DeFi protocols continue to get hacked due to same basic maths problem

Reserve Factor Consensus for the Compound Protocol

Risk-Off Framework for the Compound Protocol

Proposal To Improve Governance Discussion and voting processes with Commonwealth

# COMP Rewards Adjustments - Kickstart Rewards: Step Two
The initial objective of the COMP rewards program was to distribute the token to our users. While this was an effective way to kickstart Compound and reward early users, the practice of COMP farming for profit has become very problematic.

Since most COMP being distributed by the current rewards program is instantly sold off, existing users and token holders are at a great disservice. Their share of the protocol is being diluted for nothing other than farming COMP for profit. This COMP farming behavior is not the kind of activity that will bring value to the protocol, or for the existing users and token holders. Incentives need to be used to grow the protocol to the benefit of the protocol itself and its users and token holders.

Going forward, I believe it’s best to end the current COMP rewards program and to start a new one with the sole purpose of kickstarting new markets: kickstart rewards.

This proposal is the second step towards launching the new rewards program - **existing rewards are being slashed to 0**.

For more information and discussion, please visit the [discussion thread on the forums](https://www.comp.xyz/t/comp-reward-adjustments-v2/3074/).

# COMP Rewards Adjustments - Kickstart Rewards: Step Two

# Contribute funding to the Nomic Foundation
## **Summary**
- Nomic Labs, the team behind Hardhat, has become the Nomic Foundation, a non-profit organization dedicated to Ethereum. Our mission is to empower developers to decentralize the world.
- The Nomic Foundation’s work will be focused on Ethereum’s developer platform with the objective of achieving a world-class developer experience, and generally improving Ethereum’s public goods support structures.
- [Hardhat](https://hardhat.org/) is the de facto standard developer tool used to build Ethereum software, with more than 23000 Github repositories using it and tens of thousands of active users. Prominent teams relying on it include ENS, Uniswap, Optimism, OpenZeppelin, Aave, Balancer, Chainlink, Synthetix, and many more leading teams.
- The new foundation will expand the Hardhat suite of tools and, most importantly, build long-term infrastructure to catalyze organic growth in the Ethereum tooling ecosystem, decreasing Ethereum’s dependence on any one organization to build and maintain core development platform components.
- Seeking $30m in total funding from the ecosystem. Donations of $15M already secured by the Ethereum Foundation, Vitalik Buterin, Coinbase, a16z, The Graph, Polygon, Chainlink, a16z, and Kaszek Ventures.
- **We’re proposing to Compound Governance to make a contribution of $2m to the Nomic Foundation to support its mission.**
## **Funding**
The Nomic Foundation aims to benefit the entire Ethereum ecosystem, which is why we’re fundraising across multiple organizations and individuals within it.
The Ethereum Foundation is leading this round of contributions with $8M, alongside contributions from Vitalik Buterin, Coinbase, Consensys, The Graph, Polygon, Chainlink, Gnosis, a16z, a_capital, and Kaszek Ventures. These donors make up $15M, and we’re aiming to raise $15M more.
## **Why Compound?**
Generally, we think that allocating capital to the Nomic Foundation makes strategic sense for any protocol treasury that is aligned long term with the growth of Ethereum, and we’ve approached and will continue approaching several protocols.
The projects that the Nomic Foundation will deliver will create value for the entire ecosystem, including Compound. We’ll provide services to the Ethereum community that will:
1. Continue the maintenance of critical infrastructure used to build most protocols (Hardhat).
2. Increase developer productivity for every team in the ecosystem.
3. Accelerate developer onboarding to Ethereum, increasing the size of the experienced engineering hiring pool and making time-to-productivity shorter for new hires.
4. Accelerate the pace of innovation and the number of products being built.
5. Increase market volume driven by new users and new products.
We believe this grows the market for everyone, including Compound, and we’d love to have the Compound DAO contribute $2m in funding to this community effort.

# Contribute funding to the Nomic Foundation

# [Temp. Check] Should Compound retroactively distribute COMP tokens to early users?
This question has been [debated and specifics have been worked on](https://www.comp.xyz/t/should-compound-retroactively-airdrop-tokens-to-early-users/595v) for about the past year by the community.

