Gauntlet Update: Compound Incentive and Revenue Analytics

Compound Incentive and Revenue Analytics


Gauntlet would like to give the community some benchmark data on projected reserves accumulated vs COMP rewards distributed across protocols. We will keep these metrics in mind as we update the community on the progress of our Incentive Optimization (IO) work.

Recent IO Proposals

Note that the following two Gauntlet IO proposals have already been recently executed, yielding positive results:

1) Polygon Compound v3 USDC Supply Reward Proposal (executed on 5/18/23)

Since the proposal was executed:

  • USDC supply in the protocol has increased from $5.62M to $18.13M (+222%)
  • USDC borrows in the protocol have increased from $4.59M to $12.10M (+163%)

2) Ethereum Compound v3 USDC Interest Rate Proposal (executed on 5/30/23)

The IR curve proposal was executed on 5/30/23, resulting in more appealing USDC supply and borrow APRs for users. USDC supply decreased in the protocol four days later, from $250M to $200M, perhaps due to market volatility, resulting in ~100% utilization. However, due to the flatlined 4% borrow APR, no borrowers left the protocol at the time, and new USDC suppliers quickly joined the protocol to reestablish equilibrium, as intended. Under the previous IR curves, borrowers would have incurred much higher borrow APR at 100% utilization, likely resulting in borrowers leaving.

Currently, utilization is at 89%, within the intended 85%-95% utilization range, while still offering stable appealing borrow APRs to new borrowers and effectively utilizing the supplied USDC.

Current IO Metrics

COMP Distributions

To give the community insight into the protocol’s current metrics, we provide the data below for COMP distributions across v2 and v3 comets (assuming a 30-day VWAP COMP price of $33):

V3 Ethereum USDC V3 Ethereum ETH V3 Polygon USDC V3 Arbitrum USDC V2 Aggregate
Total COMP Distributions (Annualized tokens) 175,715 14,122 25,349 12,676 235,352 463,214
Total COMP Distributions (Annualized USD) $5,798,583 $466,021 $836,525 $418,323 $7,766,616 $15,286,069

As shown above, the protocols are losing a projected $15.29M of COMP rewards over the next year (assuming 30-day VWAP COMP price of $33).

Reserve Growth

The v3 IR curves are unique in the sense that reserve growth % fluctuates at various utilizations, at times even being negative. V2 IR curves, on the other hand, have fixed reserve growth based on the reserve factor. Gauntlet would like to improve reserve growth efficiency relative to the COMP Distributions.


Below are the V2 projected annual reserves (USD), relative to the current borrows, borrows APRs, and reserve factors, as of 6/13/23. The total amounts to $2.1M.


V3 Ethereum USDC V3 Ethereum ETH V3 Polygon USDC V3 Arbitrum USDC Aggregate
Total Base Asset Reserves Accumulated from 5/14/23 - 6/13/23 (Annualized USD) $366k $530k $12.5k -$9.2k $899k

Base Asset Supplies & Borrows

Another objective of the incentive optimization is to grow TVL in the v3 protocols relative to the COMP distributions. Below are the Base Asset supplies and borrows as of 6/13/23:

V3 Ethereum USDC V3 Ethereum ETH V3 Polygon USDC V3 Arbitrum USDC Aggregate
Base Asset Supply 6/13/23 (USD) $217.9M $65.7M $18.0M $8.25M $309.9M
Base Asset Borrows 6/13/23 (USD) $185.7M $32.3M $11.3M $0.75M $230.0M
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I would like to suggest to look at another aspect as well. Reserves management. As Compound protocol exist for quite a time it accumulated noticeble reserves. And while from time to time there were some talks about some sort of management of them, i believe now, with eventual sunsetting of v2 and relatively good growth of v3 i believe there is quite an opportunity for much better utilization of existing reserves.

Why wouldn’t protocol use part of its amassed stable coins and possibly eth reserves to deploy them into Supply side of v3 deployments? Certanly there is hardly better use of reserves than to use in own code and own product. They also would stay relativily liquid, not really much less liquid than they are currently sitting in v2 markets, but on the bright side they will accrue interest which is meaningful if we talk years. They don’t accrue anything in v2, and there is really not that much reason to subsidize suppliers by keeping reserves in v2 markets in their entirety, considering general direction of incentevising users to migrate to v3.

Reserves earning by themselves is not negligeble income for the protocol in the long run and can be useful part of revenue equation looking into the future. Since Gauntlet at some point was in the position of reserves being excessive for the purpose of strictly risk mitigation i believe you might be in qualified position to estimate viability of idea to use a portion of already accumulated reserves inside the protocol for the purpose of generating revenue to increase those reserves.


Note that reserves also accrue interests in V2. The supply rate of V3 of is higher on both USDC and ETH at the moment though.

I believe it is just normal accumulaton of new reserves what you linked. Reserves do grow as fraction of interest from borrowers goes to them, but reserves already sitting in market do not get their share of interest as user supplied assets do. If we speak of stable coins they just loose their value overtime as inflation eats their purchasing value away. That is why it is actually important to address that issue eventually as the bigger they are and the longer time goes the bigger impact there is to protocol.

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