- Compound users will now wield the power to propose and vote for changes to be implemented on the platform. This aligns with their objective of being truly decentralized.
- With just 1% backing the proposal users will have to determine by voting whether the change is in their interests.
Compound is setting its project to a decentralized governance system as it experiments with a testnet launched on Wednesday. The Open Finance backed startup is looking to grant its users the power to propose and vote for implementations to occur on the platform without requiring permissions from the compound team. A tokenization process will be launched developing the Compound governance token, COMP, to carry out the voting process.
This is in line with the pressure from the community to work on decentralized systems more than centralized chains, explained by Compound founder, Robert Leshner, who used the Bitcoin analogy. He said,
“My personal belief is that nobody would use bitcoin if it was run by the ‘Bitcoin Corporation.”
Compound an algorithmic, autonomous interest rate protocol built for developers, has been at the top of the industry and accounts for up to 15% of total $1 billion in funds locked in Ethereum DeFi. They are currently supporting lending options such as BTC, ETH, and ZRX.
Tokenization not aimed at raising funds
The Compound team is looking at various ways it can tokenize the platform. Leshner was however quick in dispelling any notion that the tokenization was aimed at raising funds. The COMP token won’t be available to the public until complete decentralization has occurred.
Employees, investors, and Compound’s top brass will be issued with the tokens first. Later on, another share of the tokens will be issued on Ethereum with criteria that hasn't been defined by Compound yet.
Notably, users will be able to propose updates. They will, however, need 1% of the total COMP tokens (set at 1% to help battle spam) to propose an update.
Once a proposal has been made, there is a 3 day voting period. As long as you have the power to do so, you can vote FOR or AGAINST it. A proposal will need to reach quorum (4%) in order to take effect. Once a quorum is reached, the proposal put into TimeLock and will be implemented 2 days later.
At the end of 2019, the Compound Finance team raised over $25 million USD in a funding round including Andreessen Horowitz’s subsidiary, az16, Polychain Capital, Paradigm and Bain Capital Ventures to integrate crypto exchanges, lenders and users on a singular platform.