This proposal serves as a temperature check, ensuring that this initiative has sufficient support before making further proposals as to address how to distribute the token to early users.

The actions of this proposal are nil - the protocol does not change at all regardless of whether this proposal passes or fails. Rather, this proposal gauges consensus regarding the issue in the following way:
- FOR: You believe COMP tokens should be distributed to early users in at least some amount and/or way.
- AGAINST: You believe no amount of COMP tokens should be distributed to early users.

If this proposal...
- PASSES: The community will continue its efforts in distributing COMP tokens to early users. A series of follow-up proposals will guide the community in finalizing the total amount, the distribution model, and the way in which the tokens are distributed.
- FAILS: The community will abandon its efforts of this initiative.

A quick summary in support and opposition of this initiative:
- FOR: Early users were key in Compound's success. Their early use of the protocol shaped it to be what it is today, and those users should be given the power to continue shaping the protocol. Compound should continue to decentralize ownership of the protocol by distributing voting power amongst its early community members and users.
- AGAINST: Compound should use the tokens in the treasury as incentives for new work to continue growing the protocol.

Note: Since governance proposals require actions, a nil action has been provided.

## Credits

Allthecolors et al.

## References
- [Forums thread](https://www.comp.xyz/t/should-compound-retroactively-airdrop-tokens-to-early-users/595)

# [Temp. Check] Should Compound retroactively distribute COMP tokens to early users?

# Migration to Governor Bravo
### Introduction
Governor Bravo has been a community effort for the past few months to bring governance to the next stage. This proposal transfers Compound governance to the new Governor Bravo contract. If this proposal is successful, all future Compound governance calls should be sent to [Governor Bravo](https://etherscan.io/address/0xc0da02939e1441f497fd74f78ce7decb17b66529).

### Proposal Calls
The first two calls reimburse Compound Labs $27k that was paid to Open Zeppelin for the audit from the cUSDC reserves. The following two calls award COMP bounties to Arr00 and Blurr for organizing and executing the Governor Bravo project. The following call sets Governor Bravo as the pending admin, and the last call initiates Governor Bravo, accepting the Timelock admin.

### Governor Bravo Details:
Governor Bravo has been developed by members of the community in the open for the past few months. The new contracts have been fully audited by Open Zeppelin, are fully covered by extensive test suites, have been simulated by forking simulations, and have been running on the kovan testnet. 

The new features are as follows:
- Upgradable implementation 
- Settable parameters (proposal threshold, voting period, voting delay)
- Abstain vote option
- Optional string voting reason
- Proposer can always cancel their proposal (until execution)
- Removal of the guardian
- Continuous proposal id logic

#### PS:
To celebrate the alphas who voted on Governor Alpha, we will be releasing a limited edition Compound NFT claimable by anyone who voted meaningfully on Governor Alpha prior to this proposal once Governor Bravo is initiated.

#### References:
Development forum [post](https://www.comp.xyz/t/governor-bravo-development/942)
Proposal forum [post](https://www.comp.xyz/t/governor-bravo-proposal/1384)
[Github PR](https://github.com/compound-finance/compound-protocol/pull/91)
[Open Zeppelin Audit](https://blog.openzeppelin.com/compound-governor-bravo-audit/)

Migration to Governor Bravo

# Compound Grants Program
**Summary**

We propose to start a program called the Compound Grants Program (“CGP”), which will provide funding to projects, ideas, and events that benefit Compound and its stakeholders. If approved, funding for the program will come from Compound’s [treasury ](https://etherscan.io/tokenholdings?a=0x3d9819210a31b4961b30ef54be2aed79b9c9cd3b), which currently holds ~200k COMP (~$95mm as of 03/01/21). As a reminder, the treasury currently accrues 0.5 COMP per block, spends 0.352 COMP per block on liquidity incentives, and saves the balance of 0.148 COMP per block for governance by tokenholders.

The program will be a pilot. For this reason, we believe it’s prudent to limit the program’s dollar value to $1mm per quarter and the length to two quarters for a cost of $2mm (4,444 COMP) over six months.

