Deploy Compound v3 on Arbitrum
Preamble
Type: Meta Process
Title: Deploy Compound v3 on Arbitrum
Author: FranklinDAO Governance (prev. Penn Blockchain)
Proposal Introduction
Point of contact: @pennblockchain & @haymond (Offchain Labs)
Description: We propose the deployment of Compound III on Arbitrum One for the community.
Grant Application: Applied
Abstract
Arbitrum is the leading Layer 2 on Ethereum from a TVL perspective and also by number of live dApps. Arbitrum provides a 90-99% decrease in gas costs for users while also expanding Ethereum’s computational capacity up to 7X mainnet Ethereum with the latest Nitro upgrade.
With over 500+ live applications, 129M+ transactions and over $3B+ in assets bridged in, Arbitrum is a logical ecosystem for Compound to deploy to.
About Arbitrum
This proposal is to authorize Compound Labs to deploy Compound III on the Arbitrum One optimistic rollup chain on behalf of the community. We will briefly outline the most important reasons:
- Arbitrum is a leading DeFi ecosystem on Ethereum Layer 2.
Arbitrum has experienced tremendous growth after launching a little over a year ago in August 2021. During this period Arbitrum has seen a rise in various defi projects including:
- Arbitrum native defi teams - GMX, Radiant, Mycelium, Vesta Finance, Cap, JonesDAO, Shell Protocol etc.
- Blue-chip Ethereum teams - Uniswap, Sushiswap, Balancer, Curve, 0x/Matcha, Aave V3
- Many smaller up-and-coming DeFi projects
The Arbitrum team did all of this without any incentives and we believe they’re uniquely positioned to help Compound succeed.
- Deploying on Arbitrum can have a lot of benefits
DeFi projects that have deployed on Arbitrum have experienced a number of benefits, including:
- Gas Cost savings
- According to L2fees, the average cost to send ETH is $0.04 and the average cost to swap tokens is $0.12.
- Compare that to Ethereum’s $0.79 fee to send ETH and $3.93 fee to swap tokens.
- Further work is being done (EIP-4844) to lower gas costs for users, so this will continue to get better for Arbitrum users!
- User base growth
- According to Nansen Pro, Arbitrum One has 400k unique monthly active users for the past 30 days, which is up substantially from launch
- Return to the original vision, on a truly aligned Ethereum rollup
- Even though the bear market has seen declining gas costs for users, we know this won’t stay this way forever. Eventually the bull market will return and gas costs will spike again. If Compound proactively deploys on Arbitrum, as every other major DeFi blue chip has, the Compound community will have a future proof system to scale as Ethereum does.
- Mature infrastructure
- Arbitrum has support from numerous Ethereum infrastructure providers including Etherscan (Arbiscan), The Graph, Chainlink, Alchemy, Truffle, Dune Analytics and Nansen. Tangentially, Offchain Labs also has also gained momentum with support for Google Cloud on Arbitrum Nova and the sentiment towards infrastructure providers working with Arbitrum technology is on the path to becoming even stronger.
- Arbitrum also has the strongest exchange support of any Layer 2 with support from Binance, Kraken, Coinbase, Huobi & Crypto.com as well as native USDC support coming soon from Circle, which is relevant to Compound’s usage on Layer 2.
- Partnership support
- Offchain Labs, the team behind Arbitrum, is agnostic in being helpful and supportive of all teams in the Arbitrum ecosystem. They can be helpful with intros to teams, co-marketing and technical support to ensure that Compound III has success.
- Arbitrum is aligned with Vitalik’s vision of a rollup centric Ethereum roadmap
In Vitalik’s original post on a rollup centric Ethereum roadmap, Arbitrum is exactly that long term solution that handles execution and computation on the Arbitrum blockchain & posts the data back to Ethereum for its security. In tandem, acquiring Prysmatic Labs, the team behind the leading Eth proof-of-stake client, helps establish this alignment even more as Offchain Labs provides the resources to realize this vision. As Compound was born natively on Ethereum, its community should be aligned with the most advanced Ethereum rollup to date.
Proposal Details
Non-Technical Evaluation
- TVL on chain: ~$3.3 billion: Arbitrum TVL - DefiLlama
- Number of protocols on the chain: >500: Arbitrum TVL - DefiLlama
- Unique addresses: 2.8 million: Arbitrum Unique Addresses Chart | Arbiscan
- Number of unique active users: Nansen - Analytics for Crypto, DeFi and NFT
- 1 day: 72k
- 7 days: 310k
- 30 days: 672k
Deploying on Arbitrum
We believe the Arbitrum One optimistic rollup is a great next step as a deployment option for Compound III for several reason:
- Arbitrum One is the leading DeFi ecosystem on Layer 2 despite not offering any protocol incentives
- Deploying to Arbitrum One can bring a lot of benefits (gas cost savings, fastest growing L2, etc.)
- Arbitrum is aligned with Vitalik’s vision of a rollup centric Ethereum roadmap
We submit this proposal for your consideration and look forward to hearing your feedback.
Copyright Waiver
Copyright and related rights waived via CC0.
License Exemption
We are requesting an exemption that will allow the Arbitrum One network to obtain a Compound Business Source License (BSL) to use the Licensed Work, update compound-community-licenses.eth, and deploy it on the Arbitrum One Network, provided that the deployment is subject to Ethereum Layer 1 Compound Protocol governance and control.
