Deploy Compound v3 on Arbitrum

Proposals
1

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:

  1. 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.

  1. 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.
  1. 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

  1. TVL on chain: ~$3.3 billion: Arbitrum TVL - DefiLlama
  2. Number of protocols on the chain: >500: Arbitrum TVL - DefiLlama
  3. Unique addresses: 2.8 million: Arbitrum Unique Addresses Chart | Arbiscan
  4. 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.

11 Likes
2

(Note: We understand the core team’s priorities and bandwidth regarding deployments of Comet and don’t want to rush them. This is simply to start discussion around this topic and timeline dependent on other priorities)

1 Like
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We are kicking off work on the governance receiver contract for Arbitrum shortly and actually have already tentatively scheduled an audit with OZ for 3/27!

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To follow up on this discussion, do y’all have any asset suggestions for the initial market? Right now we are looking at WETH, WBTC, and possibly GMX, although we want to investigate the project more closely.

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In discussions with the team, they have mentioned having:

  1. WBTC
  2. WETH
  3. LINK
  4. Also possibly GMX as well.

This is based on data from Arbiscan as well as Compound’s existing markets on Ethereum mainnet.

1 Like
6

Add the $GLP

Staked GLP token address (Arbitrum): 0x1aDDD80E6039594eE970E5872D247bf0414C8903

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Add $Magic

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For the initial assets, I would also add wstETH, USDC and DAI along with what Penn Blockchain recommended. GMX would be a nice-to-have.

1 Like
8

Where may I find Arbitrum Goerli deployments?

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Add $ARB

The launch of $ARB

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Here you go Public Chains | Arbitrum Documentation Center

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I believe it make sense to support protocol own governance token, COMP as well. Even while from collateral point of view it’s relatively minor asset. But i strongly believe that having support of own tokens is very important in long run.

1 Like
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I’m looking for Comet contracts deployed on Arbitrum Goerli to run testnet on them. Do you know if Comet is deployed on Arbitrum Goerli yet?

14

Following Gauntlet’s recommendations for deploying Compound v3 on Optimism and Polygon, we are currently conducting analysis for Arbitrum as well.

3 Likes
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Gauntlet Initial Parameter Recommendations - Compound v3 Arbitrum USDC Comet

Summary

We provide two options to the community below. Option 1 is very conservative for the purpose of testing out Compound V3 mechanics. As such, the conservatism is less so derived from market risk (which is Gauntlet’s focus) but more so on the smart contract and other technical risks. Option 2 is less conservative and assumes that the community does not need to test Compound V3 mechanics on a new chain.

Option 1: Very Conservative (Test out Mechanics)

WETH WBTC ARB GMX
Supply Cap 2k ($3.79M) 100 ($3.04M) 1M ($1.22M) 10k ($780k)
Liquidation Factor 50% 45% 40% 30%
Collateral Factor 45% 40% 35% 25%
Liquidation Bonus 5% 5% 7% 7%

Storefront price factor: 80%
IR Curve: Same as Ethereum and Polygon USDC comets

Option 2: Conservative (Assume mechanics are working, then gradually increase aggressiveness of parameters)

WETH WBTC ARB GMX
Supply Cap 5k ($9.47M) 300 ($9.04M) 4M ($4.88M) 50k ($3.90M)
Liquidation Factor 85% 77% 60% 45%
Collateral Factor 78% 70% 55% 40%
Liquidation Bonus 5% 5% 7% 7%

Storefront price factor: 80%
IR Curve: Same as Ethereum and Polygon USDC comets

The supply caps are set as a function of on-chain liquidity and can be increased after the initial launch. The proposed LFs for the initial listing are set conservatively while still being capital efficient enough for usability.

*Note that the ARB token has only been on the market for 3 weeks. It may be prudent for the community to wait longer to list this asset.

By approving this proposal, you agree that any services provided by Gauntlet shall be governed by the terms of service available at gauntlet.network/tos.

6 Likes
16

Thank @nlord for sharing your thoughts on the asset risk parameter recommendation.
It’s great to see Compound taking steps ahead of AAVE on the supported assets. We would to share our thoughts on $ARB and $GMX.

  1. The comparison between $ARB on Compound and $OP on AAVE seems appropriate, as both tokens share similar tokenomics. If the $ARB adoption rate on Compound follows a similar pattern to that of $OP on AAVE, we can expect a low percentage of $ARB’s total supply to be deposited.

  2. We agree with @ClairvoyantLabs that GLP would be more suitable for a lending protocol over $GMX. Since $GMX itself can generate interest, there might not be enough incentive for people to use it as collateral at a low LTV. On the other hand, GLP could offer a more stable and less risky alternative due to its lower volatility compared to $GMX.

3 Likes
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Following the conversations on this thread, recent community calls, Discord, and GitHub, a cUSDCv3 market has been deployed to Arbitrum from this pull request.

