Request for Proposal (RFP): Compound DAO Voting Service Provider (VSP)

Proposals
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Aragon’s Response to Compound DAO’s RFP

Thank you to the Compound Governance Working Group (CGWG) for conducting this RFP. We appreciate the fairness and clarity of the process, and are confident that it will help the Compound DAO make the best decision for its future.

Before responding in detail to the provided questions, we want to provide our perspective on what this RFP means to the direction and future of the Compound DAO.

The current governance model is exclusively reliant on token-based voting. This model is akin to running census-wide referendums for all decisions. We believe the governance mechanism itself has failed to meet the project’s needs. There are persistent issues reaching quorum, high levels of voter apathy, and service providers are paralyzed. Total value locked (TVL) has stagnated, plateauing in the last three years and giving Aave a now tenfold lead, clearly indicating that the Compound DAO urgently requires a structural shift in its decision making.

This RFP itself, as noted by @Avantgarde, focuses on optimizing the existing referendum-based approach. We propose that incremental improvements will not directly address the root causes of Compound’s hampered growth and operational agility. Simply put, token-based referendum voting is insufficient on its own to efficiently manage a mature protocol like Compound.

This proposal advocates for Compound DAO’s adoption of Aragon’s modular governance tooling. The proposal will explain how having different decision-making flows with different stakeholder groups represented as their own governing bodies, optionally in an optimistic or non-optimistic configuration, will address the challenges outlined above. These features also accommodate easy further changes thanks to the plugin-based architecture of OSx, designed to adapt to changing regulatory requirements.

What we propose is highly practical:

  • Risk managers like Gauntlet that will gain limited permissions to efficiently adjust protocol parameters without requiring full community votes.
  • Security partners like OpenZeppelin that can immediately trigger a pause on critical functions without holding broader administrative rights.
  • Delegates can shift their attention from routine votes to strategic and growth-oriented initiatives.
  • The upcoming Foundation will access powerful new governance tools to swiftly implement and manage diverse decision flows transparently and replicate their legal setup onchain.

All these improvements are available at a fraction of the cost of other proposals, without vendor lock-in, and through open-source contracts that avoid the need for full-scale upgrades and expensive security audits with each incremental improvement. These savings allow Compound to better use its funds to focus on what it does best - growing the best lending market in DeFi.

General Overview

Aragon Background

Founded in 2016, Aragon has established itself as one of the most trusted onchain governance providers. Our frameworks secure tens of billions of dollars in DeFi, including high-profile implementations for Lido (stETH), Curve, and Taiko. We emphasize security and modularity with a long-term orientation, reflected in over seven years with no security incidents. This commitment to security has led us to create OSx, the most modular smart contract governance framework.

Aragon OSx is fully audited by tier-1 security firms. Links to our audits can be found here.

Existing History with Compound

Aragon and Compound were side by side, building governance at the beginning of Ethereum.

While Compound’s Governor product line became a standard for vanilla token-based voting, and this standard has served many DAOs well in recent years, it has become evident that one-size-fits-all governance, where everyone is required to vote on everything, is hindering projects from reaching their potential. Aragon’s modular stack was built directly to address these challenges.

Section 1: Platform Functionality

1a) Platform Overview and Feature Set

Proposal Types:

  • Emergency Proposals: Governance processes can be added for quickly responding to urgent vulnerabilities or protocol threats. This prevents governance from being paralyzed when time-sensitive action is needed.
  • Resource Allocation: Governance processes can be added specifically (e.g., staking contracts, voting gauges) for financial decisions.
  • Additional Proposal Types: Aragon DAOs have their own dedicated and flexible ACL, so any number of permissions can be arbitrarily defined with no new code. This allows a DAO to have any number of governance processes, each able to execute actions for specific types of functionality only (based on function selector).

Flexible Governance Processes:

  • Staged Proposals: Governance processes can pass through any number of sequential stages, each governed by different bodies. Compound-pioneered timelocks are also available between or after stages.
  • Governing Bodies (including Councils): Specialized bodies (e.g., a multisig, another Aragon OSx plugin, an EOA) can be added to any governance stage, ensuring that the right stakeholders are involved in the right proposals at the right time. Multi-body governance can happen serially (in stages) or in parallel, with any number of bodies voting at the same time.
  • Legal Structures: Integrates compliance or off-chain legal frameworks directly into onchain governance by using them as governing bodies. This can help mirror real-world legal entity requirements for DAOs that must adhere to regulated environments, or add BORGs as governing bodies.

Optimistic Governance:

  • Governance stages can be configured to pass optimistically, so that proposals pass automatically unless vetoed by a governing body, reducing voter fatigue yet still providing them a voice.

Future-proof Governance:

  • Governance processes can be added, removed, or modified to iterate as the needs of the DAO evolves. There’s no need to re-audit anything.

Additional features:

  • Action Decoding: Onchain actions are automatically decoded and displayed in a user friendly way, with many of the most common actions (i.e. transfers) having a custom UI. Common Compound functions can be given their own custom UIs.
  • Notifications & Alerts: Email or telegram notifications for new proposals, impending deadlines, or veto windows, letting delegates or other stakeholders stay informed.

1b) Service Tiers and Customization Levels

Free, Open-Source Tier

Aragon’s no-code open source governance platform is openly available at zero cost. All the features described above are available, but no custom work or dedicated support channel is available. We do not have a proposal fee.

Dedicated Support (Recommended for Compound)

For $5k/month, Compound receives specialized support and advisory, including custom branding and assistance with any governance-specific need. In addition, our team is available to review any proposal for an additional layer of security. Any highly advanced or specialized feature (unique analytics or staking logic) can be scoped under a separate work arrangement if needed.

