Compound V3

Lending

Compound is a decentralized money market built on Ethereum that enables users to lend and borrow from a pool of whitelisted assets. Compound v3 introduces a new borrowing model that facilitates a single borrowable asset, while all other supported assets function as collateral.

Risk Rating
Best
Protocol Code Quality
Protocol Maturity
Protocol Design
Summary
What we like
Compound V3 introduces the concept of a base asset as it moves away from a pooled-risk model, where users can borrow any asset, to a single borrowable asset, USDC.
What we like less
The protocol accepts its own native COMP token as collateral which increases risk.
What it means for you
Compound V3 is a streamlined version of the protocol that focuses on security, capital efficiency, and user experience.
Information
Info
  • Website
  • Token: COMP
  • Tags: Lending
Key Metrics
  • TVL: $1.4B (Rank #23)
  • TVL Ranking by Lending: #5
  • Blockchain: Ethereum, Arbitrum, Base, Polygon, Optimism, Scroll
  • Chain TVL
    • Ethereum: $1.28B
    • Arbitrum: $49.37M
    • Base: $41.62M
    • Polygon: $40.84M
    • Optimism: $7.32M
    • Others: $545.26K
Risk Assessment
Best
Protocol Code Quality
  • Code reviewed by several experienced auditors including ChainSecurity and OpenZeppelin
  • Public team promotes accountability
  • No documented protocol hacks since launch
Protocol Maturity
  • Latest protocol version launched in 2022; maturity over one year minimizes technical risk as smart contracts are well battle-tested
  • Top 5% by total value locked reduces risk
  • Requires members of a DAO to vote on-chain for approving contract upgrades
  • Timelock is at least 48hrs, which provides users with sufficient time to exit if any malicious upgrades are approved
  • Low voting power concentration reduces risk
Protocol Design
  • No death spiral concerns
  • Robust controls to mitigate oracle price manipulation
  • Isolated markets enable asset risks to be contained to each individual pool without impacting the entire protocol
  • Robust controls in place to prevent risky borrowing
  • Solid mechanisms in place to ensure healthy liquidations
  • Solid methods to accrue protocol reserves
Things to know about Compound V3

What are key new features of Compound V3?

Compound V3 launched as a streamlined version of the V2 protocol. The initial deployment of V3 on Ethereum introduces the concept of a base asset. The protocol's new functionality transitions away from a pooled-risk model, where users are able to borrow any asset. In V3, users are can only borrow one base asset, USDC, instead of any asset from a pooled set of assets. This new borrowing model facilitates a single borrowable, interest-earning asset, while all other supported assets function only as collateral and do not earn interest. Users can only earn interest by supplying the baset asset or USDC. Users with a positive balance of the base asset earn interest, paid in the base asset, based on a supply rate model; users with a negative balance pay interest based on a borrow rate model.

How do liquidations work on V3?

Liquidations on Compound V3 use a different mechanism than V2. In V3, the protocol absorbs the borrower's account when the value of collateral locked in the protocol is less than the total value borrowed. The underwater positions are repaid using the protocol's reserves and the protocol seizes the the entirety of the account's collateral assets. Compound determines a discounted price for the seized collateral and sells it publicly for the base asset. Anyone can buy this discounted collateral asset and sell it on an exchange to profit on the difference.

How are protocol reserves accrued?

Protocol reserves are a balance of the base or collateral asset and stored internally on Compound. Reserves may be withdrawn or used through the governance process. Compound accumulates reserves in two ways: the difference in interest paid by borrowers, and earned by suppliers of the base asset. Second, the liquidation process uses, and can add to, protocol reserves based on the target reserve level set by governance.

Compound V3 Pools
Compound USD Lending
6.7%
Yield
$84M
TVL
Risk
B
Protocol
Compound V3
Chain
Ethereum
Compound ETH Lending
1.9%
Yield
$28M
TVL
Risk
A
Protocol
Compound V3
Chain
Ethereum
Compound ETH Lending
2.9%
Yield
$6M
TVL
Risk
B
Protocol
Compound V3
Chain
Base
Compound USD Lending
7.6%
Yield
$6M
TVL
Risk
B
Protocol
Compound V3
Chain
Arbitrum
Compound USD Lending
8.2%
Yield
$3M
TVL
Risk
C
Protocol
Compound V3
Chain
Polygon
Compound USD Lending
12.5%
Yield
$652K
TVL
Risk
B
Protocol
Compound V3
Chain
Base
Compound USD Lending
6.8%
Yield
$294K
TVL
Risk
B
Protocol
Compound V3
Chain
Arbitrum