets to be sold off in the event of a (partial) liquidation.