@humpy glad we could be helpful and thank you for championing increasing utility for COMP token through features such as staking and we agree with the benefits to the protocol you brought up. Given the change in regulatory environment, it could also make sense to start thinking about a fee switch as a potential value accrual mechanism. These fall within the sections of our proposed service agreement around mechanism design and quantitative evaluation of business proposals and if the community wants to move forward, we are happy to provide further analysis and assist in designing a solution.
As for the LTV ratios, while we left Gauntlet and can’t speak to their current approach, we can offer some of our perspective. Three key factors come to mind for setting risk parameters: objective considerations like capital efficiency (aggressiveness) and risk (insolvency buffer, VaR), as well as the more subjective element of the community’s risk preference. While the goal has been to take an objective approach, communicating and aligning on risk appetite has remained challenging. Various efforts such as risk level polling and multiple iterations of VaR modeling were attempted, but as far as we know, these approaches did not fully resonate with the community.
Assuming both Aave and Compound community’s risk preferences are the same, and we assume the same fixed insolvency buffers, Compound III should be inherently more conservative than Aave V3 due to its design. Factors such as its liquidation mechanism design (theoretical formulation in our previous post) and Aave’s use of CAPO for ETH-correlated assets and other features contribute to Compound’s conservatism. Without specific data on hand, the current parameterization seems roughly reasonable at a high level.
If the community prefers to increase capital efficiency and risk, it would be important to align on a quantitative measure to ensure clear and sustainable decision-making. Without such alignment, it would be challenging to make parameterization consistent and responsible.
@cmrn thank you for starting the community discourse on Compound V4 and for incorporating our team into the vision. Our proposed scope includes both V3 and V4 initiatives e.g. COMP staking as @humpy mentioned, OEV recapture for V3, improved liquidation design for V4 but we are happy to contribute in whatever way the community deems valuable. Glad to hear that we’re aligned on the partnership areas and looking forward to working together.