Strengthening Compound Governance using Staker

Proposals
1

Contributors: Gauntlet, ScopeLift, Tally

Summary

This proposal introduces COMP Staker a staking mechanism designed to increase governance participation and align incentives among COMP holders. Leveraging the Staker framework built by ScopeLift & Tally, COMP Staker enables users to stake and delegate COMP tokens to earn a share of protocol revenue. This approach directly incentivizes active governance, addressing Compound’s current challenges with low voter engagement and governance risks.

Over the last few months, Gauntlet has discussed Staker with ScopeLift and Tally to assess the feasibility of COMP Staker, and we now seek community feedback.

The Current State of Compound Governance

Strengths:

  • Decentralization: Compound remains one of the leading decentralized lending protocols with active governance.
  • Security: The protocol has maintained resilience against major exploits and economic attacks.

Challenges:

  • Low Voter Engagement: With an average of ~7.4% of COMP supply voting in the last 15 proposals, the DAO is at risk of not responding effectively to market shifts, time-sensitive proposals, or emergencies in a timely fashion.
  • Governance Manipulation Risk: Large, idle token balances create opportunities for opportunistic voters to manipulate governance.
  • No Value Accrual: COMP holders have little incentive to engage beyond speculation, leading to passive governance and weak alignment.

Introducing COMP Staker (Powered by Staker)

COMP Staker is an on-chain staking contract using the Staker system developed by ScopeLift and Tally. It enables COMP holders to stake, delegate, and earn revenue from Compound protocol fees.

Key Features of COMP Staker

  • Staking: Deposited tokens can be withdrawn at any time without delay.
  • Mandatory Delegation: Users must delegate their governance power to earn rewards, incentivizing active participation.
  • Revenue Sharing: Stakers receive proportional shares of protocol-generated revenue, aligning their interests with protocol success.
  • Governance Controls: The DAO fully controls reward distributions, eligibility criteria (e.g., minimum governance participation), and delegate scoring parameters to discourage inactive or exploitative delegation.
  • Security by Design: Once deployed, the core system is immutable, but governance retains the flexibility to adjust rewards and participation rules as needed, enhancing the protocol’s resilience against governance manipulation.

Benefits to the DAO

  • Strengthened Governance: Promotes active delegation, decentralization, and governance responsiveness.
  • Enhanced Security: Raises the cost and difficulty of governance attacks.
  • Economic Alignment: Revenue-sharing incentives reward active participation.

Phased Implementation Plan:

A phased rollout is designed to ensure rapid implementation while giving the community flexibility to iterate on governance incentives. Starting with a straightforward delegation requirement and revenue sharing enables the DAO to measure initial results before advancing to more complex reward structures, such as delegate scoring.

Phase 1 – Initial Launch

  • Implement staking, delegation, and revenue sharing.
  • Delegation is required to earn rewards immediately.

Phase 2 – Enhanced Participation Incentives

  • Integrate Delegate Scoring into reward calculation.
    • DAO decides thresholds and reward parameters.

Summary

This proposal introduces COMP Staker, a staking mechanism built on the secure and audited Staker framework (developed by ScopeLift and Tally) designed to address key governance challenges facing Compound today. COMP Staker transforms previously idle tokens into active governance participants by enabling COMP holders to stake, delegate governance power, and directly earn protocol revenue. This alignment of economic incentives significantly enhances Compound’s security, increases governance participation, and ensures token holders directly benefit from Compound’s continued growth.

Next Steps

  1. Community Discussion: Solicit feedback on Staker and phased approach.
  2. On-Chain Vote
  3. Technical Scoping & Deployment: Gauntlet, ScopeLift, and Tally will collaborate on scoping contract deployment, parameter configuration, and an implementation budget/timeline.
  4. On-Chain Vote Approving Implementation Budget: Work with Compound delegates and governance stakeholders to test and implement Phase 1.

Disclaimer: Gauntlet holds COMP tokens and may directly or indirectly benefit from implementing COMP Staker. We’ve disclosed this to ensure complete transparency and alignment with Compound DAO’s governance standards.

12 Likes
2

Staker framework seems a simple yet effective staking solution without adding complexity. The phased approach allows for quicker implementation, a laudable proposition.

6 Likes
3

Thanks for proposing and it is indeed an exciting idea that also incorporate ways to increase value for COMP holders while also incentivizing more voting participation. Is this something the team is working together with Alpha Growth team as they also been working on staked COMP, just to clarify? Potential Requirements of Staked COMP

5 Likes
4

Wanted to highlight this forum post as an up to date overview of potential Staked Comp solutions. Currently there are two.

