TL;DR
Compound, a blue chip protocol with laudable heritage, is one of the most important protocols in decentralized finance (DeFi). It established the standard for decentralized governance across the entire crypto ecosystem and was a core catalyst for a step change in innovation across DeFi. But while its brand remains prominent, protocol growth has stagnated, driven by increasing competition, challenging regulatory environments, and execution efficiency. With the rapidly evolving regulatory landscape and improving market sentiment, there is a unique opportunity now to re-establish Compound as the leading global protocol for decentralized lending.
Today, we propose to establish the Compound Foundation to achieve this goal. The Compound Foundation would support the Compound protocol and broader community, including the DAO, in connection with its mission to promote and accelerate education and adoption of DeFi technology and related financial and social tools.
In order to achieve this, the Compound Foundationâs core goal will be to provide strategic leadership and direction for the protocol, which includes steering product direction and growth based on market feedback and trends, acting as an ambassador for Compound globally, and orchestrating execution across decentralized stakeholders and service providers. The Foundation model has proven successful with peers across the industry, and we believe it can drive considerable impact to Compoundâs followership, user base, and protocol usage with time.
Given this ambitious mandate and the anticipated time to establish the Foundation and set up operations, we propose an 18 month plan (July 1, 2025 - December 31, 2026). Running an effective Foundation can have meaningful costs; however, our approach seeks to first establish a small team, demonstrate impact for Compound protocol users through results, then follow up with additional opportunities for growth. Therefore, we are requesting a lean budget of $6M per year ($9M for the duration of this proposal) to help drive protocol growth and strategy, foster governance participation, and reignite momentum. Our proposed operating model is straightforward: stay lean, deliver results before asking for more, and make every initiative count.
Over the last few weeks, we had the chance to meet some 20 Compound stakeholders, and welcome the opportunity to have additional dialogues. We heard about the necessary steps for the Foundation to take while sharing our vision and ideas. We are grateful for the feedback and support and look to move forward once the community has a chance to assess this proposal.
Introduction
Compound was the first DeFi protocol to truly demonstrate the power of on-chain finance. Launched in 2018, it pioneered algorithmic money markets, key token models, and fully decentralized governance. Many of the patterns we now take for granted in DeFiâpermissionless lending, token-based DAO voting and governor contracts, autonomous protocol upgradesâwere either created or popularized by Compound. Compound pioneered what we now recognize as modern decentralized finance. Legacy isnât given, itâs earned. Compound built its reputation by consistently doing the right thing and avoiding unnecessary risks.
Even today, Compoundâs brand maintains a strong legacy, as a cornerstone of DeFi. The protocol has been integrated across several ecosystems and applications, and it continues to secure $2B+ in Total Value Locked (TVL).
At the same time, there is clear opportunity to reignite growth and build on this legacy. Protocols like Aave have grown their deposits to ~16x that of Compound through rapid feature development, aggressive expansion, and dedicated ecosystem support.
Compound has an opportunity to accelerate its trajectory. Focus, consistency, and timely execution will be key. These will help us deliver protocol features and ease of use, developer incentives, next level governance, and broader ecosystem engagement to unlock growth across both protocol usage and network participation.
Timing has never been more important. Crypto is moving into the mainstream as legal frameworks are being drafted and implemented in key jurisdictions, including the US and the EU, stablecoins are becoming foundational financial infrastructure, tokenized assets are gaining incredible momentum and may unlock new use cases, and institutions are integrating crypto financial services globally. Thereâs a vibrant and expanding developer ecosystem. With the right support, Compound, with its solid brand and product, can be a foundational infrastructure component in an on-chain future. But thereâs urgency and focus required to revitalize Compoundâs growth.
To achieve this, we propose the creation of a Compound Foundationâa mission-aligned, non-profit entity focused on supporting the Compound ecosystem to the benefit of all participants in decentralized finance.
Vision
Promote mainstream global adoption of responsible Decentralized Finance (DeFi), with Compound at the forefront of lending protocols.
Mission
The Compound Foundation will serve as the operational and strategic backbone of the Compound protocol, driving execution, ecosystem engagement, and growth, while preserving a level of decentralization and transparency that sets Compound apart from many protocols that have yet to reach this degree of community ownership. The Compound Foundation will regularly interface with Compound users, including DAO members, to ensure that all participants are being heard and their needs and concerns addressed.
Team
Aaron Schnarch has been asked to step in and serve as Executive Director of the new Compound Foundation. Approval of this proposal by the DAO will also include Aaronâs appointment as Executive Director of the Compound Foundation.
