ZRX,BAT, and WBTC Parameter Update

Echoing the sentiments here on how fantastic it is to see such active discussion in Compound’s protocol governance.

@rleshner I agree with all of your points on Proposal 39 being a sub-optimal process for reducing the WBTC collateral factor. In a different market environment, I would strongly urge a re-structuring of the proposal towards a gradual ramping-down - whether over a designated time period, e.g., 2 months similar to SAI, or over multiple rounds of proposals.

The Gauntlet team’s diagnosis is directionally correct based on the analysis that they’ve presented, but the limitations of the protocol as it stands today and the urgency of the risk are why Pantera Capital is voting FOR Proposal 39.

Relative to past cycles and even this past summer (when the SAI change occurred), crypto markets are more leveraged, intertwined, and price-reflexive on an order of magnitude. Considering that a re-structured proposal could take another 5-7 days at minimum to pass and that a staggered approach would require multiples of that - I think we would generally agree that 5 days is a long time in crypto and 15 days is an eternity.

I’d also note that we arrived at the same conclusion as other large investors, completely independently and from the perspective of a Compound user rather than an early-stage Compound investor (which we are not). IMO, this is a significant indicator of current market views and particularly the risk of a significant, rapid de-leveraging / price spiral in today’s environment.

As governors of the protocol, we should balance stakeholder needs and consider the impact to users in all decisions. At the same time, I’m keenly aware that one of the biggest open questions about Compound governance is whether decentralized governance can assess risk accurately and react quickly to protect the health of the protocol.

In a worst-case scenario, where the risk outlined in Gauntlet’s analysis is realized during this critical decision period, the perception that we as a community were aware and did not react in time is a potentially disqualifying event for those who aren’t convinced yet on decentralized governance. In this lens, the size of WBTC on Compound and the timing realities of a more progressive approach are the key factors in us voting to act quickly rather than delay for an optimal implementation.

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