Categories: Ethereum

Money Lego: Compound Finance Is a Growing Hit in Ethereum DeFi

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In recent months, Compound Finance has become one of the most popular lending platforms in the entire cryptoeconomy. Can it become the most popular?

To be sure, it remains to be seen if Compound will one day unseat Dai builders Maker atop the DeFi ecosystem, even if temporarily. Still, the project’s builders have recently been taking steps to make the “money lego” platform better and its users’ happier. That’s certainly a start.

For example, one of the bigger threads in Compound’s march toward maturity hit the limelight this week as attention gathered around its fresh audit. Specifically, the smart contract specialists at the OpenZeppelin project just published an audit on some of the Compound platform’s most important smart contracts.

Here we present a summary of the @compoundfinance audit, including:

– System overview
– Privileged Roles and Future Direction
– Interest-free loans
– Counterproductive incentives
– Full audit report

The good news? OpenZeppelin didn’t find any code issues that it deemed to be “critical.” But the auditors did find a series of lesser serious issues that helped the Ethereum community understand the fledgling Compound platform better.

Among these issues, one problem highlighted was that there are currently admin keys that could be used to compromise some of Compound’s tech.

Custodial Compound contracts pose a risk of *unsecured debt*

> cTokens used as collateral remain in the borrower's wallet but are non-transferable

> Admin could allow transfer of collateral cTokens… essentially enabling Compound debt to be undercollateralized

In response, Compound co-founder Robert Leshner later noted that the platform intended to evolve toward total decentralization.

“Absolutely; the FAQ […] and whitepaper […] are both very transparent about how the admin privileges work, and our goal to decentralize away from having an admin at all,” Leshner said on August 27th.

Love ’em or hate ’em, Compound opening up their contracts for everyone to pick apart only works in their favor in the long run.

Like other cryptocurrency platforms, Compound only supports a select number of cryptocurrencies. But that number is about to get bigger.

That’s because Compound has opened up a voting period for its users to decide which digital assets they want to see on the platform next. The projects currently up for consideration include Maker, Tether, Decentraland, Huobi Token, Loom Network, Numeraire, OmiseGo, Paxos, and TrueUSD.

Voting has begun to select the next two Compound protocol assets!

Voting is open for two weeks!

“Voting will last for 14 days, after which the 2 winning tokens will be added to the protocol following the creation of cToken integration contracts, successful security audits, and a determination of suitability,” the aforementioned Leshner said.

Berlin Blockchain Week was earlier this month, and one of its events — ETHBerlin Zwei — saw no shortage of Hackathon projects built atop Compound. That gave the platform a tangible bump in usage.

According to tracker website DeFi Pulse, Compound has been steadily gaining on Maker’s DeFi dominance as of late. Of course, Maker still dominates more than 50 percent of the DeFi ecosystem, but Maker’s slice of the pie has been slowly declining as Compound has gained more attention.

2/ The total supply of DAI in the market has lowered around $14M in the last 90d thanks in part to CDPs moving to Compound and tools like @InstaDApp's Bridge. And so, the stability fee is starting to lower as a result. [TVL charts included for reference. Note difference in scale]

It’s not that one is more impressive than the other, rather that both are at the top of DeFi right now and Compound is notably gaining steam. With that said, Maker and Compound are far from enemies as the DeFi Pulse team has explained:

“For the time being, they appear to have a symbiotic relationship. Maker prints the DAI, Compound creates more demand for DAI in the market.”

On August 29th, Dharma — a top 10 DeFi project at present — announced that it was relaunching its cryptocurrency services upon having phased out its initial offering.

The twist? Dharma’s new services will rely on Compound’s liquidity pools. In moving away from crypto lending, the project’s first offering after the relaunch will be a savings product.

“Working with Compound allows Dharma to focus on the parts of the business which they do best, which in my view include design, product, and user experience, and instead outsource part of the stack,” Autonomous Partners founder and Dharma investor Arianna Simpson said on the news.

To be sure, it remains to […]


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