The rally of new upgrades coming up in the crypto world is mindboggling and the crypto community is ever excited for it! Starting from the Ethereum Merge, that started back in 2020, DogeCoin launching Dogechain, the crypto market crash following the Terra LUNA crash, launch of LUNC, Eminem and Snoop Dogg releasing a music video with BAYC NFTs and so much more!!
With newer upgrades from notable crypto assets, Compound, which is a DeFi lending protocol that allows users to earn interest on their crypto by depositing them into one of several pools supported by the platform; has upgraded itself to v3!
Compound v3 will be limiting the protocol’s supported tokens and its v3 introduces governance changes!
According to the CoinDesk news article, Compound’s latest iteration which is known as Comet, will be allowing users to borrow a single, interest-earning asset, USD Coin (USDC), using wrapped bitcoin (WBTC)! That is not all, users will also be able to make use of the native tokens from Chainlink (LINK), Uniswap (UNI) and Compound (COMP) as collateral.
This new upgraded version of Compound also employs Chainlink as the protocol’s exclusive price feed and simplifies governance smart contracts, which will enhance the system’s security and scalability. The limited release protocol is capped at $100 million in assets, or about 2% of the $3.8 billion of assets held by Compound v2.
According to the founder of Compound, Robert Leshner, Compound v3 will be allowing users to borrow more tokens with less risk of liquidation and lower liquidation penalties.
The CoinDesk news also stated that “Compound’s previous iterations employed a pooled-risk model, which supported nine crypto, including ether (ETH), dai (DAI) and tether (USDT). Under the old model, users would deposit assets into lending pools, where their assets would earn interest. In exchange for their deposits, lenders received cTokens, which represented the value of their deposits. Using those cTokens, the lender could then borrow up to a certain percentage of the value of their collateralized assets in different crypto.”
Other Changes In The Compound v3
Forking Of the Protocol: Adding to reducing the number of supported tokens in Compound, this new version is also cracking down on unauthorized forks. To explain it in simple terms, Forking is a protocol that basically amounts to cloning its code over to a new project. The forks make adjustments to a protocol’s original code. However, some low-effort Compound forks have been wholesale copies of the platform with little changed beyond branding.
With the upgrade, forking the Compound protocol will require community permissions. The approval process aims to ensure the code behind each proposed fork is less susceptible to exploits.
Change in Governance: Compound v3 is not only upgrading the protocol’s security, but Compound v3 will also introduce changes to the protocol’s governance system.
According to Leshner, “The code base is a lot simpler, and everything’s contained in a single smart contract for each deployment. That makes it very easy to govern and manage, which we think will make governance participation increase.”
Within Compound v3, governance will be conducted through a single “Configurator” contract, instead of a network of contracts that are individually managed. As stated in the CoinDesk News, Governance token holders will now also have the ability to exercise greater control over economic policy across the protocol thanks to the protocol’s use of ChainLink for price oracles.
Additioanl Read: Compound Price Prediction