Aaronâs background includes roles such as Chief Operating Officer of Anchorage Digital and Chief Executive Officer of Coinbase Custody, after a successful tenure in the institutional financial technology industry, where he built front-to-back applications for capital markets and wealth management, and oversaw enhancements of corporate governance and investor experience for public companies.
With his track record building products such as Prime Onchain Wallet, Coinbaseâs institutional-grade web3 wallet built on MPC technology, Aaron will bring executive leadership, focus on growth through product and execution, and be instrumental in serving as the ambassador of the Compound protocol to the marketplace. At the Foundation, Aaronâs responsibilities will include setting up the new entity, serving as its ambassador, attracting and managing top talent, and providing executive oversight of the product roadmap and execution.
Initially, Aaron will be the sole contributor, with one of his first priorities to build out the Foundationâs organizational structure and full-time working team as outlined below.
Goals and Guiding Principles
While the Foundation will pay close attention to market dynamics and user needs, we plan to operate under these guiding principles:
- Bias for action, aligned with context: Move quickly on high-quality decisions, grounded in data, analysis and community input
- Redefine product strategy. Identify, direct, and drive protocol and application improvements. These may include new protocol evolutions, market incentives, revamped user experience, and more
- Ensure Compoundâs seat at the table. Build strategic partnerships to expand Compoundâs reach and integration across the DeFi and traditional finance ecosystems
- Design for diverse risk profiles. Meet users where they are by offering products tailored to varying risk appetites and levels of sophistication, while upholding Compoundâs reputation for security
Proposed OKRs
These OKRs are focused on the 18 month scope of this proposal and are based on our guiding principles, although they may evolve based on new information and strategic market opportunities.
| Objective | Key Result | Activities |
|---|---|---|
| Objective 1: Strategic Setup & Governance | * Establish the Compound Foundation organization | * Incorporate in US: establish a non-stock 501(c)(4) Delaware entity (i.e. a non-profit) * Standup lean team and nominate and ratify its Board of Directors, including external, non-Foundation members * Onboard top-tier operational talent |
| Objective 2: Accelerate Protocol Usage | * Strengthen Compoundâs position to make it more competitive with peers * Increase participation in governance (number of unique voters per proposal) by implementing best practices and enhancing community engagement and communications |
* Allocate 70%+ of Foundation budget to focused initiatives driving Compound growth (TVL, deposits, and/or users). These could include: * Reimagining UX for borrowers & lenders focused on ease of use * New ecosystem and dApp integrations * Improved developer tooling |
| Objective 3: Champion and advocate for the Protocol | * Improve Compoundâs followership and public profile; we see an opportunity to engage existing followers more effectively * Initiate new partnership dialogues to launch high leverage partnerships and integrations to drive Compoundâs growth * Drive sustainable protocol revenue growth |
* Collaborate with 3+ other DeFi Foundations to advocate for responsible DeFi adoption for mainstream applications * Build pipeline and identify ~20 potential crypto partners * Build pipeline and identify 2-3 potential FinTech partners * Facilitate community engagement * Assume ownership over and maintain Twitter and other key social/ comms channels * Identify indirect levers such as public education or co-branded programs |
| Objective 4: Strategic Review and Future Roadmap | * Establish and execute an updated product roadmap * Assess product improvements to enhance protocol governance structure |
* Release a transparent, community- driven Compound Ecosystem Roadmap with 12â18 month goals, based on market research and Compound positioning * Incentivize community research and RFPs for new protocol features (e.g., fixed-rate lending, new collateral types, chain expansions) * Set priority grants tracks and roadmap to steer DAO-funded community grants |
Proposed Organizational Structure
We plan to keep the core Foundation team lean during the initial 18 month phase.
| Role | Responsibility | Selection Method |
|---|---|---|
| Board of Directors for Foundation | Strategic oversight and governance | Appointed by Executive Director and ratified by the Compound DAO. We target hiring 2 external board members in addition to the ED |
| Executive Director | Strategic leadership, operations oversight, public representation | Appointed via DAO vote (via approval of this proposal) |
| Growth, product, and ops lead | Drive product improvements, set roadmap, and lead growth | Hired by Foundation |
| Marketing lead | Grow Compoundâs brand and reach | Hired by Foundation |
| Engineering and design team | Protocol level improvements | Hired by Foundation |
*Additional roles may be defined by verticals including Legal & Compliance, Community, Product & R&D, and Operations. Does not include external resources, such as legal counsel, accounting, finance, and other functions, as needed
Expected Implementation Timeline*
| Milestone | Estimated Completion |
|---|---|
| Proposal Discussion + Feedback | May 2025 |
| Community vote on proposal | June 2025 |
| Legal entity incorporation kickoff | JuneâJuly 2025 |
| Core team hiring + onboarding | AugustâSeptember 2025 |
| Strategic Review + 1st Community Update | December 2025 |
*A visual timeline sheet will be published with the final proposal.
