Governance Weekly Recap

Hi all - duncand from Boardroom here :wave:

Part of our team’s mission is to increase informed participation in governance, and as a project supporting Compound governance we thought it would be useful to provide a weekly recap of recent governance activity in the Compound community. We feel a governance-focused summary will be useful for delegates and voters due to the often rapid pace of governance news and updates. When appropriate we’ll also note a few specific areas for action on timely subjects.

Within our weekly recap, we’ll provide a look back at:

  • Proposals
  • Governance changes
  • Impactful operating suggestions, and
  • Critical governance-related discussions across Discourse, Twitter, and Discord

The first recap will be posted today. We’d love to hear your feedback and any suggestions you have!

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September 9, 2022

Summary

It’s been an eventful few weeks. The big news: Compound III was announced on August 25; the first deployment allows for the borrowing of USDC using ETH, WBTC, LINK, UNI, and COMP as collateral. The unexpected news: there were some difficulties with the Oracle upgrade. The v3 Oracle, which updated the price feed for Compound v2 and which was implemented 12 days ago with the passing of the Compound Oracle Upgrade proposal, contained an error in the code that caused the cETH market to be “temporarily frozen.” The response was fast, as you’ll see in the first two proposals described below.

Proposals

  • Oracle Update” (119). Once the oracle error was discovered, @GFXlabs quickly proposed reverting the oracle from v3 to v2. This proposal passed and “the cETH v2 markets are fully functional again.” Because of the seven-day governance process, however, there remained a risk that sudden liquidations could occur during this period due to price fluctuations.
  • Unpause Seize” (121). Before the above proposal succeeded, a proactive proposal was made by @Arr00 (working with OpenZeppelin) to allow for liquidations to be paused “to ensure that any users or downstream protocols have ample time to rebalance their positions once the price feed for cETH is restored.” As written, the proposal was meant to make sure that Compound’s Pause Guardian (which is designed to pause liquidations if certain conditions are met) can be unpaused: “This ensures that a pause action will only last ~23 hours as opposed to the usual 7-day governance process.” Since the Pause Guardian was not triggered the proposal was canceled.
  • Risk Parameter Updates for 1 Collateral Asset” (118). Gauntlet’s risk parameter update, part of their regular recommendations, was canceled pending a fix to the Oracle.
  • cETH Risk Mitigation” (122). Among other things, this proposal by @monet-supply sets a borrow cap and updates the interest-rate model in Compound v2 ahead of the Ethereum merge, which “has the potential to cause disruption to ETH lending markets.” The proposal passed with 100% voting in favor.
  • Risk Parameter Changes for FEI” (123). This proposal by Gauntlet pauses FEI borrowing and sets a high reserve factor (99%) as the “first step in winding down the FEI market,” which will be deprecated due to Tribe DAO’s entering a “terminal state.” The proposal passed with 100% voting in favor.
  • Initialize Compound III COMP Distribution” (124). Prior to this proposal, COMP distribution — which enables Compound community governance — was provided only for users of Compound v2. This proposal initiates COMP distribution to users of Compound III by re-allocating 14.17% from v2 markets (total distribution has not changed), according to the parameters specified in the proposal. This “empowers users of the new deployment, and encourages the migration of usage from Compound v2.” The proposal passed with 100% voting in favor.

:speaking_head: Meanwhile, Gauntlet is seeking community feedback through two Snapshot votes:

  • The first (which ends on September 9) aims for discussion and consensus on reserve factors in Compound v2.
  • The second (which ends on September 14) seeks consensus on rate-of-change for collateral factors, particularly with respect to “risk-off” liquidations.

In the Forums

On Twitter

In Discord

Developer Community Calls

  • Calls are held every two weeks. A recording of he last one can be found here.

:speaking_head: Join the next call on September 21 (4:30PM GMT), in Discord.

Quick Gov Links: Governance Overview | Governance Docs | Compound on Boardroom

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Week of September 12, 2022

Summary

The Merge was — happily! — successful, with no signs of disturbance to markets on Compound, thanks in large part to careful preparation. In other, big (non governance-related) news, Compound Treasury announced borrowing for institutions.

Proposals

Gauntlet <> Compound Renewal (125): This proposal from Gauntlet seeks to renew their twelve-month engagement with Compound. Gauntlet has been working with Compound in various ways for three years; their current engagement runs through September 27, 2022. Gauntlet describes their role as follows: “continuous market risk management to maximize capital efficiency while minimizing the risk of insolvency and liquidations to create long-term sustainable growth.” New for this engagement: Coverage of the recently initiated Compound III, and a refund model should Gauntlet’s optimizations incur losses.

“Our ultimate goal is to protect the protocol - we stand behind our work and want the community to have confidence in our recommendations.”

:speaking_head: Vote here, beginning tomorrow.

