As pointed out in this post on the Polygon cUSDCv3 thread, Compound Labs is proposing to refresh the supply of COMP rewards on Polygon by bridging over 12.5k COMP to sustain the current distribution for approximately another year.
When the cUSDCv3 market initially launched on Polygon, a conservative amount of COMP rewards was bridged over to Polygon to reduce the risk of Compound’s first cross-chain deployment and proposal.
In more detail, 2.5k COMP was bridged over, which was worth ~72 days of rewards. Today, as the Polygon market steadily grows and approaches its 50th day of being live, the rewards contract has about 22 days of COMP rewards left to distribute.
Proposal 158 was created last week to bridge roughly a year’s worth of COMP rewards to Polygon, but ultimately failed due to not reaching quorum despite all the votes being for the proposal. This is likely because the voting period happened over the weekend, when Compound governance generally has a low amount of activity. Since there doesn’t appear to be any opposition to the proposal, Compound Labs intends to resubmit the proposal again next week, this time making sure the voting period happens over the weekday.
Bridging over a year’s worth of COMP rewards does not necessarily mean that all of it has to be distributed on Polygon. The community can always choose to turn off distributions on Polygon and bridge any remaining COMP back to Ethereum mainnet. This proposal is just to make sure that Compound users on Polygon can continue to claim the rewards that they accrue as long as the distribution is turned on.
I do not think the reason it failed is because of weekend. It is more likely because it’s controversal at best.
While COMP distributions are useful tool for bootstraping markets and as well still good tool of decentralising governance process a bit. But Compound Polygon market kind of have no steam, and certanly it’s not for the lack of rewards. As it is still payed-to-borrow rates.
As i am not against general idea of refilling a reward pool on Polygon for a bit, but current reward speed is indeed excessive and not really bringing a new usage.
Broader discussion could be held on the topic, but as it looks now, borrow distribution should be decreased as 9.3% distribution APR vs 4.9% borrow APR looks overshot by a lot. (that could be justified as temporary overshot to attract more usage, which however does not happened)
There can be several actions taken as i see it:
It makes sense to decrease borrow disributions, to bring it approx to 1-2% APR above borrow APR to maintain healthy initiative without overpaying.
Supply distributions could be introduced to add 1-2%APR of rewards to supply side.
Or a combination of both could be applied by cutting borrow distributions by about 30% and redistributing those to supply side instead.
After observing the results for 2-3 months further adjustments could be taken if needed, but the current distributions doesn’t really look productive, market is relatively stagnant on polygon and likely need adjustments.
@Sirokko Gauntlet agrees that the current reward distribution in Polygon is inhibiting growth. Even though Net Borrow APR is positive (payed-to-borrow), the lack of USDC available to be borrowed seems to be what’s dissuading borrowers from joining the protocol.
We are going to publish a forum post tomorrow recommending allocating COMP rewards to USDC suppliers, which should increase USDC supply, decrease USDC utilization, and incentivize larger borrowers to join to the protocol.
Great points raised by @Sirokko and @nlord. I also personally agree that the current distribution on Polygon does not appear very effective and could use some adjustments. Looking forward to the upcoming forum post from Gauntlet about this.
That being said, I still think we need to top-up the COMP rewards on Polygon to avoid any disruptions in the UX for users there. That way, users on Polygon can continue to use Compound v3 without any hiccups while the community discusses improvements to the distribution.
As @nlord said, “there’s no steam” because there isn’t enough USDC supplied to attract borrowers. There is definitely “steam” in the Polygon DeFi market, countless dapps show enough activity to prove that, the chain’s scalability and its fees have proven that it is a suitable place for frequent users who are on its DeFi ecosystem daily. There is no doubt that the Polygon ecosystem is home to plenty of active of users, there cannot be any doubt as it is backed by actual stats and there are plenty of examples of dapps that grew as a result of moving to the Polygon ecosystem.
Point is, Compound stands to gain a lot from participating in this market, and the only way it can grow its userbase is by allocating more resources, starting with topping-up the COMP rewards and increasing USDC supply.
A little too early to decide that as we still need to meet the required quorom. However I would really like to see that discussion being made, the zkEVM is exciting tech and will play a big role in the future. The earlier we get in on it, the better our chances are later on.
We voted for it, though acknowledging that there may be a flawed incentive structure on Compound. The community should start re-consider the problem of redesigning the emission mechanism just as two years ago. It’s great to see that Gauntlet is picking up this problem again.