Compound Governance

Steps towards complete decentralization

Robert Leshner
Feb 26 · 4 min read

At Compound, our goal is to create financial infrastructure that applications and developers can rely on, forever. To get there, we intend to fully decentralize the Compound protocol — removing the largest single point of failure (our team), and creating an indestructible, open protocol that can evolve in entirely new ways.

Today, we’re proud to introduce a governance system that will replace the Compound protocol’s administrator with community governance — allowing you to suggest, debate, and implement changes to Compound — without relying on, or requiring, our team whatsoever.

The Compound governance token

Participation starts with the Compound governance token, COMP.

In addition to being a standard ERC-20 asset, COMP allows the owner to delegate voting rights to the address of their choice; the owner’s wallet, another user, an application, or a DeFi expert. Anybody can participate in Compound governance by receiving delegation, without needing to own COMP. The token also includes code to query an address’ historical voting weight, which is useful for building complex voting systems.

We hope that COMP can set the standard for how governance tokens operate, and our team will write an Ethereum Improvement Plan (similar to the ERC-20 standard) to accelerate decentralization for the entire ecosystem.

COMP empowers community governance — it isn’t a fundraising device or investment opportunity. Until the decentralization process is complete, COMP will not be available to the public.

Community, not centralized, decisions

We’ve designed a simple governance framework so that you can easily participate in shaping the direction of Compound. Here’s how it works:

Anybody with 1% of COMP delegated to their address can propose a governance action; these are simple or complex sets of actions, such as adding support for a new asset, changing an asset’s collateral factor, changing a market’s interest rate model, or changing any other parameter or variable of the protocol that the current administrator can modify.

Proposals are executable code, not suggestions for a team or foundation to implement.

All proposals are subject to a 3 day voting period, and any address with voting power can vote for or against the proposal. If the majority of votes (and a 4% quorum) vote for the proposal, the proposal is queued in the Timelock, and can be implemented after 2 days.

And if you don’t like the governance framework, great! You can vote to replace it with a new model.

Testing Compound Governance

For months, we’ve been designing and building Compound governance; today, the journey begins:

Throughout the decentralization process, you can explore, monitor, and track all activity in the Compound Governance Explorer.

Decentralization Process

The transition to community governance will be managed with a relentless focus on security & stability, and will follow the principle of increasing decentralization.

During an initial sandbox period, a portion of the governance tokens will be distributed amongst our company’s shareholders, who can delegate voting weight to themselves or the public as they see fit; the majority of COMP will be escrowed, and will not participate in governance.

Developers building on top of Compound are encouraged to actively participate in governance, which will be tested in the open. As a failsafe, our team will have the ability to suspend the governance system (though not the protocol’s 2-day timelock) during the sandbox.

When the governance system is operating in a reliable, distributed manner, we’ll suggest that the failsafe be removed — and that the remaining tokens be distributed to Compound protocol users. We’ll be releasing more details of this plan in the coming months — stay tuned!


You can request Ropsten testnet COMP from our team in Discord — and if you have any questions or ideas, we’d love to hear from you. From all of us at Compound, 📈.

Compound

The protocol for algorithmic, efficient Money Markets on the Ethereum blockchain. Seamlessly earn interest or borrow ERC-20 tokens without managing an order book.

Robert Leshner

Written by

Full-stack founder of Compound. Chartered Financial Analyst, previously a finance guy.

Compound

Compound

The protocol for algorithmic, efficient Money Markets on the Ethereum blockchain. Seamlessly earn interest or borrow ERC-20 tokens without managing an order book.

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