Should Compound Retroactively Airdrop Tokens to Early Users?

I just want to add a thought to this discussion as a new-ish user of Compound. The fact that these discussions have been on-going for so long without any real advocates from large comp holders or developers points to that this endeavor is a fools errand. The Compound team did not think to air-drop early users when the token was launched and as such, we should be forward looking. Why should I want to acquire Comp (either thru deposits/loans or on the open market) if I am just going to be diluted thru air-drops instead of spending that Comp on forward looking contributors and protocol improvements. We could also sell that Comp to capitalize protocol reserves.

It’s my opinion that we must be forward looking. Early adopters were rewarded with a larger Comp rewards from their activities with the protocol due to number of assets on the protocol. Anyone who felt they did work that they felt they should be paid for should submit a proposal outlining why they deserve it and what they would like to contribute on in the future (i.e. Getty).

This protocol has a lot of potential to be a real force for good and stability in the DeFi world and I think a large risk is us porting over too many bad ideals of the legacy finance system. With all these talks about backward looking hand outs and bailouts for overleveraged parties (yes, sometimes Dai does trade at a strong premium because it’s exchangeable for real assets in the market), I worry that maybe this project will not be able to mitigate the effects of human greed and psychology through decentralization and code. Anything we do now will set the precedents for the future of Compound.

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Fully agree with this. I think the cutoff separating “dust” from “non-dust” should not be the arbitrary 0.01, but likely something smaller than that. What would be clear examples of non-genuine users in your opinion? One that comes to mind is " A wallet that has held a position for only one block".

Since you are a new user I think you should first read the threads on the forum about the topics you are commenting on.

Most early users were not rewarded with “larger” Comp rewards. I don’t know how you came to that conclusion. Its probably just your personal assumption which can be dispprove by checking the data on Etherscan.

Obviously you are not well informed about this topic, so you should read the complete thread and look at the situation objectively and maybe your “arguments” would make sense.

Early users took the risk and used the protocol without any guarantee that they would be rewarded. These users are also one of the reasons why you can talk today about the future of the Compound protocol.

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I’m not particulary motivated in discussion on that topic, as it feels to me like beating a dead hourse. It’s mostly year-long whining about how much airdrop is deserved, but fine, I’ll share my thoughts yet again.

First of all, nice job with airdrop-emulator.

Let’s start from the beginning, to see what we currently have and what we trying to achieve here. Let’s refresh memory on how it started:

2,396,307 COMP have been distributed to shareholders of Compound Labs, Inc., which created the protocol

2,226,037 COMP are allocated to our founders & team, and subject to 4-year vesting

372,707 COMP are allocated to future team members

4,229,949 COMP are reserved for users of the protocol

775,000 COMP are reserved for the community to advance governance through other means — which will be announced at a future date

As you can see, while users of protocol have about 42% of total supply, all this COMP where scheduled for linear distribution over 4 year period. So vast majority of voting power stayed concentrated in hands of shareholders, founders and team.

And this isn’t a bad thing by itself. Compound governance mainly controls important protocol parameters, which can’t really be adjusted by average user without good understanding of not just protocol functions, but often how economy, broad markets
and even tokenomics work. And adjustments to protocol often require coding knowledge, ability to write code, test it, audit it prior than putting it into governance. That is the task many just can’t achieve. It really does make sense that Compound governance require substantial amount of voting power to be able to create proposals. (And i not even completely convinced that lowering it to 65k was such a great idea) And what is maybe more important, Compound governance works. It’s functional mechanism, not just some instrument of creating community polls.

So, that 4,229,949 COMP are those, which are currently disributing to users of protocol with aprox 3,500,000 remaining for distribution at the moment. Approach was quite innovative and not really far from being called groundbreaking at that time. Now, when many more projects followed it might not look as such, as there been some improvements to distribution model discovered by other projects. One of that improvements is so-called community airdrop. It’s something what Uniswap did later,
and what Compound have not. One of the main purposes of community airdrop, wasn’t really to enrich masses, it’s more about creating engagement and strong community, aligned in long-term success of the project.

