Hey! @Lufran Great set of questions. Listing RWAs as collaterals on Compound was one of the key agendas for us (Compound Growth Program) in our early stages, but it got shelved due to the challenges associated with on-chain liquidity of RWAs.
But still happy to give you the details required for listing an asset on Compound.
From Compound’s side, to list a token (in this case your RWA)
Technical Requirements
- ERC20 and 4626 both are compatible with Compound
- All the standard security features, bug bounties, audits that the smart contracts should have for the token. It should also have an Oracle, like Chainlink.
- A qualitative criteria to judge if a token is good to be listed on a Compound is that a ~ $1M swap on a decentralized exchange should generate less than 1% slippage. Of course this is not set in stone and varies on case by case basis.
- For quantitative aspect of listing asset, whatever trade generates a 10% slippage on a decentralized exchange becomes the supply cap of the asset. Again these are very basic qualifiers, the Risk Management team (Gauntlet) might use advanced criteria for assessing an asset
For Legal, its better to consult a bunch of professional lawyers.
Governance, fairly straightforward,
- You make a forum post like this
- Gauntlet gives Risk recommendations like this (if there is support for your asset from the community)
- Depending upon the recommendations the Compound community develops code to integrate you (Woof team does this)
- Code is sent to OpenZeppelin for Audit
- Code sent to onchain voting
The community handles most of the process beyond step 1, so no financial commitments are required from your end. But the process takes 100-200K for Compound in terms of work done by service providers (All paid by the Compound Treasury). So even though we do not charge you the proposer anything for listing, the asset should be a profitable endeavor for Compound in order for it to be listed
For KYC, Its a decentralized process so all checks are included in Audits, if any more docs are required then it will be communicated by the auditors.
My 2 cents
Gold backed tokens and other RWAs would make good collaterals for stablecoin markets, similar to WBTC being used to borrow USD stablecoins. In this direction a couple of gold RWAs did reach out to Compound. But their on-chain (dex) liquidity was the biggest barrier. If the collaterals get liquidated, we need onchain liquidity for this.
The alternative to dex liquidity could be instant redemptions where even without dex liquidity, liquidators can redeem the token for another prevalent & highly liquid token. This again, needs to happen on-chain. This option was explored with other Gold RWAs, along with some other forms of redemption, But Gold Markets in London being closed on weekends, instant redemptions become challenging.
If you could figure out the dex Liquidity part, then listing on Compound could be a ‘relatively’ straightforward process, in a way that you’ll clear the barriers that none of the RWAs could do.