Compound Finance Introduces New Risk Model For Their Upcoming Release


Compound Finance, the company behind the concept of Decentralized Finance Applications (DeFi), alongside MakerDAO, among others, has registered $9 million in crypto collateralized loan. It just took six months for the firm to reach this amount of funds, after being launched back in September 2018. Now, the firm is planning to release a new risk model for its business.

Compound Finance Introduces New Risk Model

According to a recent report released by Diar, there are five assets on the platform, Dai, Ether (ETH), 0x (ZRX), Augur (REP) and Basic Attention Token (BAT). These tokens were able to provide $50,000 to $3,500 lenders on the platform.

Compound is planning to expand its offering and update the collateral model. The main intention is to go live within the next 8 to 12 weeks. If there is a dump in price from the liquidator’s sale, it could shift the borrower collateralized value that would create problems for the participants.

In the new version, the intention is to address the collateral ration management with each assets having its own ratios. The company is also working so as to shift decisions on the platform onto market suppliers.

Diar wrote about the new model that the company wants to implement:

“The new model will also aim to help the encouragement of diversification of assets lenders deposit on the platform. Currently, nearly 60% of the net supply of Compound is Augur’s Reputation token, but only accounts for just 4% of total borrower demand.”

At the same time, they inform that overall demand for loans outside Ether and Dai have also been slim, thus resulting in small returns for these other assets.

It will be important for the firm to find demand and understand whether the community will be participating in these financial models for DeFi.

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