In recent days a very hot topic, related also to the problems faced by Fulcrum, is the one related to admin private keys in the DeFi world and perhaps to solve this issue Compound decided yesterday to cede its power through a token that will allow the community to manage the governance of the protocol.
The ERC20 token will be called COMP and will have special features.
Some dynamics related to the initial distribution of tokens are still unclear and the analysis on possible attack vectors has not yet been verified by the community. Yesterday’s statement for the moment is only a partial statement about the next activities.
Decentralized Finance, DeFi, aims to change the traditional model on which the intertwined world of finance is built.
- No middleman;
- No entry barriers;
- No boundary of jurisdiction;
- Resistance to censorship.
To do this the model must have very precise characteristics. There must not be a centralized power able to modify the rules of the game (the smart contract). The tokenomics of the platforms must have the objective of presenting a code whose predictability of execution makes it safe to use.
This means that the expected behaviours are manifested according to the will of the players in the game, not to the impositive and unpredictable choices of the main intermediary.
Governance and the new Compound token
The Compound team is working to develop a new standard in the form of a token that will solve the governance problems of many DeFi projects besides its own, and lay the foundations on which to standardize the rules of management throughout the industry.
The COMP token will guarantee:
- Standard ERC20 functions;
- Voting rights;
- Voting delegation;
- Creation of complex voting systems.
Anyone owning at least 1% of the COMP can propose simple or complex governance activities such as:
- Integration of a new asset into the platform;
- Change of the collateralization factor;
- Changing the models on which interest rate management is based;
- Modification of parameters that are currently the responsibility of the admin.
It is specified that these changes are executable and not merely suggestions to the foundation or team. The contract will act independently without intermediation.
Proposals will be subject to a voting period of 3 days. What will be supported by a majority and a 4% quorum will end up in the queue at the timelock, a mechanism that provides a programmed and irrevocable delay on the activations of the changes.
This means that the changes, in the code, will be public and accepted, but activated with a delay to allow anyone who does not consider it appropriate to withdraw funds from the contract and leave the platform.
The system has been verified thanks to OpenZeppelin.
The initial sandbox provides a test of the code open to Compound shareholders when the system will work in a distributed and reliable way the tokens will also be sent to users of the protocol.