4 Likes
5

WOOF! supports leveraging the Staker as the foundation for COMP staking, and proposes its expertise to support the deployment.

Why use Staker?

  • Proven Implementation: Staker solution has already been built and tested, minimizing the need for development from scratch.
  • Faster Deployment: Saves time by integrating an existing staking contract rather than developing a new one.

Improvement of Staker

Staker logic is robust and well built, while missing some components to get integrated to Compound. WOOF! proposes to improve Staker to make it more compatible with Compound DAO needs.

1. Reserves Withdrawal

Reserves withdrawal is a crucial component of staking infrastructure.

Compound community can lean on two approaches while withdrawing reserves:

Automatic Semi-automatic
Description Automatically split fees between reserves and Staker. Launch on-chain proposal each time when portion of fees shall be withdrawn from Reserves to Staker.
Scope Need to upgrade existing comet infrastructure. Creation of migration script template.
Dev Efforts High Low
Audit Efforts High Low
Risks High Low
Withdrawal Frequency Daily On-demand

WOOF! suggests implementing a semi-automatic approach to decrease costs and risks.

Semi-automatic approach

Compound ecosystem consists of ~40 markets on multiple chains which adds burden while moving fees to Staker.

WOOF! suggests developing a transaction builder that automates the withdrawal process:

  • User interface to withdraw reserves from multiple markets and transfer it to Staker on Ethereum.
  • Bundling all transactions under a single DAO proposal.
  • Reduce the need for manual on-chain proposal reviews by auditors.
  • Allow delegators to specify the amount of reserves to withdraw per market and submit proposals independently.

Alternatively, an automated cron job could be implemented to submit proposals every N days, withdrawing X% of reserves.

WOOF! suggests having an on-chain proposal for every reserve withdrawal. WOOF! is against updating protocol to change the reserve withdrawal logic.

2. Rewards Distribution

A critical decision for COMP staking is selecting the reward token for distribution. The reserves currently consist of various blue-chip assets, including USDC, USDT, DAI, and WETH.

Potential Approaches

Approach Description stCOMP LST
Multi-asset distribution Swap fees into blue-chip assets (USDC, USDT, DAI, WETH) then distribute as rewards. No
Single-asset Conversion Swap fees into a single asset like ETH then distribute as rewards. No
DAO Buyback Mechanism DAO purchases fees using COMP from Comptroller. Acquired COMP will be distributed as staking rewards. Yes
Reserve Purchase Smart Contract Users bid to purchase fees with COMP. COMP will be distributed as rewards. Yes

WOOF! recommends the Single-asset Conversion approach for its straightforwardness and lack of artificial COMP buying pressure.

3. Staker Interface

Robust smart contracts stack shall be supported by the user-friendly interface with advanced statistics and real-time insights. WOOF! proposes developing a Staker Interface which will serve as a central hub for both token holders and delegates, ensuring clear visibility into the staking process and reward distribution.

Staker Interface will be an addition to the newest Compound Front-end built by WOOF!

Key Features

The Staked COMP UI will include the following components:

Staked COMP Statistics

  • Total COMP staked.
  • Historical staking trends.

Rewards Overview

  • Current Staked COMP APR – real-time reward rates for stakers.
  • Current Rewards Balance – accumulated rewards available for claim.

Delegation Insights

  • Top Stakers (“Whales”) – major contributors in the staking system.
  • Delegators & Delegation Flow – list of delegators and recipients of delegation.

4. Reserves Dashboard

For transparent staking rewards, the community must track all reserves. If staked COMP becomes a long-term model, monitoring fees and reserve growth will be essential.

Proposed solution

WOOF! suggests a user-friendly UI to display reserve data for V2 and V3 markets, featuring:

  • Reserve growth trends over time
  • Historical withdrawals

This dashboard will improve community oversight and decision-making.

Integration with Staker Interface

To provide a unified experience, WOOF! suggests integrating the Reserves Dashboard to the Staker Interface.

By consolidating key insights, this UI will empower both the community and governance participants, ensuring transparency and efficiency in Staked COMP operations.

Conclusion

By integrating Staker with tailored modifications, WOOF! aims to deliver a secure, efficient, and community-driven staking solution for Staked COMP.

Next step

  1. Feedback from Gauntlet, ScopeLift, AlphaGrowth and community
3 Likes