Budget & Funding Request
Compound is not among the first DAOs to consider establishing a Foundation, and therefore we have ample prior art in assessing the appropriate funding request. One example is the Uniswap Foundation, which asked the DAO for a sizable budgetary approval of up to $74M ($14M operating budget and $60M for grants), with two recent approved proposals amounting to $170M+. Another example is dYdX, which secured $30 million in DYDX tokens from the community treasury for a three-year operational runway, supporting a roadmap aimed to enhance the dYdX ecosystem.
We are sensitive to the current size of the Compound DAO treasury as well as its recent performance, and therefore take a lean approach. Our ask of $6M per year ($9M to end of 2026), which will be funded by COMP, reflects this approach, and will focus on establishing the entity and demonstrate impact as outlined above before seeking to fund additional growth opportunities.
While specific funding decisions may evolve as we set the Foundation and learn more, we estimate using the funds as follows:
| Operating Budget Expected Breakdown | 2H 2025 | 1H 2026 | 2H 2026 |
|---|---|---|---|
| Foundation setup costs | $100,000 | - | - |
| Legal, compliance, finance, insurance & fees* | $250,000 | $250,000 | $250,000 |
| Marketing and growth | $300,000 | $500,000 | $700,000 |
| Operations (engineering, product, growth, etc.) | $1,700,000 | $1,950,000 | $2,200,000 |
| Grants | $150,000 | $250,000 | $400,000 |
| Total operating budget | $2,500,000 | $2,950,000 | $3,550,000 |
*Represents proposed budget. Any potential excess funds could be potentially redistributed to invest in other areas, including exploring setting up a DUNA, and shared transparently with the community.
**Inclusive of COMP vesting. In order to incentivize a highly qualified team, the Compound Foundation will offer competitive compensation packages (including both fiat and COMP vesting scheme), which will be determined by the Board of Directors.
This funding is requested through the Compound Treasury, in native COMP units, with payments streamed via Sablier to promote transparency and accountability. The Foundation will convert a majority of the Initial COMP payment into stablecoins and fiat as deemed responsible.
To support the funding and immediate needs of the Foundation, we would like to propose 30% payment (~$3.0M) once the vote is approved, with the remainder paid in four installments (or ~$1.5M) the first day of each quarter starting January 1st, 2026. To promote transparency, a high-level financial report (e.g. use of funds) will be published bi-annually.
Next Steps
We are excited to further discuss this proposal with the Compound community over the coming couple weeks. This proposal represents our thinking and incorporates important feedback we received from stakeholders and delegates.We are looking forward to engaging with the community as Compound potentially embarks on this journey. Should sentiment be positive, we will incorporate additional feedback before advancing this to a vote. To discuss the proposal and answer any additional questions, we plan to hold a special Compound Community call on Wednesday, May 21st (to be announced).
FAQs
Why is a Foundation necessary if we already have a DAO?
The Compound DAO plays a critical role and governs high-level decisions; there is no change to that. Consistent with many other protocols, the Foundation will provide dedicated operational oversight to define and lead execution of product strategy, coordinate the ecosystem players, and represent the protocol externally in a manner consistent with its tax-exempt mission. The DAO will still need to approve important protocol upgrades, grants, etc.
What type of legal entity will the Foundation be?
Given the changing regulatory landscape in the US and following the successful strategy of peer protocols, we plan on establishing a US non-profit entity that would be treated as a non-stock 501(c)(4) Delaware entity. This would be consistent with how the Uniswap Foundation was established, and there are other DAOs that are looking to fund such entities. As a non-profit entity, the Foundation will be looking to promote adoption of Compound, a protocol that originated in the USA but now has a global footprint, as well as to promote DeFi at large.
Will the Foundation affect the legal status of the DAO or its participants?
No, the establishment of the Foundation will not affect the legal status of the Compound DAO or its participants. Rather, it acts as a complementary force of growth in the Compound ecosystem. As part of the Foundationâs mission, it could propose certain legal structures for the DAO to consider in the future, such as setting up a DUNA. We understand that more time is required to evaluate the changing legal landscape before pursuing an effort like this.
Are you going to start legal preparations only after the proposal is approved?