And here we come to that community airdrop. First we are not in same position now, as if it was done when token launched. At that time you can call it zero-value governance token. But now it’s just not anymore. It’s traded on regulated exchanges and now is an asset which DO have monetary value, and is a taxable event as well. We not just talking about distribution of 500 000 voting tokens, but about distribution of approx 200 million of value. And much care should be taken.

Ok, so we are talking about distributing not just voting power, but a monetary value. But to whom? Well, since that tokens are taken from user distribution than it should be users of protocol. Then what is the problem with current distribution?

Well, there are some.

To be clear, i’m big fan of capitalism. Not because it’s perfect (it’s not), but it’s pretty much best what we have now. So, there is nothing wrong with the fact that bigger capital have more gains. The problem is when it grabs vast majority, like almost all. And this is the problem with current distribution. If you are a user of Compound protocol, maybe even more or less active, using it for either personal or business purposes. Might be you have 5 or 6 digit value in protocol. But you still going to get scraps from that user distribution of governance tocens, as you massively diluted by big capital. And that is NOT a good thing.

Community airdrop adresses that particular problem, decreasing that massive advantage big capital have to a degree. Not to the point of making everybody equal. But to shift some power back to community. That makes sense, as if we empower more users they eventually become stronger and more engaged players, they might be able to develop and pursue their own agenda, their values. WE need more of that both in broad society, and in particular communities, which share same interests and values.

That is what is about from my perspective, it’s about letting active users to collect fruits of their engagement. And the more you engage, the more it should scale.

It might be a bit long introduction, but it was kind of necessary, so we could look from same perspective. So, the goal of community airdrop, is to reinforce engagement primary. It’s not that much about decentralisation. In such a big project as
Compound is, it’s not viable for everybody to be able to create a proposals left and right. We can’t achieve that no matter what. And it’s completely unnesessary, person who is complaining that he can’t create a proposal more often than not is not really able to propose anything meaningful. And actually work on implementing that. There are some people in community who do, and governance should be about delegation of power to that users, not about airdropping tokens to them anyway. (but that’s out of scope of current discussion)

So, our goal is to provide additional push for people who already pushing for something. I as well see no value for Compound to deliver anything to addresses with less than 0.01$ interest accrued. This are not users, they were never really used Compound, and i see no reason why should our power be wasted on anything like that. I would strongly advocate for zero, and if we feel charitable for some reason than 1 COMP is a max in my opinion what should be considered. It’s about 400$, which is very generous for doing literally nothing useful.

Second group is group from 0.01 to 0.5. Or might be even to 1$. These aren’t really an active users either. It took very little usage to get 1$ of interest, and that argument somebody presented, that he supplied ETH and iterest was low. Yeah, but
you not really supply collateral to earn 0.01% APR. That’s not even peanuts. You use that collateral to borrow something, and interest on stables was double digits for a very long time. So telling that somebody is active user of Compound and he not
managed to earn 0.01$ in interest is damn LOL.

But ok, that’s so-so users, but still users. They kind of fit into description. I see airdrop of 5 COMP kind of appropriate to an extend (more about that later)

And here we come to third, largest group earned from 0.5$ (or 1$) to whatever. That’s primary userbase, actual users who did used protocol. If we are talking about doing community airdrop, that is where most of COMP drop should go. And weighted by
their interest accrued.

There is some nuance i want to suggest though. Last 2 addresses in the list earned amounts vastly bigger then anybody else. I suggest to exclude them from calculations. Not from airdrop itself, but from calculations. I suggest to distribute to them exactly same amount as third address from the end of the list recieves according to formula. And the reason is because it’s overall a community distribution. Interest earned is used as a measure of activity rather than size of capital. Big capital can still very much participate in ongoing distribution and isn’t diluted to same point as small users.

Now, when we outlined main thoughts on every group and starting to talk about numbers i want to highlight that the idea to reward somebody for actions done in some distant past doesn’t really resonate in me much. And certanly it feels extremelly
wrong to distribute 30 COMP to addresses which achieved only as much as 1$ of interest. Like 12k$? Are we even serious here?

