Dividend on COMP

I am new to compound and this forum. Forgive any ignorance on my behalf.
I was wondering if its already proposed to give some % dividend on comp token now or in the future for compholders?
Either to let them generate income or to encourage people to hold on to them.
At the current rate some people seem to dump any tokens earned really fast on the market which lead to a downward spiral in price. Especcially if there is little incentive to buy tokens.
Maybe it is in the best interest of the compound protocol to depreciate the token in value?
But if the token should bring other value besides governance a dividend would at least be beneficial to the intrinsic value of a comp token.
Some thing like staking or baking or pos mining would also be a form of dividend.
Please if possible share any thoughts on this.

Thanks Tim


The idea has been thrown around before, but there hasn’t been any serious talk around it. Raising the price of COMP has never been a goal of the Compound team or community: its high price has caused issues with farming and required some actions to be taken to decrease risk.

Now that governance is being distributed more though, I could see a majority wanting to make financial gains from COMP as that is what most in DeFi are looking for.


Hello arr00
thanks a lot for this reply. It helped explain alot.
I understand the distribution among the community needs to be done first. It could be the safer route in case of scc and such regulations. But at this moment the distribution is already for more than half done too less than 20 parties. So is it really neccesary to wait untill the rest is given to smaller parties?
Then again the benefits of a higher price seemed also to be the incentive to use the protocol by farming. It increased the compounds protocols popularity among an ever steady growing landacape of defi protocols that jump on the hype.
When the price of the token drops almost everyday, this doesn’t seem like a good choice to allocate some funds or even hold on to it. It also may risk losing the network effect gained previously…possibly.
A dividend would certainly incentivise holding on even when a price drops.
Lets wait and see the when somebody will propose it. Thanks for your insights.

From a securities law point of view it would be much safer to finish the COMP distribution before trying to monetize the protocol.

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Do you mind elaborating here, @monet-supply?

Having studied Compound for the few weeks (as I’m shorting COMP) this is what I’ve found on this topic so far. The website describes COMP’s utility as follows:

Compound (COMP) is an ERC-20 asset that empowers community governance of the Compound protocol; COMP token-holders and their delegates debate, propose, and vote on all changes to the protocol.

So it seems the real intend here is for COMP to be the token for governance. But Compound isn’t fully giving up control just yet. About 40% will be distributed over 4 years to the community, some are with investors and most are still with Compound and the team. (Although I found it hard to get good info on this) So for the next few years Compound will likely keep the ability to jump in and veto any proposal they really don’t like. So while the ultimate goal is decentralized governance, this is still a few years away I think.

As mentioned before here and on discord, one of the issues with dividends is that it could means COMP is seen as a security. So until the 4 year distribution is done or Compound registers COMP as a security or something like that… it may cause real legal issues for Compound if COMP paid dividend.

The second issue with this is that currently a small fee goes into the reserves. These reserves exist to cover black swan events in which case Compound goes insolvent. Paying dividend would come out of these reserves and would increase the risk a black swan event poses. I think the reserves are still rather small at the moment. Last I checked there was around $1.4M in all reserves combined. And even with the yield farming going on now it’s only growing by something like $6.500/day.

So the parties who currently have the voting power for COMP seem to view COMP as intended: the governance token of Compound. If you are interested in voting on decisions regarding Compound, buy some COMP. Or better yet, use Compound to receive COMP.

Since most vote holders are on this forum, please correct me if I’m mistaken anywhere, because all my comments here are second hand hearsay and educated guesswork.

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I tried to get some more details on who the most important vote holders are exactly. I have also matched (for validation) ETH wallet addressed with voters, as document in this Medium post.
I fully agree that it’s hard to talk of community governance when the community is first and foremost employees of Compound Labs and early investors.

@Tim - diluting the coin is not a great idea. One idea could be to take a small portion of each transaction on the COMP and apply it to a master fund pool to be distributed as dividend for holding $COMP and a portion used to improve the protocol.