[WOOF!] Correlated-Assets Price Oracle (CAPO)

Protocol Development
4

CAPO: Development Update

Executive Summary

Following our comprehensive positive community engagement, we’re excited to announce that CAPO implementation is entering its final phase.

Overview

We strongly believe that the OEV discussion will be closed shortly with a chosen direction. OEV update will require updates to the price feed. To make OEV and CAPO integrations efficient, we suggest combining the integration and governance processes.

Scope
Full CAPO implementation across 4626-assets; LST and LRT assets will be supported in CAPO v2 scope.

What CAPO Delivers
CAPO addresses a critical gap in securecollateral utilization by implementing sophisticated rate growth controls that protect against exchange rate manipulation while preserving organic yield growth:

Core Protection Mechanisms:

  • Snapshot-Based Rate Capping: Implements PriceCapSnapshot structure with configurable snapshot ratios, timestamps, and maximum yearly growth percentages expressed in basis points
  • Dynamic Maximum Ratio Calculation: Real-time computation using snapshotRatio + (maxRatioGrowthPerSecond * elapsed_time) / GROWTH_RATIO_SCALE with linear growth approximation
  • ERC4626 Integration: Native support through IERC4626.convertToAssets() calls for accurate share-to-asset ratio retrieval
  • Manager-Controlled Governance: Timelock-compatible manager role enabling DAO control over snapshot updates and growth parameters
  • Chainlink Compatibility: Seamless integration maintaining AggregatorV3Interface standard with latestRoundData() implementation

Supported Assets: all 4626 assets

Implementation Benefits

Enhanced Protocol Security:

  • Eliminates exchange rate manipulation vectors that could compromise liquidation profitability
  • Protects against flash loan attacks targeting correlated asset pricing
  • Maintains protocol solvency during market volatility

Improved Market Competitiveness:

  • Enables higher leverage ratios for 4626-assets markets through reduced risk exposure
  • Supports protocol TVL growth by safely integrating high-demand correlated assets
  • Provides governance with precise tools for risk parameter optimization

Technical Robustness:

  • Professional Security Review: The first implementation underwent comprehensive security audit by OpenZeppelin with identified findings addressed and remediation completed. Re-audit requested for final validation of the current version.
  • Precision Engineering: Advanced decimal scaling mechanisms through rescaleFactor calculations ensuring accurate price computations across varying token decimal configurations
  • Overflow Protection: Built-in mathematical safeguards preventing overflow conditions with three-year growth validation limits
  • Growth Rate Controls: BASIS_POINTS (1e4) precision for yearly growth percentages with GROWTH_RATIO_SCALE (1e10) for per-second calculations
  • Parameter Validation: Comprehensive input validation including zero-address checks, ratio validation, and timestamp constraints

Example Protection Scenarios

Scenario 1: Legitimate Growth Tracking

  • Asset experiences 8% annual growth over 120 days (~2.63% growth)
  • CAPO correctly allows rate progression: 1.000 → 1.025

Scenario 2: Spike Prevention

  • Manipulated rate attempts 8% spike in 10 days (20% annual equivalent)
  • CAPO caps rate at legitimate growth level: 1.080 → 1.0055

Next Steps

  • Security Audit Completion: OpenZeppelin security audit report.
  • Final integration testing and parameter validation across supported networks
  • Governance proposal preparation for parameter initialization and price feed activation (Will be done during OEV on-boarding)
  • Providing risk recommendations by Gauntlet
  • On-chain infrastructure preparations in the most efficient way by WOOF!
  • Analytics tool & with notification for new price feeds monitoring

Community Engagement

We encourage community members to review the original CAPO proposal and prepare for the upcoming governance discussions regarding initial parameter settings. Your feedback continues to be invaluable as we strengthen Compound’s position.
For technical inquiries or implementation feedback, please engage through this community discussion.

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