Should Compound Retroactively Airdrop Tokens to Early Users?

When the COMP Distribution began, it was expected that Governance would alter, improve, and rethink the program–its fantastic to see the community organizing, and doing the research to distribute COMP to early users.

There are a few questions to answer, and build consensus around:

  1. What is the purpose of distributing COMP to early users? Why is this a better use of COMP, than distributing it to current users, or to protocol improvements through development grants?
  2. How many COMP should be distributed to early users?
  3. What should the vesting schedule, mechanics, and implementation be?
  4. Which addresses should be eligible, and how should the quantity of COMP per user be calculated?

A lot of recent discussion has gone in to question 4, and I wanted to document my own views, and some of the historical issues surrounding this question.

The addresses that receive COMP should be early users that risked their time and capital to establish the protocol. This means excluding addresses that were deliberately created to manipulate the protocol; one example of this is the first community vote, which was “sybil” attacked with hundreds of addresses supplying ~0.01 Ether each.

Second, early should be defined as anybody that tested the protocol before the COMP token & distribution was announced on 2/26/20.

Third, users should be measured by usage of the protocol. For an interest rate market, usage is a function of capital over time; how other protocols have distributed tokens to users is irrelevant to Compound. This approach was piloted during the second community vote, and formed the basis of the COMP Distribution when it began for users. Luckily, in Compound’s case, this can be easily measured by interest earned, and interest paid.

Lastly, several members of the community feel that the distribution should exclude or limit “whales” in some way, even though these addresses took the most risk, and contributed the most value to the protocol. This is a political question – but could be implemented in a simple way, by allocating through the square root (or another power) of interest earned+paid, which would partially “flatten” the wealth effect.

I’m excited about the effort occurring here – and wanted to plug the Compound Grants program as a tool to help organize the research, smart contract development, auditing, and proposal work that this distribution will require.

23 Likes