TUSD market update proposal. @Joyce from TrueUSD has submitted for discussion a proposal for adding TUSD as a collateral asset on Compound. TUSD is an ERC-20 that describes itself as “the first independently-verified digital asset redeemable 1-for-1 for US Dollars.”

Results of community feedback on Gauntlet’s two Snapshot polls: 75% voted in favor of increasing reserve factors by 0.025 for USDT and DAI while nearly 100% voted in favor of reducing each collateral asset’s collateral factor by up to 5%.

In the Forums

Post-mortem of the cETH price-feed incident. @cylon from OpenZeppelin (a security advisor for Compound DAO) breaks down what happened and provides suggestions for going forward — which include exploring “how proposal upgrades could be rolled back more quickly for a limited time following an upgrade’s execution without going through 7-day governance.”

Normalizing ETH market post-merge. @pauljlei from Gauntlet initiates discussion on this topic, since proposal 122 mitigated cETH market risk prior to the merge. @monet-supply suggests shifting to a “jump rate” model.

There are some follow-up questions for Questbook’s delegated domain allocation proposal to the Compound Grants program.

On Twitter

@getty_hill wonders whether it’s time to push for Compound Autonomous Proposals again, given how much the DeFi space has changed.

@blockworks_ publishes an op-ed by John Morrow of Gauntlet pointing to their new advisory standard with DAOs (see proposal above): “if you are wrong, you don’t get paid.”

In Discord

Leighton asks “when do we cut all COMP V2 Distribution??? V3 COMP Distribution method is so superior.”

Matto suggests “streamling the [COMP] distribution adjustments dynamically.”

Developer Community Calls

  • Calls are held every two weeks. A recording of he last one can be found here.

:speaking_head: Join the next call on September 21 (4:30PM GMT), in Discord.

Quick Gov Links: Governance Overview | Governance Docs | Compound on Boardroom

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Week of September 19, 2022

Summary

Welcome to the latest governance recap from Boardroom, covering all of last week’s important governance related content. We hope it proves useful to the community.

Proposals

Compound III Supply Caps (127). Noting that WBTC, ETH, and COMP are utilizing most of their supply caps in Compound III — which has been operating for more than a month ”without bugs, losses, or disruptions” — @rleshner writes that “Now is a prudent time to begin carefully raising collateral supply caps, so that the protocol can continue expanding past its trial phase.” The specific increases suggested are outlined in the proposal.

OpenZeppelin Security Partnership - 2022 Q4 Adjustment (126). Last December OpenZeppelin was selected to provide “continuous audit, security advisory, and auditing services” to Compound. Each quarter they submit a proposal to update their service fee, which this round as in the last is a $1m lump-sum payment in COMP.

The Gauntlet <> Compound Renewal (125), summarized in last week’s recap, was passed, and was executed on September 25.

:speaking_head: Vote here!

In the Forums

OpenZeppelin security updates for August & September are detailed here by @cylon. It includes a link to their Q4 compensation proposal, which follows the structure of their Q3 proposal.

Update cComp parameters? @monet-supply suggests that “it may be safe to increase borrowing caps to allow for more utilization and greater cCOMP yields.”

Dune dashboard and educational materials for Compound III. @andrewhong5297 proposes a Dune dashboard “to build out more user-level analysis, as well as a writeup and youtube video explaining the technicals of the protocol (making it more accessible for developers and analysts to understand).” Here’s the poll.

Normalizing ETH market post merge. The discussion continues; Gauntlet “Gauntlet supports >0% borrow rate at 0% utilization.”

Deprecate FEI market. The first part of this proposal was executed on September 10; @OneTrueKirk wonders if it’s time to submit a proposal to execute the second part, which sets the “FEI reserve factor to 100% (which allows for liquidation of outstanding borrows).”

TUSD market update proposal. This was noted in last week’s recap — and discussion continues, with an update from a16z, and a presentation during the community call.

1independence, which aims to “distribute life-changing opportunities to people,” hopes to discuss a partnership with Compound.

Initialize Compound III (USDC on Polygon PoS). @hamzahkhan proposes initializing Compound III on Polygon, an EVM compatible chain, “with USDC as the borrowable asset…[and seeding] the market with 500k USDC.” While there is support expressed in the comments, a few concerns are noted, and a suggestion made to split the proposal into smaller parts so that governance can address each portion adequately.

Investigate market manipulation risk in ZRK and other tokens? Volt Protocol wonders whether we should return to the topic, given the GMX oracle attack.

Developer Community Calls

The last call took place on September 21, and included discussions led by Gauntlet, OpenZeppelin, and the TUSD team. The recording can be found here.

:speaking_head: Join the next call on October 5 (4:30PM GMT), in Discord.

Quick Gov Links: Governance Overview | Governance Docs | Compound on Boardroom

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