USDT, USDC, and WBTC are all pausable tokens*. A single authority can call pause() at any time, halting all transfer of the token. If a token is paused, it’s bad news for Compound users on both sides. Depositors cannot withdraw their underlying and borrowers are unable to repay, leaving their collateral locked.
*TUSD is upgradable, and a pause function could be added.
Add a new repayBorrow function that allows repayment with the cToken rather than the underlying. Then when a token is paused a market will develop for the cToken (e.g. on Uniswap). Depositors can now exit position by selling their cToken. And borrowers can now exit by buying the cToken and using the new repayBorrow function. An additional benefit is that folks lending/borrowing the same token for COMP farming could more easily exit their position.
This lets users more confidently deposit or borrow pausable tokens–a major improvement to the platform. In fact, many folks who would otherwise hold a pausable token might choose to hold the cToken form instead simply because it’s unpausable.
Request for Feedback
Are you for or against this idea? Are there downsides? Or any benefits not mentioned here?
Any other thoughts on what happens when a token is paused?
Anybody interested in applying for a grant and developing this with me?