No. We front-loaded the considerable effort to study the legal landscape, research best practices, secure quality legal representation specializing in digital assets after interviewing ~10 law firms and practitioners, and understand the required execution framework. As a result, we are confident we can successfully launch the Compound Foundation within the proposalâs suggested timeline.
How does Compound Foundationâs proposed budget compare with the budgets of similar web3 Foundations?
The Compound Foundation annualized ask for $6M is significantly lower than industry peers, especially given our scope. Sharing a few comparables as examples below:
- Uniswap Foundation asked for $14M in an upfront operating budget, and an additional $60M in grants funding allocation
- Morpho Association asked for >10% of total supply of $MORPHO, for a similar mandate to Compound Foundation
What does this proposal mean for vendors who have provided product and strategy services to the DAO?
We propose that the Compound Foundation, or one or more wholly owned subsidiaries (to the extent necessary for legal, regulatory, or tax reasons), become the primary entity responsible for product and growth. At this preliminary stage, we remain open minded about the best possible paths to support the growth and will maintain communications with ecosystem participants seeking to assist. Of course, the DAOâs governance system will remain the formal venue for material updates and funding proposals.
What will the operations budget include?
We plan on hiring a highly qualified team that will be capable of and passionate about building the future of Compound. While our proposed budget is not large, we plan on hiring a lead for product and growth, full time engineers, as well as design and marketing to help us execute against our OKRs.
Do you think the proposed grant budget is sufficient to accomplish your goals?
While a helpful starting point, we consider this grant budget as preliminary and will seek to engage with the Compound DAO at a later point to assess additional opportunities to grow the Compound ecosystem and development, based on demonstrated success metrics. For material proposals that are outside of the contemplated budget of the Foundation, it is intended that such service providers will submit such proposals to the DAO for funding.
How will the Foundation engage with other service providers for the Compound DAO?
We recognize the importance of service providers to the success and smooth operations of Compound and have engaged with several of them prior to sharing this proposal. As a Foundation, we will look to assist in coordinating the efforts and services to enhance the user experience for all participants in the Compound ecosystem.
What is the relationship between the proposed Compound Foundation and Compound Labs?
The proposed Compound Foundation is an independent entity that will seek to accomplish the vision and mission outlined in this proposal. We will work with all organizations involved in the Compound ecosystem. Compound Labs is supportive of this proposal and will discuss potential asset transition, including potentially relevant IP and communication channels, at a later time.
How will the Compound DAOâs role be affected?
As a champion of decentralized governance, Compound Foundation believes that close collaboration and transparency with the Compound DAO will be foundational to achieving its social welfare mission. We are committed to working closely with the DAO to align on key decisions, incorporate community input, and ensure that our efforts are fully coordinated in support of Compoundâs long-term goals.
How do you plan on using the COMP that will be transferred to the Compound Foundation?
Should the proposal gain the support of the community, funds will be sent to a dedicated Compound Foundation custody account. The Foundation will convert a portion of COMP payment into stablecoins and fiat as deemed responsible. We are mindful that significant volatility in COMP price by reason of large market sales could adversely affect Compoundâs current governance model, and will look for ways to use these funds while minimizing impact. To manage token price volatility, weâve outlined a potential approach, with plans to refine it further over time.
How does the Compound Foundation plan to sustain itself over time?
This proposal seeks to gain community support for 18 months to establish an entity and stand up a lean team. In 2025 and as we make progress, we plan to update the community and propose a budget for sustained operations in size that would be appropriate to the market and token conditions at that time.
How will grant funding be handled between the DAO and the Foundation?
While Compound Foundation will primarily rely on the DAO to continue voting on and allocating grant budget, Foundation is including in its budget an ask for some discretionary grant allocation, for which it can distribute grants to high priority developer initiatives at the Foundationâs direction, and have the opportunity to ensure timely execution. These would be shared publicly as part of regular financial reporting.
Will the Compound Foundation set up a Decentralized Unincorporated Nonprofit Association (DUNA)?
The Compound Foundation will always strive to explore ways to support the DAO. Wyomingâs new legal framework for DAOs provides protection and power to maintain decentralization. We would welcome feedback from the community and seek legal guidance as appropriate to assess whether pursuing this path would be in the best interest of Compound.
How will the Compound Foundation use its voting power for foundation-held $COMP?
The Foundation may hold some voting power to support operational agility and transparent decision-making. While the Foundation retains discretion over how this power is used, we are committed to acting in the protocolâs best interests. As this initiative progresses, weâll assess the best approach and refine our strategy accordingly.
