Leading DeFi Protocol Compound Releases New Upgrade

Leading DeFi Protocol Compound Releases New Upgrade
  • The release is the result of a successful governance proposal.
  • As of right now, customers may only withdraw their collateral.

To simplify the process of borrowing and lending cryptocurrency, Compound, the leading DeFi protocol, has released a new “streamlined” version of the protocol dubbed Comet. The release is the result of a successful governance proposal, and the new version of the protocol is being hailed as a “game-changing upgrade” for debtors in the DeFi market.

Robert Leshner, the founder of Compound, stated:

“Compound III is a streamlined version of the protocol, with an emphasis on security, capital efficiency, and user experience. Complexity wasn’t added — it was removed. What remains is the most effective tool for borrowers in DeFi.”

Robust Borrowing Model

There are a number of enhancements to the protocol in its latest iteration, but the most significant change is the adoption of a new borrowing model that allows for the creation of a single interest-bearing asset that may be borrowed against the security of all other supported assets.

Previous versions of the pooling approach included combining posted collateral with other forms of collateral. As an example, if someone secured a loan in USDC against Ethereum, the Ethereum users lent may have been combined with the Ethereum of other borrowers. However, as of right now, customers may only withdraw their collateral. 

According to the initial proposal written by Compound Labs’ VP of Engineering Jared Flatow, this method “protects borrowers from early liquidation, and can improve risk management” since there are two distinct types of collateral variables involved: those for borrowing and those for liquidation.

Users of Ethereum (ETH), wrapped Bitcoin (wBTC), and the native tokens of Chainlink (LINK), Uniswap (UNI), and Compound (COMP) will be able to borrow the USDC stablecoin in the initial deployment of Compound v3, with Chainlink’s oracles providing the sole pricing feed for the protocol.

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An engineering graduate who is passionate about writing and loves the very existence of crypto. Trading forex currency keeps me busy when I am not writing and analysing the crypto world.