Context:
Dharma is a voting delegation in the new Compound open governance system. We have decided to record our governance decisions in blog posts, so that the community can see our reasoning and voting record over time.
Proposal Title: COMP Distribution Patch (Link)
Proposer: Geoffrey Hayes
Dharma Vote: Yes
Rationale:
Over the past few weeks, it has been clear that the COMP distribution mechanism is being exploited. This started with the cUSDT market, and quickly rotated into a few DeFi tokens, most notably cBAT.
To a certain extent, users are simply reacting to the economic incentives of the COMP distribution model. Which would be fine. Except that this usage of the Compound Protocol does not generate more utility for the protocol or for other protocol users. Moreover, this usage has introduced significant systemic risk to the Compound protocol, particularly in the case of the cBAT market, which currently has a gross supply of ~300M+ USD compared with BAT’s total market cap of ~380m USD.
The combination of low-utility usage and systemic risk makes it extremely important to address the shortcomings of the COMP distribution mechanism that are causing these issues.
Dharma has been working to combat these issues through asset Reserve Factors (Prop 9, Prop 10) and Interest Rate Models (USDC/USDT Discussion, DAI Discussion). While these are all good steps, we know that the most effective adjustment is a direct change of the COMP distribution mechanism. We were simply unable to take on a change of that magnitude at this time.
As such, we believe this is an important and urgently-needed change, and we are happy to contribute our Yes vote.
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