[Request for Comment] Proposal for Developing an ERC-4626 compatible cToken Wrapper

Proposals
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Hey Compound Community, I’m reaching out on behalf of Gyroscope, a project that developed a new type of concentrated liquidity pool.

Gyroscope already supports Aave’s aToken as pool assets and would love to support cTokens as well. To make this happen, we’re suggesting the development of a v3 cToken wrapper that is compatible with the ERC-4626 tokenized vault standard.

Some further stats on Gyroscope: Gyroscope currently has about 35mn USD (as of Jul 25) in TVL across all pools. Gyroscope’s 30d volume can be inspected here.

Background

ERC-4626 sets a standard for tokenized vaults in the Ethereum ecosystem. This standard aims to unify interfaces for yield-bearing vaults, making it easier for developers to integrate with different DeFi protocols and for users to interact with these vaults more seamlessly.

Gyroscope’s use of ERC-4626 compatible cTokens

Gyroscope built an extension of its concentrated liquidity pool, ‘E-CLP’. The extension supports a static form of yield bearing deposit-receipt token. Gyroscope pools are built on top of Balancer infrastructure.

This pool makes use of the knowledge build-up of order routers and lower gas fees, as it relies on order routers to wrap/unwrap pool assets, which allows keeping the smart contract complexity of the AMM at a minimum.

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The pool uses Balancer rate providers to update pool asset prices without leaking MEV [rate provider animation / docs].

This has the potential to dramatically improve capital efficiency & leverage ongoing trends of increasing offchain computation by order routers. It allows LPs to combine the yield from lending protocols with swap fee revenue of LPing and, where applicable, external incentives (e.g. BAL or AURA from Balancer ecosystem participants).

A version with aTokens is live in production with the first order routers (e.g. Paraswap) fully picking up the route. A version with cTokens could follow soon. These pools are also growing rapidly with a MoM TVL growth of 345%.

General value of ERC-4626 compatible cTokens

However, we imagine many other protocols to also benefit. Here’s why:

  1. Interoperability: ERC-4626 compatibility means cTokens could work more smoothly with a variety of DeFi apps and platforms.
  2. Ease of Integration: Developers would find it easier to include cTokens in their projects, boosting Compound’s adoption and use.
  3. User Experience: Users get a more standardized and user-friendly interface when dealing with cTokens.
  4. Innovation: A standardized interface could spark more innovation within the Compound ecosystem, with developers building more advanced and interoperable financial products.

Call to Action

We are proposing that the Compound community or other relevant parties develop or fund the development of an ERC-4626 compatible cToken wrapper for Compound v3.

Gyroscope is eager to hear your thoughts and suggestions. If there’s enough support, we can move forward with a formal governance proposal to allocate the needed resources for this project.

Thanks for your time!

Best,
Jonas
on behalf of Gyroscope

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A Compound V3 cToken wrapper was developed by @gjaldon through support of the Compound Grants Program’s Dev Tooling domain. The grant was completed, but I am not up to date on the status of this project. I know that it was audited by OZ and that a follow-up proposal to add Forta monitoring for its events was not supported for unclear reasons. Perhaps @cylon or @gjaldon can elaborate on the relevance of the existing wrapper development effort for Gyroscope’s interests.

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There were some security issues that came up in the security review conducted by OpenZeppelin and the Compound Labs team had taken on efforts to make further improvements to the implementation to address these issues. @adam Do you know the latest status of CometWrapper with the Labs team?

The monitoring grant was cancelled in the meantime given that the status of the project was still unclear and there may have been changes that occurred before it made sense to develop monitoring.

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A fork of the Comet Wrapper (aka v3 cToken wrapper) was under development by Compound Labs, and if I am not mistaken, it was audited by OZ with the newest changes.

Internally, we determined that our wrapper had too many features besides EIP-4626 support, namely encumber support (EIP-7246). The general opinion of our engineering team was that we are not confident that it is safe to deploy to production until the scope of the project is reduced and the code is reviewed with more scrutiny.

At this time, the readme of the public repository states that production network deployments are “Upcoming.” At this time, we are not contributing changes to the project.

Personally, I would love to see this project further developed because it would enable easier integrations with several other DeFi protocols. I have a list of projects that regularly ask me for the status of this project because they want to implement v3 cTokens but need 4626 support to do so.

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Thanks for the input everyone.

It seems like we did establish a need for a production-ready ERC-4626 compliant cToken wrapper for Compound v3, what would be a good next step to push this forward? Not too familiar with Compound governance.

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A 4626 wrapper inherently is not a part of the protocol; it should be completely encapsulated outside of the protocol contracts. So there isn’t any need to go through governance to deploy it or use it.

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Sure, but someone needs to develop that wrapper. Who?

If its not done by some Compound contributor, maybe it could get funded by Compound?

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The report from OpenZeppelin’s audit of Comet Wrapper is available here:

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OpenZeppelin audited the latest version of the Comet Wrapper which removes the ability to encumber shares. The report is available here:

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