With the Compound protocol holding roughly $100M in total value across dozens of applications (like Dharma and PoolTogether), the release of COMP governance tokens has been highly anticipated within the DeFi community. For the past two months, COMP tokens have been behind closed doors for a limited group of stakeholders in order to test and improve the protocol’s governance system. Since then, community members have successfully implemented multiple upgrades and additions to the protocol. This includes adding Tether (USDT) led by Compound Labs, updating a new interest model led by Dharma, and the process for phasing out for Maker’s SAI led by community member, Blck.
Now that there’s been sufficient testing on governance, Compound is preparing to publicly launch COMP tokens to the most important group – the users.
Robert Leshner, CEO of Compound echoed this sentiment telling DeFi Rate “When every user is able to participate in governance, there will be an entire ecosystem (of individual voters, and representative governance e.g. DeFi Rate) that can guide the protocol forward, with skin in the game. Decentralization of applications is still early & experimental, but we hope that Compound’s approach can inspire other DeFi projects.”
Here’s what you should know about COMP’s public distribution model.
The public distribution will feature 4.2M COMP (out of 10M) in total, distributing 0.5 COMP every block. Tokens will be allocated proportionally to the interest accrued in each market, with an average of 5,760 blocks produced per day. This means we can expect to see ~2,880 COMP entering circulation every day with the public distribution expected to last around ~4 years based on normal block times.
That said, it’s important to recognize that Ethereum has been producing more blocks than normal in recent months, ~6,400 blocks per day as of writing. As such, this may have an effect on the amount of COMP distributed per day and the expected runway with the allocation.
COMP tokens will be distributed evenly between the borrowers and suppliers in each respective market, with users earning COMP proportional to their balance held. With COMP tokens being distributed based on the interest accrued in each market, DAI and USDC markets will dominate the distribution. As of early May, 95% of all interest accrued on Compound comes from DAI and USDC money markets.
Chart via Our Network: Issue #20
To start the transition, Compound Labs will retire the Guardian functionality which allows the team to disable Governance in the case of an emergency. Once disabled, Compound will effectively become an unstoppable, censorship-resistant protocol controlled entirely by COMP token holders.
For DeFi and the ethos of trust-minimization, this is a crucial step to the long-term success of the lending protocol. Once the Guardian function is disabled, a team member from Compound Labs will propose a protocol upgrade to support COMP distribution – expected to launch next month.
With this upgrade, we’re beginning to watch the SAFG model play out first hand. To summarize, early adopters of DeFi protocols are the first to earn governance tokens through usage, and Compound is the perfect protocol to lead this charge.
In case you missed, DeFi Rate was fortunate to have an opportunity to participate in Compound’s governance testing. Our team voted on both sides of the aisle across a handful of proposals including voting “against” USDT support, voting “for” on the DAI interest rate model, as well as supporting the deprecation of Maker’s legacy stablecoin, SAI. To us, this has been an awesome testing ground for our governance initiative and we’re extremely excited to kick things into full-gear in the coming months. If you’re looking for someone to delegate COMP to in the coming months, we’d be happy to vote on your behalf using our official governance address: DefiRate.eth