But here is the concept of what possibly can be done with that list.

  1. First it shouldn’t be airdrop. It should be claim only, for any address, any amount. Big chunk of that addresses in list might be dead and not active anymore. We don’t want COMP to be send to dead address.

  2. I suggest to implement additional requirements for users to be eligible. For example, let’s say user address is eligible for 30 COMP according to the formula.

Than, to be able to claim it, user is required to provide equivivalent value amount of LP tokens in Uniswap v2.

If it’s 30 COMP, then to claim it, user need to stake 30x400$=12k$ of COMP/ETH Uniswap V2 liquidity tokens, lock them in staking contract for 1 year, and than can claim his 30 COMP. Which, ideally, would become gradually unlocked and able to be
withdrawn linearly overly one year period.

I hold very small amount of governance tokens personally. It’s not me who can decide how value, created by other people may be distributed. My main point is here: it’s not about charity, it’s not about giving away, and it’s not about decentralization for the sake of decentralization. It should be about empowering active userbase in doing something they already doing. Kind of fixing a little bit a disbalance in distribution, vastly diluted by massive capital holders. And i don’t believe that doing something in very distant past justifies giving away 10k$ of value.

But qustion is: Are we fine that vast majority of tokens dedicated for users going to go in to pocket of very few owners of big Capital? Because if nothing is done, that will how it will eventually end with current distribution mechanic.

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So I think as community we first need to take an approach that distributes COMP to all that have “used” the protocol. This way we get consensus from all.

The first step to me is to define a minimum COMP for the lowest usage and a maximum for the most usage, based on the Interest earned list provided by @allthecolors.

Recommendation

Minimum

Lowest Interest Earned = 1 Comp

Maximum

Highest Interest Owned = 500 Comp

If we can get consensus with these two starting and end points we can then discuss Point Allocation, Criteria on ratio estimates.

But if we can all agree on these two end points it would make the rest a little easier.

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@gabrocheleau,

Very nice! These numbers look good. When looking at some random addresses that earned $0.00 interest, it looks as though some of them are smart contracts in which distributed small amounts of cTokens to many other addresses. Some only kept the funds for a day, others for a week, but majority of them looks like something ‘fishy’ is going on… LOL!

Also, you’ll notice a lot of those addresses start with the same number:
0x5D, 0x5E, 0x5F, 0x99, 0x98, 0x97, 0x96, etc.

I wonder if there is a way to gather data on these addresses to weed out the addresses that deposited less than $5 or so. Or addresses that received cTokens via transfer, then were soon sent to another address. Maybe there is a way to search for contracts that are linked to malicious activity and we could select those accounts, like @allthecolors did with the Sybil attack.

I’m thinking there are a lot more bad actors that made less than $0.10. Either way, I think that addresses in which earned less than $x.xx interest needs claim the airdrop. I hate to bring up how other protocols distributed their airdrops, but seems like the majority of them used a ‘Claim’ function.

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@Sirokko, nice! This is what we need!

The way the airdrop is distributed might be able to accommodate for that.

This idea has the possibility of either losing the amount of COMP that users should have received with the airdrop, or the chance of there being a surplus of COMP by the time it gets distributed. That depends on the ETH/COMP price being stable.

I had thought of a distribution method that would really engage the early users of the protocol. Without simply handing out an airdrop to early users. That wouldn’t help Compound at all, especially if those users are no longer using the protocol (sell pressure/dumping) or those addresses can no longer be accessed (burning). We all agree, this is NOT what we want, right?

So, my idea is to distribute the COMP using the current reward mechanism, through earning COMP as interest.
Once the owner of an address who qualified for the airdrop chooses to claim the COMP:

1. Their address becomes blacklisted from earning the standard COMP rewards.

This should effectively increase rewards to Compound’s current users who didn’t receive the airdrop.