The parameters to enable the market are being finalized on this pull request. It includes Gauntlet’s recommended risk parameters for the following assets::

  • ARB: $5.2M supply cap (4M tokens), 55% CF, 60% LCF, and 7% liquidation fee
  • GMX: $3.4M supply cap (50K tokens), 40% CF, 45% LCF, and 7% liquidation fee
  • WETH: $9.3M supply cap (5K tokens), 78% CF, 85% LCF, and 5% liquidation fee
  • WBTC: $8.6M supply cap (300 tokens), 70% CF, 77% LCF, and 5% liquidation fee

The interest rate model is currently configured the same as cUSDCv3 on mainnet. After the launch of the market, Gauntlet will monitor and consider recommendations to the interest rate model based on preliminary utilization & growth.

The assets and price feeds of the deployment use the following inputs:

OpenZeppelin has completed an additional audit of the bridged governance contracts and flows.

Finally, see the Initialization Proposal section below for more information about the next steps to enable the deployed market.

Deployed Contracts

cUSDCv3: 0xA5EDBDD9646f8dFF606d7448e414884C7d905dCA

This is the main proxy contract for interacting with the new market. The address should remain fixed and independent from future upgrades to the market. It is an OpenZeppelin TransparentUpgradeableProxy contract.

cUSDCv3 Implementation: 0x9aB958D306Beb81711e5f5CA0731C1E4772dF9cb

This is the implementation of the market logic contract, as deployed by the Comet Factory via the Configurator.

cUSDCv3 Ext: 0x1B2E88cC7365d90e7E81392432482925BD8437E9

This is an extension of the market logic contract which supports some auxiliary/independent interfaces for the protocol. This is used to add additional functionality without requiring contract space in the main protocol contract.

Configurator: 0xb21b06D71c75973babdE35b49fFDAc3F82Ad3775

This is a proxy contract for the ‘configurator’, which is used to set and update parameters of a Comet proxy contract. The configurator deploys implementations of the Comet logic contract according to its configuration. This pattern allows significant gas savings for users of the protocol by ‘constantizing’ the parameters of the protocol.

Configurator Implementation: 0x8495AF03fb797E2965bCB42Cb0693e1c15614798

This is the implementation of the Configurator contract, which can also be upgraded to support unforeseen changes to the protocol.

Proxy Admin: 0xD10b40fF1D92e2267D099Da3509253D9Da4D715e

This is the admin of the Comet and Configurator proxy contracts. It is a ProxyAdmin as recommended/implemented by OpenZeppelin according to their upgradeability pattern.

Comet Factory: 0xe2AA5194E45B043AfdD6E98F467c0B1c13484ae9

This is the factory contract capable of producing instances of the Comet implementation/logic contract, and invoked by the Configurator.

Rewards: 0x88730d254A2f7e6AC8388c3198aFd694bA9f7fae

This is a rewards contract which can hold rewards tokens (e.g. COMP, ARB) and allows claiming rewards by users, according to the core protocol tracking indices.

Bridge Receiver: 0x42480C37B249e33aABaf4c22B20235656bd38068

Receives bridged governance messages from the Arbitrum gateway contracts and forwards them to the bridge timelock.

Bridge Timelock: 0x3fB4d38ea7EC20D91917c09591490Eeda38Cf88A

The governor of the Comet deployment, exclusively receiving input from Ethereum mainnet governance through the bridge receiver.

Initialization Proposal

To initialize the market, the deployment process is similar to the initialization of cUSDCv3 on Ethereum mainnet, the primary difference being the bridging of governance actions to Arbitrum, instead of taking place directly on the governance chain (Ethereum mainnet).

The initialization proposal will take the following actions:

  1. Set Comet configuration, deploy new Comet on Arbitrum, and set rewards configuration. This sends the encoded setConfiguration, deployAndUpgradeTo and setRewardConfig calls across the bridge to the governance receiver on Arbitrum.

  2. Approve Arbitrum’s L1 Arb-Custom Gateway to take Timelock’s USDC, in order to seed the market reserves through the bridge.

  3. Bridge USDC from mainnet to Arbitrum Comet, via the Arbitrum L1GatewayRouter

  4. Approve Arbitrum’s L1 ERC20 Gateway to take Timelock’s COMP, in order to seed the rewards contract through the bridge.

  5. Bridge COMP from mainnet to the Arbitrum rewards contract, via the Arbitrum L1GatewayRouter

  6. Write the ENS TXT record v3-official-markets on v3-additional-grants.compound-community-licenses.eth containing the official markets JSON.

  7. Turn off COMP distribution on Compound v2 USDT borrows, as the distribution is being shifted over to bootstrap the Arbitrum market.

The deployment and proposal migrations have been built using the Comet scenario framework and deployed using the Comet deployment manager. The deployment was run through a GitHub action using seacrest and the scenario checks can be seen from the proposal branch CI checks.

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The proposal has been created and will commence voting in 2 days.

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The proposal was executed on Arbitrum earlier today and the market is now live for everyone to use!

3 Likes