Since it’s not practical to solicit a community vote for every disbursement, we propose forming a small and nimble committee that has the power to administer the grants at its own discretion (limited by the aforementioned dollar and length caps). We suggest forming a committee of eight members: one lead member to head the program and seven reviewing members to review the lead’s work and assist with program operations. The committee will operate with a 4 of 7 multi-sig (only reviewers will be part of the multi-sig).

As compensation for administering the program, we propose the lead be paid $5k upfront and $100 per hour thereafter with a cap of 30 hours per week for a maximum compensation of $83k (184 COMP). In total, we are asking for a maximum of ~5,000 COMP to fund the grants (4,444 COMP), program setup and operational costs (444 COMP), and compensation for the program lead (184 COMP). All unspent funds will be returned to the community treasury at the conclusion of the CGP.

**Purpose**

Decentralized projects are living and breathing communities with a variety of stakeholders. These stakeholders include project team/contributors, tokenholders, users, partners, and for certain projects, liquidity providers. The goal for the CGP is to nurture Compound’s ecosystem to benefit all of these stakeholders. To be more specific, the grants program aims to:

* Grow Compound’s ecosystem by funding development happening on top of it. Funding development focused on helping Compound grow is critical to the project’s long-term success.
* Fund ideas that benefit Compound that would otherwise not receive funding. Many good ideas are left unexplored because they fail to receive funding. We intend to make sure as few good ideas as possible are underfunded or unfunded.
* Strengthen goodwill by providing funding for community-led ideas. Funding projects, ideas, and events brought forth by community members will encourage more active participation by the community. It will have the added benefit of nourishing goodwill. A well-nourished goodwill keeps community members loyal and happy, which in turn, encourages new members to join what they see is a thriving community.

**Program Scope**

The CGP was heavily inspired by the [Uniswap Grants Program ](https://gov.uniswap.org/t/rfc-uniswap-grants-program-v0-1/9081) (“UGP”), which received approval from the community to deploy a maximum of $750k per quarter for two quarters. It’s difficult to deploy a meaningful amount of money to ecosystem grants without compromising on quality. While we believe all of these ecosystems will be enormous in the future, it’s important for us to be practical today by matching the grants budget to the size of the ecosystem.

To that end, the pilot program will deploy a maximum of $1mm per quarter and run for two quarters. We have no way of knowing whether this amount of money is overshooting or undershooting the needs of the ecosystem — we will only find out *after* running the experiment. For example, if we find out $2mm is not enough money to fund all of the high quality opportunities, we as a community may decide we need to create a larger allocation for grants. On the flipside, if we find out $2mm is too much, all unspent funds will be returned to the community treasury for use at a later time.

As part of the program, our intention is to fund projects, ideas, and events that *directly* benefit Compound and its stakeholders. While there may be opportunities to fund projects, ideas, and events that *indirectly* benefit Compound, these opportunities fall outside the scope of this program.

Not all opportunities applying for grants will benefit the Compound ecosystem equally. To help us prioritize which ideas to fund, we propose the following buckets:

*High priority*

* Protocol and parameter development. Apart from acts of stewardship and generosity, there is little to no incentive for community members to propose technical updates to the protocol. With no carrot with which to motivate community members to propose changes, the protocol isn’t able to innovate as quickly as it should be innovating in a dynamic and competitive market. We should note that in a minority of cases community members did receive payment for work done (for example, see the work done by Gauntlet on the [COMP Contributor Grants ](https://compound.finance/governance/proposals/30) proposal), although here too, the incentive to contribute was not well-designed since it required Gauntlet to front audit and development costs before knowing the proposal to pay them would pass. To encourage community members to propose changes, the CGP will fully or partially pre-fund development and audit costs. In doing so, we hope to encourage more proposals, which will lead to more innovation and as a result, a far better Compound for all of us.
* Code audits. Making technical updates to the protocol is risky business: smart contracts are immutable and control billions of dollars in user funds. An error in a technical update can have serious consequences. Because of this, it is considered best practice to have an auditor review the proposed update for soundness prior to its submission. Unfortunately, these audits are [expensive ](https://www.comp.xyz/t/compound-contributor-grants/756/6), particularly for individual contributors who need to pay for them out of pocket. We intend to provide grants that pre-fund audit costs for soon-to-be proposals. We hope this will encourage more individual contributors to propose technical updates to the protocol.
* Business development / integrations. A greater amount of liquidity makes Compound a better product for all users. To grow liquidity, Compound should be integrated with as many applications as possible. To that end, we aim to fund integrations that grow usage of Compound. In funding integrations, we will effectively be funding the business development function for the protocol.
* Advertising and sponsorships. It will be important to get the word out there about this program. The more people there are that know about the CGP, the more applications we should expect to receive. To spread the word about the program, we will spend funds to advertise the CGP on podcasts, newsletters, and other mediums that attract the audience we want to attract.