2. The 'airdrop' details need to be clearly displayed to users on their dashboard.

Could appear on their dashboard where it usually shows their COMP rewards. Would display something like: “Earned 0.535 of 30.00 COMP”

3. Now, we just have to figure out a rate of accumulation.

The following are just examples.

a. Match it to the current reward %, but in COMP value instead of USD value, it would be in COMP value – i.e. every $1.00 of earned rewards would be 1 COMP.
b. Derive it from multiplying the current reward % by x.
c. Use the interest that the user earned/owed, to get the airdrop. The airdropped COMP rewards will be unlocked as the user earns/owes interest and will be fully unlocked once they earn the same amount of interest as they earned as an early user.
d. etc., etc.

That is the reason I created the spreadsheet, for community members like you to be able to change a few variables and provide your very own simulated airdrop. Maybe your simulation will be the one that gets the okay to go.

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How is 30 comp calculated ? I thought we have total of 50k addresses and 500k comp that puts about 10 comp per user ? Isn’t that true ? Thanks

thank u
I agree with you

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My understanding (correct me if I’m wrong) is that it is based on @gabrocheleau copy of airdrop sheet, where his use of 30 COMP works out to around 500 000 COMP airdrop. It is around 32 560 addresses, but with his specific use, many of them get 0 COMP, and then there’s several values in between (under and over).

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Makes sense. So we have the users who are eligible and emulator in place to play around and just a week span to prevent the grant expire. So what’s preventing someone to start a proposal and take this idea into fruition ? Thanks

First off, I’m guessing “whats the holdup” is just that I don’t think there’s reasonable consensus around the actual numbers. I mean, @gabrocheleau had some reasonable numbers, but I’m not sure it has matured enough yet.

Second, you’re talking about the grant expire. I’m not sure I see the issue here. The grant as I see it was to provide the data. The data is here. There’s no real urgency about it. Obviously this thread has been going on forever, but as long as there is progress I think there is no short term urgency.

Just my 2 wei.

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Hey guys, are you available to listen to the developer call tomorrow? @gabrocheleau, @TragedyStruck, @bulajacky, @cryptobuddy_1712, @Fishbtc and anyone who I may have missed.

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I’ll be listening in.

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Yes. I see no agenda item for this topic though…?

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@TradegyStruck is correct. I really appreciate @cryptobuddy_1712 's enthusiasm, but the grant expiry concern is a bit of a misunderstanding of how the grant is related to this broader initiative. The grant supported the early user interest analysis, and that work is complete; I will do my best to be responsive to any questions or concerns about it. This broader initiative continues beyond the expiration of that grant.

The only difference before v. after the grant is that until the grant is officially closed out, I won’t be weighing in on the present discussion of translating the data into a distribution. If this discussion seems to be converging on a consensus recommendation before that happens, that’s awesome; otherwise I might add my two cents to the discussion after the grant’s closed.

It looks like a pretty full agenda, but it would be great to have someone involved in this discussion briefly jump in to update the dev community about the current state of the discussion, so that it can incorporate any questions or concerns from the broader dev community. I am not sure if I will be able to make it; if I can, I’m happy to bring it up, otherwise anyone else here is welcome to do so. I’ll post a note to this effect in the forum thread for the dev call agenda.

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Oh I see. Thanks for clarification on the grant. Just wanted to make sure all great efforts are not in vain. As some one pointed out as long as the progress is made probably we are good .

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just do same amount for all eligible address, uniswap done with 400 each address, why not compound? much easy and take no more than week to completed

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That’s not how Uniswap worked. Uniswap had a capital weighting mechnasim based on amount and duration an address provided liquidity. What’s being discussed here is actually pretty similar to how the Uniswap airdrop was structured.

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@samscalet @daver,
It is really besides the point of how Uniswap or any other project decided on how to do the airdrop. Those projects aren’t Compound. Those projects may or may not have had the huge difference in users, or the multitude of users who interacted in such a way to not really be users (Sybil attack/smart contracts designed to spread cTokens to make it look like there were more users/etc/etc). Over 50% or +20,000 “early users” had earned $0.00 interest.

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