After a thorough evaluation of the proposal to deploy Compound III on the Sonic Mainnet, Sonic has decided not to proceed with this integration at this time. This decision is based on several key considerations:
1. Risk Parameter Constraints:
The recommended risk parameters from Gauntlet, such as collateral factors and liquidation penalties are extremely conservative in spite of the current liquidity landscape which has significantly improved. For instance, the suggested supply caps of $S and $stS are 2.3M and 2.2M respectively which is much lower than the liquidity commitments of Sonic (~7M $S). These stringent parameters will hinder user engagement and the overall effectiveness of Compound on Sonic
2. Time-Consuming Process:
The process of assessing and adapting the deployment for Sonic has proven to be more time-consuming than anticipated. The proposal was made in the first week of December and its been ~3 months with no clarity on when the on chain vote would happen to deploy on Sonic. The lack of communication also does not give us confidence that compound has to speed to stay competitive in our rapidly growing DeFi ecosystem. Given the complexity and ongoing challenges, it is not viable to continue pursuing this integration under the current conditions
3. Lack of Confidence in Compound’s Growth and Speed of Execution:
We lack confidence that Compound is moving fast enough to grow and adapt to the evolving DeFi landscape. Their current pace and available resources do not justify the deployment of incentives on Sonic, as there is little assurance that Compound III will be able to scale effectively and attract sufficient adoption. Given that the process has taken ~3 months with no clarity, we have concerns in directing incentives towards an integration that lacks strong growth potential does not align with Sonic’s long-term strategy.
Conclusion:
While the integration of Compound III offers potential benefits, proceeding under the current conditions could pose significant risks to users and the protocol. Sonic will focus on strengthening its liquidity infrastructure and ecosystem to create a more conducive environment for future collaborations.