*Medium priority*

* Hackathons. It’s very likely that there exist uses for Compound that haven’t been explored yet. Hackathons are a fantastic way to explore design spaces, and the CGP intends to sponsor them.
* Bounties. This one speaks for itself: bug fixes and minor protocol updates will be covered by the CGP.

*Low priority*

* Miscellaneous improvements. It’s difficult to know ahead of time all of the grant applications that will come through. Just because an application does not fit neatly into one of the above buckets doesn’t mean it’s not valuable to the Compound ecosystem. So long as an application benefits Compound directly, we will consider it for a grant.
* Applications for miscellaneous improvements to Compound fall into this bucket. Because the scope of this bucket is broad, we consider it to be low priority compared to the narrowly scoped buckets above.

While we did our best to prioritize items among each of the three buckets, we are confident that the above list is not all-inclusive. We expect to receive grant applications for phenomenal ideas that we simply can’t think of today. The committee asks the community for the right to exercise discretion to fund ideas that are beneficial to Compound but are not part of the scope outlined above.

**Process and Timeline**

If approved, the program will begin shortly after this proposal passes and end six months following the start of the program. (In other words, if the proposal passes on 3/15/2021 and begins on 3/22/2021, it will end on 9/22/2021). The program will run on a rolling process: we will welcome applications at any point in time during the program length! We will stop accepting applications two weeks before the end of the program (during these two weeks, we will start wrapping the program up, which will include evaluating the last of the applications and returning unspent funds to the treasury).

We will source potential grants via an applications process. (We will be sharing the application soon after this proposal passes).

Once an application is received, CGP committee members will discuss the application and evaluate it in the context of its benefit to Compound and its stakeholders. If the committee approves the application, funds will be paid out to the receiving party on the timely basis. If the committee does not approve the application, the soliciting party will be notified as to why the application was not approved and, if applicable, what steps need to be taken to have the application approved in the future. All approved grants and their amounts will be disclosed to the community publicly and on a timely basis.

Finally, a member of the CGP committee will participate in the bi-weekly Compound community developer calls. We will attend the call, listen to what the community thinks should be funded, and present some of the newly funded grants.

**Committee Members**

The CGP committee will consist of eight members: one lead and seven reviewers. We believe the best committees share two features: first they must be capable, and second they must be motivated to actively participate. We believe this committee shares these two vital features.

*Lead*

[Larry Sukernik ](https://twitter.com/lsukernik) (Sheepshead Bay, LLC)

*Reviewer*

[Getty Hill ](https://twitter.com/getty_hill) (Grapefruit Trading)

*Reviewer*

[Aparna Krishnan ](https://twitter.com/aparnalocked) (Opyn)

*Reviewer*

[Monetsupply ](https://twitter.com/monetsupply) (Independent)

*Reviewer*

[Min Teo ](https://twitter.com/_minteo) (ConsenSys)

*Reviewer*

[Leighton Cusack](https://twitter.com/lay2000lbs) (PoolTogether)

*Reviewer*

[Jesse Walden ](https://twitter.com/jessewldn) (Variant)

*Reviewer*

[Nick Cannon](https://twitter.com/inkymaze) (Gauntlet)

The lead will be tasked with managing and operating the program while reviewers will have a duty of holding the lead accountable. To guarantee accountability, the committee will operate with a 4 of 7 multi-sig managed by the reviewers (note that the lead is not part of the multi-sig). In other words, four out of seven reviewers will need to sign the transaction for a grant to be approved and disbursed.

