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Compound’s governance proposal aims to end the earnings fever of COMP

August 26, 2020

A new Composite governance proposal from the founder of cuff, Tarun Chitrayou would see all future COMP token distributions in a Rights acquisition program.

The proposal was presented on Wednesday and describes various ways in which the acquisition of rights could be implemented. One would imply a discreet collection where tokens could be claimed at regular intervalswhile another a “Ongoing acquisition” where the tokens are gradually released as they are mature.

One of the two solutions This is in stark contrast to the way the reward system is currently set upin which the acquisition time is effectively zero. Although COMP is not immediately distributed to users’ wallets, it can be claimed at any timeeither by interacting with the protocol or by explicitly calling a claims function. This is primarily a gas saving measure.

Compound’s governance proposal aims to end the earnings fever of COMPCompound’s governance proposal aims to end the earnings fever of COMP

By not having acquired rights High yield farmers can simply pool their liquidity to earn COMP and sell it instantly in the market. This results in a somewhat skewed incentive that runs counter to the stated purpose of the COMP distribution. The idea behind this distribution is that of Distribute ownership and management of the platform to usersIn reality, however, the spread is currently dominated by whales looking to make an instant profit.

Adding rights would discourage “purely capitalist income farmers”.as the CEO of Compound Labs called them, Robert LeshnerTo tie your capital to minutes for short-term gain.

However, If the proposal is adopted, it could have a powerful impact on the current DeFi ecosystem.

Cointelegraph previously reported on it The compound is by far the largest minted DAI receiver (MKR) from MakerDAO.. According to data from DefipulseThe log currently contains 211 million DAIs, which is not only more than 46% of total current DAI supply, but 55% more than the total market cap as of June 30 of $ 129 million.

Timing is critical as DAI didn’t become Compound’s highest-yielding agricultural asset until July 2nd. Cointelegraph previously reported on it The recent surge in DAI supply was mainly due to the demand for this activity from Compound and other protocols.

While the compound seldom represents the most profitable revenue log, it has been the most stable and high volume source of revenue, mainly due to its relatively steep distribution curve and high market capitalization. The current base returns are around 8% APY, which can be roughly tripled by entering a leveraged DAI position.

Adjusting the return by acquiring rights could result in a large part of the equity being unlocked, resulting in the total value of Compound and likely Maker being locked down.. Due to the widespread belief that TVL reflects the success of the protocol, This could also lead to falling token prices. On the other hand, the selling pressure would be significantly reduced, which could have a compensatory effect.

However, the decision would severely constrain a significant portion of the total cash flow revenue, which is likely it would affect all other protocols in some way.

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