Summary
Compound V2 was introduced in May 2019 and has seen significant usage decline as the majority of user activity has shifted to V3, which now serves as the protocol’s primary deployment. V2’s pooled-collateral model introduces systemic risk by linking all assets within a single pool, creating the potential for cross-asset contagion. The broad parameter surface requires continual monitoring and increases the chance of misconfiguration. A long tail of low-utilization markets adds smart contract and governance overhead, while expanding the protocol’s attack surface. In addition, V2’s design is less gas-efficient and more complex for external integrations than V3.
In contrast, V3 has been proven in production as the primary deployment for ~3 years, with consistently higher usage than V2.
With these considerations, we recommend a staged wind-down of V2 through the following steps and estimated timeline:
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Sept 19th (today): Publish V2 Deprecation forum proposal
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Sept 29th: Initiate Snapshot proposal to gauge delegate sentiment
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Oct 6th: Publish a banner on V2 UI informing users of the deprecation plan
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Oct 10th: Initiate onchain proposal to deprecate V2 markets
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Oct 20th: Execute onchain V2 deprecation proposal
- Pause new deposits and borrows across all V2 markets (repayments and withdrawals remain open)
- Increase Reserve Factors to 100% on all V2 markets
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Ad-hoc: Provide forum updates at each milestone
Background
Between 2023 and 2024, the DAO took incremental steps to reduce V2 usage (lowering collateral factors, adjusting reserve factors, tapering rewards) to avoid forced liquidations and accommodate integrations still referencing V2. Residual activity persisted primarily due to (1) long-tail strategies not directly replicable in V3 and (2) wallets, bots, and dashboards continuing to default to V2 endpoints.
Usage Snapshot
(30-day averages as of 2025-09-18)
| Protocol | Total Loan Size ($) | Active Loans (> $50) | Fees (30d) | Active Addresses |
|---|---|---|---|---|
| V2 | 127.2M | 2,107 | 9.96M | 1,810 |
| V3 | 1.01B | 4,153 | 24.61M | 3,800 |
Deprecation Plan
Step 1: Disable new supply and borrow activity
- Pause Supply/Mint and Borrow across all V2 markets.
- Repayments, withdrawals, transfers, and liquidations remain active.
Step 2: Redirect interest to reserves
- Increase all Reserve Factors to 100% so all accrued interest flows into reserves.
Step 3: Communicate to users
- Illustrative UI banner on Compound V2:
“Compound V2 is being deprecated through governance. The DAO no longer supports V2 and is not responsible for covering losses or distributing rewards. Users remain solely responsible for managing their positions. New supplies and borrows are disabled, but repayments and withdrawals will remain available. For all other functionality, you are encouraged to use Compound V3.”
Timeline
| Milestone | Target Date | Outcome |
|---|---|---|
| Forum Post | Sept 19 | Share the V2 deprecation plan |
| Community Discussion | Sept 19 – Sept 29 | Collect feedback, answer questions |
| Snapshot Vote & Sentiment Check | Sept 29 – Oct 6 | Gauge delegate sentiment |
| Publish UI Banner on V2 | Oct 6 | Inform users of the proposal for V2 deprecation |
| Onchain Proposal | Oct 10 – Oct 18 | Implement deprecation if approved |
| Execution | Oct 20 | Pause supply/borrow, increase RF to 100% |
Next Steps
We welcome community feedback on the proposed plan and timeline. Following community discussion, we intend to initiate a Snapshot vote on September 29 to gauge support for V2 deprecation.
Note: This post is provided for community discussion purposes only. It does not constitute financial, legal, tax, or investment advice. Any changes to the protocol will be implemented solely through on-chain DAO governance. Users remain solely responsible for their own positions and decisions, including whether and how to interact with V2 or migrate to other deployments.