**Committee Compensation**

We propose the lead be paid $5k upfront and $100 per hour thereafter with a cap of 30 hours per week for a maximum compensation of $83k (~184 COMP). Since the majority of the work will be performed by the lead, they will be the only committee member to receive payment as part of the program pilot. Payments to the lead will be approved by the reviewers and made according to the following schedule: $5k upfront, with the balance paid at the end of each quarter (i.e., if the program begins on 3/22/21, the lead will be paid $5k on 3/22/21, and the again on 6/22/21 and 9/22/21 based on hours worked).

The funds for both the program and the lead’s pay will be allocated to the CGP multi-sig from the Compound treasury. Running the CGP will come with setup and operational costs; we will set aside approximately 10% of the CGP budget to cover these costs. All unspent funds will be returned to the community treasury at the conclusion of the CGP.

**What Does Success Look Like?**

We expect success to come in two forms: one that’s measurable and the other that’s of the “you know it when you see it” type.

Measurable success metrics:

* Number of projects, ideas, and events funded
* Community engagement (e.g., increased activity on forums, Discord, and so forth)
* Increase in number of applications

“Know it when you see it” success metrics:

* Improved sentiment and goodwill within the community
* Improvement to Compound’s brand and positioning in the market

**Conclusion**

If approved, the CGP will begin accepting applications for grants on a rolling basis shortly after its approval. To assist with the evaluation of potential grants, each grant will be classified into three buckets: high, medium, and low. High priority grants will be funded first; medium priority grants will be funded second; low priority grants will be funded last.

This program is a pilot. As such, we intend to keep the budget lean for a maximum disbursement of 5,000 COMP over six months across grants, setup and operational costs, and lead compensation. Make no mistake: this is an experiment. If the CGP works, Compound may want to graduate the program from a pilot to a full-time endeavor. If it doesn’t work, we will learn why it didn’t work and what should be done differently. Most of us are COMP holders here. That gives the privilege to try something that’s never been tried before at a meaningful scale: to let the test subjects run the experiments.

Compound Grants Program

# Legacy market migration: WBTC
This proposal begins the [migration of legacy cToken contracts to the latest cToken contracts used by the protocol](https://www.comp.xyz/t/managing-ctoken-versions/1220), starting with the WBTC market.

The next-generation cTokens have two years of development & feature advantages over their immutable counterparts. Standardizing the protocol to use the latest cTokens will reduce "tech debt" and allow us to roll out new features to all markets.

WBTC was chosen as the first market to upgrade because of its recent proposal, which highlighted the need to be able to de-risk the market with new features (like supply caps, and protocol liquidation fees). After this migration, the community can proceed with upgrading BAT, ZRX, USDC, and finally ETH.

### Upgrade Process
A new WBTC cToken has been deployed, using the latest upgradable cToken contract and implementation. This proposal *supports* the new market, then *switches* the COMP Distribution from the prior market, to the new market. The market then inherits a 65% Collateral Factor, to match the legacy market.

The new WBTC cToken uses a modern interest rate model, that governance can update the parameters for. Initially, the parameters are set to an inflection point at 80% utilization, and a maximum interest rate of 40%, which resembles the legacy market.

The two WBTC markets will run in parallel, with users incentivized (but not required) to begin using the new contracts. When the legacy market is small enough, it can be deprectated like SAI and REP.

### Contracts

The new cWBTC contract, and its implementation, rely on existing cToken contracts; no code was modified for this proposal, though new contracts were deployed, and peer reviewed.

Discussion: [comp.xyz](https://www.comp.xyz/t/legacy-market-migration-wbtc/1333)

Legacy market migration: WBTC

Initialize USDC & DAI markets

Initialize Comptroller & OUSG Market

FIP-01: Add USDT Support & Set Stablecoin CF to 0

Compound Finance

Compound is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.

Ethereum	$2.309b
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Fully Diluted Valuation	$549.38m
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	$12.98m
	$33.2m

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