The Story So Far
Crypto has always been about building networks that are owned and operated by their respective communities. For example, when Compound launched the COMP governance token in April of this year, the goal was to place control of the Compound protocol in the hands of a broad, representative, and actively engaged community of users and developers that have a stake in Compound’s success. After all, that’s what decentralization means.
While the COMP token launch has brought new users onto the platform, most of those users to date have been professional liquidity providers (e.g., crypto hedge funds, whales, and prop shops). This has been good for Compound because, as a money market, it needs liquidity to function.
The problem is that protocols like Compound need more than just liquidity to succeed. They need developers who work on things like protocol upgrades and on integrations with the outside world (i.e. wallets, exchanges, dapps, other protocols, etc); they also need a set of long-term power users who take an interest and step up to participate in protocol governance.
An Idea for Discussion
Compound owes much of its success to the thousands of community members that have joined its journey over the past two years. This is true particularly of the early users who provided liquidity (both as borrowers and lenders) before there was any monetary incentive to do so and of the early developers who opted for building on top of Compound before the launch of the COMP token.
If there is any group of people that is most likely to be aligned with Compound’s long term success, it’s that group. As Compound’s early adopters, they are the ones who are the most likely to become enduring superfans of the network; they are the ones who stand to be the best stewards of the protocol’s long-term direction.
Concretely, the community can opt through governance to redirect 5% the total COMP supply to the ~5,000 addresses that belong to both users and developers who interacted with the Compound protocol (either v1 or v2) before June 8, 2020 — i.e. one week before the launch of the COMP token. To help ensure that the recipients of these grants remain aligned with the community in long term, these tokens would be distributed to those addresses gradually, over the course of four years.
The above would imply that each of the ~5,000 early adopters of the Compound protocol would receive 100 COMP tokens over the course of four years. At today’s prices, that implies a grant of $12.35k worth of COMP per address each year. As for where these tokens would come from: they would be redirected from the flow that currently goes to liquidity providers.
We would love feedback from the community on this idea.
For disclosures, please see https://a16z.com/disclosures/