Simple Summary
- Provide a retrospective of Gauntlet’s partnership with Compound in Q4 2021
- As outlined in the original proposal, update the ContributorCompSpeed at the beginning of every quarter
Retrospective of Gauntlet <> Compound Partnership
Over the past several months, Gauntlet has been executing on its Dynamic Risk Parameters engagement. In just a quarter, Gauntlet has delivered the following:
- Launched the Compound Risk Dashboard to help the community understand Gauntlet’s methodology and risk in the Compound protocol
- Implemented 5 sets of parameter recommendations to manage risk and optimize capital efficiency
- As a result of Gauntlet’s parameter recommendations, Gauntlet has safely unlocked $832.5M of additional borrow, leading to $33.8M additional borrow interest paid and leading to $2.54M increase in annual income to the Compound protocol (assuming elasticity of borrow with collateral factor increases), all while maintaining protocol risk at safe levels
- Published 2 Monthly Risk Reviews to keep the community informed of market risk pertaining to Compound
Assumes elasticity of borrow in relation with collateral factor increases.
Dollars shown in $USD millions. Gauntlet quarterly fee calculated using current COMP price.
Specification
As outlined in the original proposal, at the start of every quarter Gauntlet will create a proposal to update the service fee payment (higher or lower) in accordance with the formula outlined in the full proposal.
The formula to calculate Gauntlet’s service fee has four components:
- An asset multiplier to track risk management complexity
- A proxy for capital efficiency
- A marginal base fee
- VWAP (Volume Weighted Average Price) of COMP
The asset multiplier calculation is log(Number of Assets, 10).
The proxy for capital efficiency is the total borrowed for risk-managed assets. Capital efficiency is realized by borrowing demand. The total borrowed amount is calculated as the 30-day average and rounded down to the nearest $1B.
Gauntlet’s risk management marginal base fee is shown below:
Below shows Gauntlet’s quarterly service fee denominated in COMP (table calculated at $221.14 30-Day VWAP)
Currently (as of 12-27-2021), the 30-Day VWAP is $221.14, the 30-day average borrow is $7.31B, and the number of assets on Compound is 16. With these inputs, Gauntlet’s quarterly fee for the next quarter is 8,168 COMP tokens. We plan on making an on-chain proposal next week. At that point in time, we will also update the pricing inputs so that the proposal is fresh. We want to provide the community ample time to respond with any questions or comments.
Next Steps
- Gauntlet will post an on-chain proposal next week for vote
Gauntlet Ongoing Developments
A substantial growth driver for Compound is supporting more assets to enable an increasingly diverse ecosystem. Importantly, Gauntlet will help safely onboard new assets onto the Compound protocol. As new assets launch on the protocol, Gauntlet will dynamically adjust parameters to drive safe, sustainable growth for Compound.
In early January, Gauntlet will publish a reserve factor recommendation methodology, which will drive even more impact to the protocol. This methodology will incorporate several important considerations including the tradeoffs between covering insolvencies and promoting protocol growth.
In addition, Gauntlet is thinking of ways to streamline the parameter recommendation process so that Gauntlet’s risk management product can be delivered more dynamically, as the current governance process requires around one week to implement risk parameter changes. We look forward to returning to the Community with more defined solutions and would welcome all thoughts and feedback.