1c) Existing Partnerships

Lido: Lido uses Aragon contracts both for stETH, securing billions in TVL, and for governance proposals.
Curve: Curve’s governance and ve-system operates on Aragon-based smart contracts.
Polygon: Polygon uses Aragon for its governance, including their Community Treasury.
Taiko: Taiko uses an optimistic governance system on OSx, creating a security council with a tokenholder veto rather than relying on referendum-based governance.

We’ve recently upgraded our UI to fully unlock the capabilities of battle-tested OSx, with no code wizards for creating and managing complex multibody governance structures.

Section 2: Technical Integration and Security Assessment

2a) Audit History and Security Reviews

Aragon OSx and previous frameworks have been audited by tier-1 firms. No security incidents or exploits have ever occurred since Aragon’s inception. We welcome any specific tests or external audits upon Compound’s request.

2b) Integration Requirements and Implementation Timeline

Smart Contract Compatibility: No proposals would be necessary to upgrade any of the existing Governor contracts as the permissions would be granted to the Aragon DAO contract. The COMP token, delegations, etc. would not change.

Onchain Proposal Requirements: Integrating with Compound requires a single onchain proposal that moves the relevant permissions to the Aragon DAO contract.

Design Assumptions & Limitations: COMP does not use the latest IVotes ABI so a simple adapter contract or minor code change to the Aragon TokenVoting plugin would ensure compatibility.

Timeline: We can deliver a fully operational interface within one month of DAO approval. Further customization can be layered on gradually, without blocking daily governance.

Dependencies: Aragon has a philosophy of fully onchain binding execution so for the DAO to operate onchain there are no strict dependencies. The Aragon frontend, our recommended UI to use for Compound, uses the Aragon indexer. Alchemy is used for RPC calls and the Etherscan API for smart contract ABIs. API keys and secrets are obfuscated through server-side proxying so that they are not exposed to the frontend.

Frontend dependencies (e.g. WalletConnect) are kept up-to-date every two weeks.

The advantage of putting in this effort now is that any further changes to Compound’s governance system over the years (and especially with regulation coming up shortly) will not require any changing the DAO contract address, due its decoupling from the governance layer–one of the core principles of OSx’s modular plugin-based architecture. In contrast, in other Governor DAOs, new contract versions have required replacing (rather than upgrading) the Governor contract in order to keep up with new features. For example, any future staking contract that the DAO would select can work with Aragon DAO contracts, while the current system would need to use a new Governor contract to be compatible.

2c) onchain/Off-chain Data Alignment and Proposal Verification

The Aragon indexer has automated data integrity checks that call multiple APIs to ensure that the data is internally coherent. These run as part of our GitHub pipeline for all commits, but also on a schedule as part of our monitoring services.

However, to ensure that data is consistent with onchain state, we currently have in development and are soon deploying a parallel subgraph specifically as an aggregate source of truth.

2d) Developer Support

Comprehensive guides are available at docs.aragon.org. In addition, I’d like to invite delegates to message me on Telegram at @nathan_vdh for technical or governance-related questions. If chosen, we will create a specific setup to ensure we’re easily accessible.

2e) Threat Modeling

Aragon maintains the Aragon Scorecard, a self-imposed continuously updated assessment of our commitment to security, open-source code, and threat-mitigation.

We are open to collaborating with Compound’s security experts on further threat modeling or targeted reviews.

Section 3: Commercial Terms and Commitment

3a) Budget Request

Budget Request:

  • $5,000/month for 12 months, totalling $60,000.

  • Payments can be streamed monthly or quarterly.

  • Open to receiving COMP, stablecoins, or a combination thereof.

After Year 1: Compound can continue using our products for free, or can decide to continue the 5k/month agreement to benefit from the previously described Dedicated Support fee tier. None of our features are dependent on the continuation of the Dedicated Support fee tier.

3b) Milestone-Based Payment Structure

Milestones & KPIs: Seeing as we propose a large structural shift, the key milestones we will focus on are related to:

  • 99.9% frontend availability, 24-hour response time for critical issues, and quarterly incident reporting.
  • Fast and orderly migration of permissions.
  • Delegate satisfaction with the new UI, and participation in the creation of the new system.

Usage & Adoption: We will measure basic metrics such as governance participation and successful proposal proportion, but as stated earlier our goal is to eventually help Compound transition towards a better system. When this system will be in place, under the oversight of the CWGW, we will put KPIs in place related to the good functioning of said system.

Payments can be paused if expectations are not met, operational uptime is not respected, or if the new system doesn’t improve DAO operations and decision making (under the oversight by the Compound Governance Working Group).

3c) Offboarding, Data Portability, and Sunset Plans

Offboarding & Data Portability:

  • All governance data is onchain, so historical records remain accessible even if Aragon is discontinued.
  • After the first year, Compound can use Aragon’s infrastructure at no additional cost, or transition to a new provider with no vendor lock-in.

Final Considerations

When we started building Aragon OSx, we had exactly DAOs like Compound in mind. DAOs that have grown to the point where one-size-fits-all governance just doesn’t cut it anymore. At this stage, you need tools that let you grow, adapt, and make changes without kicking off costly audits or introducing new security risks every time. DAOs should never get stuck, especially not by quorums they can’t reach, sluggish processes they can’t fix, or outdated contracts that feel too risky to change. Governor has been a true hallmark of both Compound and DeFi as a whole, but nostalgia and path dependency shouldn’t decide what comes next. With fresh momentum, a new foundation in place, and a friendlier regulatory landscape emerging, Compound is on the verge of an incredible opportunity. This is the perfect moment for Compound to equip itself with better governance tools, so it can move fast, adapt smoothly, and reclaim its spot as a leader in DeFi.

Relevant Links & Contact

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